With a presidential race focused on the ailing U.S. economy, Foreign Policy asked the experts to help fill in the blanks.
- By Alicia P.Q. WittmeyerAlicia P.Q. Wittmeyer is the Europe editor at Foreign Policy. Her work has appeared in the Los Angeles Times, the Washington Post, and Forbes, among other places. She holds a bachelor’s degree from the University of California, Berkeley, and master’s degrees from Peking University and the London School of Economics. The P.Q. stands for Ping-Quon.
Obama should have…
Focused on economic recovery and job creation rather than remaking the health-care system. —Steven J. Davis • Broken up the large, too-slow-to-lend, too-big-to-fail Wall Street banks. —David Smick • Taken advantage of his popularity and mandate to propose and push for true reform of entitlements. —Jeffrey Miron • Said that the 2009 stimulus was a great first start, was not nearly large enough, and we will almost certainly need more, the day after it passed. —Dean Baker • Started acting unilaterally sooner. —Richard Thaler • More forcefully promoted financial reforms and infrastructure investments, creating a second “New Deal.” —Ann Harrison
• Done more for housing. —Peter Diamond • Pushed for another stimulus package. —William Gale • Understood that Republicans would block any further attempts to ensure a robust economic recovery, and pushed for a larger stimulus package in 2009. —Menzie Chinn • Endorsed Simpson-Bowles. —Daron Acemoglu • Pounded the Republicans at every opportunity over their refusal to go along with plans to promote job creation and help the unemployed. —Mark Thoma • Tacked more to the center-right. —Tyler Cowen • Followed President Clinton’s example and moved to the political center after a disastrous midterm election. —Richard Burkhauser • Allowed market forces to work instead of following the Bush administration’s path of bailouts. —Edwin Burton • Governed more, campaigned less, taken on his left, and struck a deal that was available to him on the deficit. —Irwin Stelzer • Been more courageous on trade policy and on deficit reduction. —Uri Dadush • Lowballed the administration’s January 2012 forecast for future unemployment, in order to be able to outperform expectations. —Jeffrey Frankel • Stayed in the Senate. He wasn’t ready to be president. —Eugene Fama
My out-of-the-box idea to bring back U.S. jobs is…
Create a G.I. Bill for people whose jobs have been eliminated by globalization. —Daniel Altman • Raise the federal minimum wage to $12 per hour. —James K. Galbraith • Reduce the cost of hiring, separate health care from employment, eliminate the minimum wage. —Mark Calabria •
Shorten workweeks. If we really don’t have enough that needs to be done, we can all work shorter hours. — Dean Baker • Encourage the natural gas boom, including rapid construction of a transportation infrastructure for refueling compressed and liquefied natural gas. —Martin Baily • Invest more in education. We need a more skilled workforce. —Richard Thaler • End the tax advantages for outsourcing. —Daron Acemoglu • Increase immigration as a way of reviving the housing sector. —Justin Wolfers • Have the Fed commit to reflationary policies (raising target inflation to 3 to 4 percent) until unemployment is below 6 percent. —Jeffry Frieden • Remove the high-cost regulatory impediments to the IPO market. —David Smick • A zero capital-gains tax rate and significant entitlement cutbacks. —Amity Shlaes • Cut expenditure, cut expenditure, cut expenditure. —Jeffrey Miron • A stable, simple, and transparent tax system. —Steven J. Davis • Solve the eurozone crisis. —Maurice Obstfeld • We don’t need an out-of-the-box idea. Good ol’ stimulus works in a weak economy. We just need to do it. —William Gale
If Congress fails to avoid the “fiscal cliff,” then…
The U.S. economy will be pushed into recession, taking the global economy with it. —Mohamed A. El-Erian • There will be an immediate recession in 2013 — probably short-lived, but it will set back the necessary long-term fiscal rebalancing. —Tim Kane • The economy will go into a double-dip recession, with unemployment rising maybe above the peak level of the Great Recession. —Martin Baily • [The United States] would become more like Europe with high unemployment and relatively low levels of income. —John Coleman • There will be a temporary economic slowdown, but also a smaller deficit that will help bring the economy back into balance in the longer run. —Uri Dadush • Negative 2 percent knock to GDP, but maybe some fiscal sanity in the longer run. —Tyler Cowen • It will scramble to enact retroactive tax cuts early in 2013. —Donald Marron • In January Congress will have to cut some tax rates for the middle class from the new, higher rates. This will be easy. —James K. Galbraith • Tax rates will climb, enabling bigger government and pushing the U.S. modestly closer to a Greek-style fiscal crunch at some point in the next couple of decades. —Daniel J. Mitchell • Both consumer and business confidence will collapse, the dollar will weaken, and U.S. equity markets will take a significant hit. —David Smick • There might be a recession, but the resultant reduction in the deficit might, just might, prove to be a reasonable substitute for the elusive “grand bargain.” —Irwin Stelzer • The economy is likely to stagnate regardless, unless there is a major retrenchment of government activity. —Edwin Burton • It will have caused the most predictable and preventable recession in U.S. history. —Jeffrey Frankel • We will have even more evidence that politicians on Capitol Hill are more interested in posturing meaningless games than in doing anything that really matters for the fiscal position of the U.S. government. —Ricardo Reis • It won’t. The future success of the country requires a functional Congress, and the current stakes are too high for Congress to fail again. —Lee Ohanian
