Romney, Obama Worlds Apart on How to Fix Economy
Millions of Americans are desperate for work, runaway government spending clouds the future and Democratic and Republican candidates are busy making one thing clear: They're light years apart on what to do about it.
They do agree that in this election, the economy is everything. President Barack Obama calls it "the defining issue of our time." But for voters wishing Washington would come together in a time of crisis, Obama, his Republican rival Mitt Romney and their congressional allies don't offer much hope.
Instead, they've taken to describing the gulf on economic policy in galactic terms. Romney must be "on a different planet," an Obama adviser declares. The president is "living in an alternative universe," the Republican Party chief says.
On planet Republican, the economy is backsliding, and the president is to blame. His stimulus spending did more harm than good, and his big-government rules are strangling businesses. The answer is repealing health care, energy and financial regulations and cutting taxes. That should spark investment and create jobs. Tackling the deficit requires huge spending cuts, just not at the Pentagon. The unsustainable guarantee of Medicare and Medicaid must change.
In the Democratic universe, the economy's slowly improving, thanks to government spending that helped fend off a depression. Another dose of targeted spending will help. Republican policies in the Bush administration — cutting taxes and eliminating rules — brought on the financial crisis and budget deficits. The rich should help dig us out by paying higher taxes. The Pentagon's budget must be cut, but entitlement spending can be controlled without drastically altering the social safety net.
"These two positions are almost diametrically opposed to each other," said Sung Won Sohn, a California State University economics professor. "And there's no common ground it seems."
They can't both be right.
How do voters decide which economic world they're living in?
You could try asking an economist.
Republicans and Democrats alike offer up prominent names — many still arguing the supply-siders versus Keynesian debates that heated up during the Reagan administration. Did President George W. Bush's tax cuts boost the economy or just pile up more debt? Was Obama's $831 billion stimulus worthwhile or wasted money?
"Our economy is too complex, too complicated. No one knows for sure what the right answer is," Sohn said. "Economists are the first ones to admit we've been wrong many, many times."
This time, the stakes are high.
Recovery from the financial meltdown and 2007-2009 recession has been slow. Not even half of the 8.8 million jobs that were lost have come back. States and cities are still laying off workers. Unemployment hovers at 8.2 percent. Even for those with jobs, wages and net worth haven't recovered. Europe's troubles pose new threats.
More problems are ahead: Annual deficits of more than a trillion dollars per year have piled up $15.7 trillion in national debt . The crush of baby boomer retirees over the next two decades threatens to ruin the nation's finances, unless politicians slow spending on Medicare and Social Security.
Anxiety about the mushrooming national debt, exacerbated by bank bailouts and stimulus spending, fueled the tea party movement that helped Republicans win control of the House in 2010. That set off a series of showdowns with Obama over taxes, spending and the federal debt ceiling.
"Our economy is too complex, too complicated. No one knows for sure what the right answer is.""
The ongoing brinkmanship has unsettled Wall Street investors, business owners timid about hiring and plenty of voters, too. Three-quarters of Americans say the federal government is too divided along party lines. Only 20 percent think it can usually work together to get things done, according to a Pew Research Center poll conducted in April.
A glimmer of Washington cooperation would make a big difference for the economy right now, said Mark Zandi, chief economist at Moody's Analytics.
"If they could signal that they would be willing to work together to do something substantive and helpful," he said, "it could ease the collective psyche and help soothe nerves."
So far, no one's signaling a congressional kumbaya to come after the November elections.
Instead, Obama is telling voters they can break the stalemate by electing Democrats. That's a longshot — an Obama win would be unlikely to sweep Democrats into control of the House. If elected, Romney is considered more likely to enjoy a kindred Congress. But Democrats would probably hold onto enough Senate seats to impede Romney's agenda under that chamber's rules.
Times of war bring the nation together; maybe economic peril can do the same. Are voters scared enough to push for action?
"People like low taxes. People like small government," said David Wyss, former chief economist for Standard & Poor's. "But then they want their Social Security and Medicare, and a strong Defense Department, and getting the airport and the roads built in their city. Nobody's willing to tell them they can't have it both ways."
Sohn, who's been following these debates since serving as an economist for Richard Nixon's White House, said the problems are too dire this time to allow politicians to hide behind their partisan differences.
"In this situation, the worst thing you can do is to cause gridlock by trying to stick to your economic philosophy," he said. "We want to make sure the economic ship stays afloat. If the ship sinks, all this argument is for naught."