DAVID GREENE, HOST:
And let's turn to the issue that is front and center this election year - the economy. Austerity measures aimed at curing Europe's debt crisis have thrown a number of eurozone countries into recession. The threat of defaults in Greece and even larger countries like Spain have rattled U.S. financial markets, and President Obama recently said that Europe's troubles are casting a shadow over the U.S. economy.
To better understand what the president is talking about, we brought in NPR economics correspondent John Ydstie.
John, thanks for coming by, as always.
JONH YDSTIE, BYLINE: My pleasure, David.
GREENE: Well, so I guess let's start off with a simple question: Is the U.S. economy growing slower because of Europe?
YDSTIE: Well, certainly Europe's struggle is having some negative effects on our economy at the ground level. After all, last year Europe bought about 20 percent of our exports. So it's our largest trading partner after our neighbors in North America.
I just talked to Drew Greenblatt, president of Marlin Steel Wire Products, a small manufacturer in Baltimore. He makes things for other manufacturers, like steel baskets and brackets and that sort of thing. And he says Europe's problems are affecting him too.
DREW GREENBLATT, MARLIN STEEL WIRE PRODUCTS: They're in a funk over there. Everybody's just kind of waiting for the world to end over there. And when you're waiting for the world to end, you're not so, you know, excited about buying more equipment or buying more machinery or whatever.
JOHN YDSTIE, BYLINE: Greenblatt says he's doing five to 10 percent of his business in Europe right now and he should be doing 30 percent.
GREENE: Well, that's really giving us a window. I mean, I suppose if companies are doing that much less business in Europe, I mean it has to start affecting, you know, hiring decisions. I mean is Greenblatt not able to keep as many people on?
YDSTIE: You know, no. He says he's actually been doing a little hiring recently. He told me that's because he's doing pretty good business in some other parts of the world.
PRODUCTS: We just shipped a nice load to China the other day. We ship to Mexico weekly. Mexico's one of our biggest export markets. Canada - we got an order from Canada last week.
GREENE: So we have an American business like this looking for other options if they can't do as much business in Europe. But we've heard recently that China's growth is also slowing down. So I suppose, you know, once you start limiting options one by one it becomes more of a problem.
YDSTIE: Absolutely right. China is slowing. India is slowing. And there's a general slowing in all of these big economies, including the United States, and Europe is a part of that. You know, I talked to Chad Moutray, an economist at the National Association for Manufacturers, and he said that while Europe's problems might dampen some hiring in the U.S., our exports to Europe have actually grown steadily in the first half of this year. And he sees a bigger impact from Europe in terms of the psychological effect on U.S. businesses and consumers.
CHAD MOUTRAY: The daily dribbling out of bad news is not good, I think, for the consumer. And so I think the real effect that Europe is going to have in 2012 is this dampening of the overall of enthusiasm.
YDSTIE: You know, David, Moutray says it's difficult to tease out just how much Europe's problems might reduce overall U.S. GDP. But he says he still thinks the U.S. economy could grow at a rate of about two-and-a-half percent in the second half of this year. And he really rejects any idea that Europe's slow growth could push us into recession. He sees more danger from the U.S.'s own problems, like the so-called fiscal cliff, the rise in taxes set for the end of this year if the Congress doesn't do anything.
GREENE: And if we think about the news coming from Europe, I mean let's say it got much worse. Let's say there was some kind of financial meltdown. I mean is there some sort of shock that we would feel in the United States in some large way?
YDSTIE: Well, it could be very messy, and there are some analysts who say we could face another Lehman moment, the kind of credit freeze that occurred after Lehman Brothers failed in 2008, the event that triggered our financial crisis. But other analysts say that U.S. banks are much less vulnerable to those kinds of shocks and have much less exposure to Europe than they once had, so the danger isn't that great.
GREENE: John, thanks so much for talking to us.
YDSTIE: You're welcome, David.
GREENE: NPR economics correspondent John Ydstie. Transcript provided by NPR, Copyright NPR.