The Thinker

Between an economic rock and a hard place

Truth seems to be a precious commodity these days. Truth is not always easy to handle, but it does has the virtue of being true. Given the truth, you at least have a chance of working your way out of a problem. Unfortunately, there are many vested interests out there willing to lie or give us only partial truths purely to advance their agendas at the expense of the nation as a whole.

The current presidential campaign needs a whole lot of truth from both President Obama and future Republican nominee Mitt Romney. Of the two, Obama at least is closer to telling us the truth, but he is shielding Americans from harder truths. I wish that Obama could simply dump his posturing and nuancing and simply tell us the truth. It would be especially welcome to hear some truth about the economy, particularly yesterday when our unemployment rate crept up from 8.1 percent to 8.2 percent, while we actually very modestly increased hiring.

Republicans are all over the report, of course, pointing it as more evidence of a failed presidency. No question about it, 8.2 percent unemployment is not great, particularly if you are unemployed and don’t wish to be unemployed. Is it Obama’s fault? Shouldn’t he be held accountable because he is president?

Obama at least has a net increase in jobs during his administration and twenty-seven months of consecutive job growth, which is more than you can say about the George W. Bush administration. I think Obama has done a remarkable job dealing with an economy that at the start of his term looked like it was heading into a new depression. At least we are heading in the right direction.

Yet the reality is that neither Obama nor a President Romney can work miracles on this economy by himself. This is because the president has limited powers. The alchemy of presidential power happens at the edges, if it happens at all. Mostly it occurs when the president is successful in persuading Congress. This was hard for Obama even when Democrats were in charge, and virtually impossible now. Moreover, there are systemic problems that are at work that are likely to cause relatively high unemployment rates for years to come. Some of these can be ameliorated; some cannot. There are some short-term strategies that will improve the situation, but fixing the long-term problems is tough and cannot be solved by doing more of the same.

Here are some truths about our economy I wish I would hear from anyone running for public office:

  • We are in a hell of an economic mess mostly of our own making. Yes, it is partially the result of lots of things outside of our control, such as the closely connected international economy. It is also due to our inability to come to a political consensus. This, more than anything else, is the root of our problem, and our problems will likely linger until broad consensus is reached.
  • Europe matters. It is going into another recession. It has and will continue to affect our economy, and is probably the reason our job growth is slowing. Austerity in Europe is leaving people there poorer, and thus they cannot buy as many of our products and services, plus it adds uncertainty to the whole world economy. To some extent, our economy will be impacted until Europe itself achieves political consensus and its economy rebounds. And that is something neither Obama nor a new president can fix.
  • The economy is not going to improve by cutting public spending. Doing so will only cause the economy in the short term to get worse. This is because, no matter how inefficiently, spending money employs people. And when people are employed they mostly spend the money, which stimulates the economy.
  • Sustainable growth happens when we make new products or services that other people broadly want. And that does not happen through inertia but through a lot of research, investment and through having a highly skilled work force. It happens to some extent through government investments. The Internet, the key to our modern economy, was not a result of entrepreneurial behavior, but a result of a government research product.
  • Wealth does not trickle down. It grows as a result of a burgeoning middle class. The one percent already have virtually all they need and are not going to spend enough of their capital to grow the economy for the rest of us.
  • Growth requires infrastructure. The surest way to cripple our economy in the long term is to neglect infrastructure spending. Austerity will do just this.
  • We are all going to have to pay more taxes. If we are stupid enough to delude ourselves that we don’t have to, we will move our country down the economic ladder, eventually moving us into a second world status. Governments don’t exist to redistribute all wealth, but do need to redistribute some wealth; otherwise you don’t have a government. If it doesn’t, bridges don’t get built, roads don’t get paved, power grids deteriorate, children don’t get educations, shoddy medicines end up on the market and unsafe food ends up on our shelves and in our bodies. Our economy, including our national defense, depends on having our infrastructure in place.
  • The education of our citizens is a critical, if not the most critical, of all the factors underpinning our long-term economy. The free market cannot solve this problem. If it were possible, there would have been no reason to create public schools in the first place. True sustainable growth comes from maximizing the educational potential of all our children and applying it to products and services the world needs. That means we want all children capable of it to go to college, if possible. We want to inculcate a curiosity in our children and provide an environment that rewards creative thinking. We must invest in our children’s education, if for no other reason so they can sustain us in our old age.

In short, we are in a huge economic mess and the choices we are making or not making are making it worse. We need a national strategy that fundamentally addresses these issues. Tax cuts won’t solve the problem. Corporate welfare won’t do it either. We can start with spending heavily on infrastructure, through deficit spending if necessary. Perhaps we need a national infrastructure bank. Such a bank would serve to depolarize the issue of spending money on infrastructure. And it would certainly stimulate job growth, as well as better position us in a competitive world.

 

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