How to Rescue the Economy In One Easy Step
There's an easy solution to American economic woes. It's called growth. But the term is something that Republicans and Democrats alike seem to have forgotten.
The recent budget debate was an abstruse exercise in cutting short-term spending without looking at entitlements. Medicare and taxes are going to be reassessed in 2013. But the easiest fix for the economy is to add jobs—in other words, start growing the economy. If both parties remain fixated with the debt, it won't happen. The less than draconian jobs report that appeared today suggests that perhaps the economy is not in quite as dire shape as the doomsayers are making out.
America has some inherent advantages. Population growth. Abundant natural resources. An inventive high-tech sector. A fairly flexible jobs market, in contrast to Europe. It's easy to get carried away and ignore these pluses. It's even easier to prognosticate the demise of the republic. But it doesn't have to happen. American has been in the doldrums before. The 1970s was a lost era that consisted of high unemployment and high inflation. Remember Gerald Ford's "Win" button? Whip inflation now. It whipped him, as it did Jimmy Carter. It wasn't until Paul Volcker, head of the Federal Reserve, raised interest rates that the stage was set for Ronald Reagan, who himself had first to endure a recession that ended in 1983.
The situation today is worse because of the structural problems America faces. Nevertheless, what on earth happened to the optimistic spirit of the GOP? There's something odd about seeing the GOP turn itself into the reincarnation of Herbert Hoover. Hoover was obsessed with balancing the budget. By 1937, so was FDR. The result was simply to prolong the Great Depression. Now President Obama has mostly exhausted any government stimulus. And the Fed has already done quantitative easing, though it could try another round.
There are some steps that can be taken to improve the economy, such as establishing an infrastructure bank that could speed up spending on bridges and other overdue national improvements. For the GOP to focus singlemindedly on the debt issue is a colossal mistake. The disapproval rating of Congress is at a whopping 82 percent. The only way that the GOP can unseat Obama is to focus on an optimistic message. Of course to do that it needs to find a viable candidate.
The fact is that with all the gloomy predictions pullulating in the mediasphere, Obama will probably be able to declare victory if he can nudge the unemployment rate slightly below 9 percent. The bar for success, in other words, is being defined downward. In any case, far too much is being made of the jittery nerves in the stock market this week. There is a lot of posturing by the likes of Larry Summers in an advance attempt to disclaim responsibility for a second recession. But the sound and fury may turn out to look preposterous should the economy begin to enjoy an uptick in coming months.