If Romney becomes president, the U.S. economy will…
Improve somewhat more than under Obama. —David R. Henderson • Grow faster than it is growing now. How much faster depends on how much policies will change, which in turn depends on the political composition of Congress following the elections. —Lee Ohanian • Grow faster thanks to fundamental tax reform that is bipartisan, grow faster thanks to freeing the health-care market, grow faster thanks to a free trade agenda, and experience a jobs surge. —Tim Kane • Continue to recover slowly, but his policies will exacerbate the widening gap between the rich and the middle class and worsen the situation of the poor. —Martin Baily •
Suffer from growing income inequality, growing inequality of opportunity, and growing poverty among children. The result will be an increase in structural unemployment and a reduction in the economy’s potential growth rate. —Laura Tyson • Experience a further deterioration in income and wealth inequality. —Mohamed A. El-Erian • Have an even less equitable distribution of economic opportunity, become less meritocratic, and grow much more slowly in the long term. —Daniel Altman • See an unprecedented wave of upper-income tax avoidance. —James K. Galbraith • Be much riskier for typical households as social insurance programs are eliminated. —Mark Thoma • See inequality increase, as well as deficits. —Richard Thaler • Grow somewhat faster and offer a more attractive environment for business investment and job creation. —Steven J. Davis • Have businesses confident enough in U.S. government policy to invest and restructure to become more globally competitive and employ more U.S. workers. —Stacie Beck • Face a lot of the same problems as it does now. —Tyler Cowen • Continue to stagnate. —Jeffry Frieden • Probably do pretty well if he just has big tax cuts and doesn’t worry about the deficit like past Republican presidents. —Dean Baker • Probably do better, but only if he can strike a deal on the deficit that includes some tax increases. —Irwin Stelzer • Probably be fine. But I don’t think there’s much of a chance that he’ll implement much of his agenda. —Justin Wolfers • Depends on what the pressure of politics allows him to do. —Eugene Fama • Sputter. —Peter Diamond
The worst thing about the economic recovery is…
How slow it has been and how hard hit low-skilled workers have been. —Martin Baily • The dismal state of the labor market, with essentially zero recovery in the employment-to-population ratio since mid-2009. —Steven J. Davis •
The unprecedented level of long-term unemployment. The longer would-be workers go without jobs, the more their skills and attachment to the labor force deteriorate and the harder it becomes to match them with new jobs. —Karen Dynan • That so little has been done to reform the institutions that were at the epicenter of the financial crisis that caused the recession. —Deborah Lucas • That the U.S. has not addressed the fundamental policy mistakes that helped generate the past crisis and recession: “too big to fail,” misguided housing policies, runaway entitlement and other spending, and an out-of-control regulatory state. —Jeffrey Miron • That it doesn’t feel much like a recovery because household balance sheets are still weak and business investment is still held back by macroeconomic uncertainty. —Daron Acemoglu • Politicians have used a weak economy that was caused by bad government policies as an excuse to adopt more bad government policies. —Daniel J. Mitchell • The slow pace of recovery fuels an endless parade of cranks, intent on using projected deficits to justify cuts in Social Security, Medicare, and Medicaid, which would do vast personal harm and no economic good. —James K. Galbraith • We are seeing how many of our problems were “baked in” some time ago. —Tyler Cowen • That it was avoidable. Failing to take the opportunity to invest in infrastructure when construction workers are unemployed and the government can borrow at negative interest rates is criminal. —Richard Thaler • That with better monetary and fiscal policy — particularly fiscal — the recovery didn’t have to be so agonizingly slow. —Mark Thoma • The unnecessary suffering caused by the 12 million jobs below what a normal recovery would have generated. —Tim Kane • The callous way Republicans have preempted any attempts to use fiscal policy productively, while Americans have been suffering joblessness and deprivation, just to accomplish their personal political goals. —Daniel Altman • How slow and faltering it has been. —Justin Wolfers • That it might take a decade. Tens of millions of people are suffering because the folks in Washington are too incompetent to manage the economy properly. —Dean Baker • Its absence. Bad policy has prevented the economy from making a normal recovery. —Edwin Burton • It hasn’t happened. —Eugene Fama