President Obama is in deep trouble, but Newt Gingrich, if nominated, is no cinch to win the presidency. His personality and three marriages aside, he has not yet tabled a convincing program to fix the economy.
Of late, the economy has showed a bit more bounce—gas prices feel low enough to lift auto sales, and the jobs market, though not great, has improved. However, oil prices are surging again, gas prices will soon follow those up, and most economists see things getting tougher in the New Year—even if Europe does not melt down.
The President blames the Bush era tax cuts and irresponsible deregulation for imposing critical damage on the economy that will take years to repair it. However, his words and actions tell another story.
The economy suffers from too little demand for what Americans make. Consumers have returned to the malls, but the huge trade deficit with China and on oil sends too many dollars abroad that do not return to buy U.S. exports.
Campaigning in the Midwest in 2008, Mr. Obama promised to redress China’s undervalued currency and protectionism, and soon after taking office he warned the Middle Kingdom to mend its mercantilist ways, or the United States could act unilaterally. The President sent envoys to Beijing, but Sino leaders sensing weakness called his bluff, and Barack Obama has proved wanting.
President Obama acknowledges the need to develop conventional oil and gas, but after the BP disaster in the Gulf, he has punished all oil companies for the sins of one with burdensome regulations and continued arbitrary limits on offshore leasing.
With oil hovering near $100 a barrel and advanced internal combustion engine technologies now coming on line, it is possible to raise U.S. oil output to 10 million barrels a day, deploy more domestic natural gas, and reduce oil imports by two thirds, and perhaps even start exporting oil again.
Dodd-Frank gave the President his financial sector reforms, but it has permitted Wall Street to increase its choke hold on capital markets. Together, large Wall Street banks now control more than 60 percent of the nation’s bank deposits, have driven down rates paid on CDs, and refuse to fund loans for small and medium sized businesses. Instead, they engage in trading reminiscent of 2005 through 2007, and finance outsourcing by multinational corporations.
Mr. Gingrich polls strongly among conservative Republicans but not independents, who must be convinced he has a program to get the economy going again. In battleground states like Pennsylvania and Ohio, which struggle with declining manufacturing and have no substantial stake in the financial services and high tech industries, the usual Republican mantra—free trade, tax and spending cuts, and deregulation--won’t cut it.
His campaign website lists nine initiatives to fire up the economy—some quite worthwhile, including revving up U.S. oil and gas production and entitlements reform. But instead of even addressing China and trade policy, the platform offers some vague pulp about strengthening the dollar.
He wants to repeal Dodd-Frank and break up government-sponsored Fannie Mae and Freddie Mac, but he does not explain what he would do about concentrations of financial power on Wall Street, and how he would make funds available again through to regional banks to finance small and medium sized businesses.
On the stump—including in the debates—Mr. Gingrich has railed against destructive consequences for the U.S. economy Chinese mercantilism and what he characterizes as “criminal behavior” on Wall Street, but he tells us little or nothing about whether or how he would confront China or break up Wall Street’s monopoly grip on financial markets.
Newt Gingrich is a charismatic personality with a marvelously entertaining mind and often provocative ideas. However, until he tells voters how he is going to crack the toughest challenge President Obama has refused to confront—China and Wall Street—he simply won’t cut it where it counts—blue collar counties in western Pennsylvania, the Midwest and Upland South, where the line between red and blue America is divided each election night and the Presidency is won.
Peter Morici is a professor at the Smith School of Business, University of Maryland, and former Chief Economist at the U.S. International Trade Commission.