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By Paolo von Schirach
June 1, 2012
WASHINGTON – The most recent US jobs report is pretty awful. The Stock Market reacted with a tumble that eradicated all 2012 gains. Only 69,000 new jobs added last month, while previous months have been adjusted down, ( GDP growth is also smaller than we thought). These new jobs numbers are not even half of what is needed just to keep up with population growth. No way to reabsorb the 12.5 million unemployed with such pitiful increments. As the US president is rated mostly on his ability as a steward of the US economy, disappointing employment numbers just months before the elections is especially bad news for incumbent Obama. His case for re-election all of a sudden has become much weaker.
Bad news is good news for Romney
For Republican challenger Mitt Romney instead the bad news is good news. The worse the economy, the stronger his case that we need new management in Washington, because Team Obama is just not up to the task. Will Mitt Romney get elected in November? Who knows. But certainly, if the economy stays in relatively poor shape, despite Romney’s public relations problems as a millionaire and despite the perception that he and the Republicans are against women rights, he may just make it. When things seem to go south, Americans are much more inclined to change coach.
That said, all this is about the political ramifications of a weak economy for which there is no easy fix. But I’am afraid that changing presidents may not change much, unless the broader climate changes as well. The problems are just too big.
Recovery slow and painful
Regarding the current contingency, let’s remember that we got into this deep trouble because of high debt –private and public– accumulated over a long period of time. De-leveraging is a long and complicated process. It takes a long time to pay back. In the meantime, with much less cash in hand, Americans spend less and so they do not pull the economy forward. By the same token, a heavily indebted federal government cannot invest.
Structural issues
But, beyond the current cycle, as nasty as this one is, America’s real problems are structural, and they cannot be addressed without a new national consensus. We need to retrain millions of people whose jobs disappeared because of Asian low cost competition and because of automation. We need to vastly improve our public education system in order to upgarde the quality of our future human capital. And, of course, we need to reform federal spending –and this means entitlements, (60% of total spending), with Medicare and Medicaid as the number one and two issues. And add to the mix badly needed fiscal reform, including simplification and the elimination of “tax expenditures”, meaning loopholes and special treatment for all sorts of privileged categories and sectors.
Nothing will get done without a new consensus
What does all this mean? It means that the magnitude and the complexity of the issues require a new policy consensus in Washington. No consensus, no far reaching reforms. No reforms, no fresh impetus for the US.
This anemic economy may very well be just what Romney needs to get elected. But then President Romney, short of a political earthquake that would wipe out the Democrats in the House and Senate, will be stuck in political gridlock just as Obama is today.
Again, America’s problems are systemic. And systemic issues can be addressed in this country only with a significant degree of cooperation between the two major parties. Sure enough, leadership from the man in the White House matters; but it cannot be everything. Short of renewed cooperation between less ideological Republicans and Democrats, there will be a stalemate under President Romney come January 2013 as there is a stalemate today under President Obama.
Compromise in the name of the national interest
American political leaders need to rediscover the art and especially the virtof dialogue and compromise in the name of the national interest. If the current ideological confrontations continue, then it will be just more political paralysis, with negative effects on federal finances and the economy, no matter who is in the White House.