If you'd asked me a year ago I would have predicted that by mid-2012 Barack Obama's re-election would have been assured, with the only question being whether he would win by a comfortable margin or a complete blowout. That's because the Great Recession--which began at the very end of 2007 and hit its nadir in 2009--should have ended by now so that 2012 would be a year of solid job growth and an unemployment number dropping steadily through the year.
For various reasons--and the politically-charged reasons being debatable--that just has not happened. Unemployment is still above 8% more than four years after the recession began, and job growth is barely keeping pace with inflation. Of course, those numbers aren't so bad as to guarantee Obama's defeat (say, monthly job losses and unemployment above 9% might have done that) but they certainly keep Mitt Romney in striking distance. Which is amazing, considering Romney's weaknesses as a candidate and demographic advantages for the Democrats.
This is all distressing to me--not the possible outcome of the election; whichever of these guys wins they're not likely to get anything substantial accomplished due to the closely divided nature of Congress--my concern is more about what longlasting effects this economic mess is having on the country. The long-term unemployed are atrophying, as they fail to gain experience, skills and of course the money that would enable them to contribute more fully to society down the road. Economic stagnation is also the principal cause of these massive trillion-dollar deficits that now have our national debt reaching 3/4 of our total GDP--all of which has to be paid off by future taxpayers who now appear less able to shoulder the burden each year. A weak American economy also affects Asia, the Eurozone and South America--along with the rest of the world--and the cycle builds on itself. A collapse in America usually means replacing one political party with another, but a collapse in fascist China could have far more devastating effects.
The presidential campaign seems to be boiling down to who Americans (or let's face it--Ohioans, Floridians and Virginians) are more put off by--a rich guy who made a fortune legally but in ways that seem unsavory to those who don't understand economics and the unpleasant decisions thereby required, or a sitting president who might secretly want to nationalize every industry to fit some Fabian socialist model. What would be more refreshing would be a debate about the following:
1) Taxes. If there's one person in the country who thinks our federal taxation system is just fine the way it is, I'd be interested in meeting him or her. The question though is how to fix it--make it more progressive? Make it more simplified? What benefits--which deductions, credits, exclusions, different tax treatments for various sources of income--are we willing to give up for the sake of fixing the system? And how much more revenue should we realistically expect from our tax system? Or should we not be trying to tax anyone more at this point while the economy is still weak?
2) Spending. Cuts to spending will be necessary at some point--but should this be put off until the economy is stronger? Or, counterintuitively, would deficit reduction itself improve the economy by strengthening the bond market or diminishing future uncertainty? Arguably it is the fear of unknown future austerity measures that is preventing a lot of private spending and hiring and investment. Is there any truth to this idea? Also, if there are to be spending cuts now, where best to make them?
3) Regulatory Reform. While tax rates affect businesses and individuals, this of course only really matters to businesses and individuals that aren't running at a loss. Regulations though (as well as legal liability) matters whether you're in the red or in the black, and can further hamper risk taking. Is there room for easing regulatory burdens in a way that doesnt' cause more societal harm? What reforms should be on the table?
4) Stimulus. Is there any appetite for a further round of stimulus, and what form should it take? We've tried a mix of spending increases and tax cuts, with mixed and debatable results, in 2008 and 2009. What would be different this time, and can it pass?