The Obama administration must have found the latest survey of economists by The Associated Press sobering. We know we did.
A majority of economists expect the national unemployment rate will remain stubbornly fixed above 6 percent for at least the next four years.
The economy simply isn’t growing fast enough to bring it down any faster.
Nationally, the unemployment rate stood at 8.2 percent in May. In reality, of course, the rate is significantly higher if those who have given up looking for work or those who are only working part time but want full-time work are counted. The extended misery in the jobs market is a hallmark of financial meltdowns. If the job market remains as unhealthy as the economists surveyed by the AP predict, it will still be weak seven years after the official end of the Great Recession.
In our view, there is only so much that the federal government can do. Presidents, in particular, get far more credit than they deserve when the economy is good (think Bill Clinton) and far more blame when it is not.
But there is one major thing the president and Congress can do that would prevent things from getting worse: Congress could give businesses and individuals some certainty about tax and spending.
The nation faces a fiscal cliff at the end of this year — one created when Congress couldn’t agree on a long-term plan for taxes and spending during the debacle over raising the debt ceiling a year ago. At the end of this year, the tax cuts passed during the administration of President George W. Bush expire, and a series of mandated spending cuts, negotiated a year ago, are due to take effect. Economists are worried that the combination of those tax hikes and spending cuts — $8 trillion total — in a weak economy would push the nation back into recession.
We think that taxes eventually need to rise on upper-income earners. But this is no time for an across-the-board tax hike, which is what would happen if Congress fails to act. While that’s unlikely, the current dysfunction on Capitol Hill makes almost anything possible. Deep spending cuts at this point also are a mistake.
We’d like to see a “grand bargain” modeled on President Barack Obama’s fiscal commission known as Simpson-Bowles. That commission, which Obama and lawmakers ignored, recommended a combination of tax hikes and spending cuts to bring the nation’s long-term finances under control. Any deal should include tax reform with an eye toward lower rates and fewer carve-outs. Unfortunately, there isn’t much serious talk in Washington about either long-term spending reform or the tax code.
One exception: Sen. Lindsey Graham, R-S.C., who hinted in an interview with ABC recently that he might be willing to renounce his pledge never to raise taxes. “We are so far in debt that if you don’t give up some ideological ground, the country sinks,” Graham said.
Much of what is holding down growth is beyond the control of the president or Congress. The current economic turmoil in Europe is a good example.
But concern remains that even these measures are inadequate. And that lack of resolve across the pond is hurting manufacturing output here. It was down in June for the first time in nearly three years. Production declined, and the number of new factory orders plunged, according to the monthly report by the Institute for Supply Management in Washington, D.C.
All the more reason for the government to take care of what it does have some control over: taxation and spending. Congress should reach a deal on spending cuts in a way that won’t hurt the economy and extend most of the Bush tax cuts. And lawmakers ought to be ready to bolster the economy with additional spending next year if needed.
It’s unrealistic to expect a deal before the presidential election, but that’s cutting it close, allowing less than two months to negotiate a fix until the witching hour on Dec. 31, and making the chances for another temporary fix more likely. Even so, members of Congress and the presidential candidates could pave the way for a broader deal by getting serious about the challenges and giving honest assessments now of what will be required. So far, very few of them have been willing to do that.
The Wilwaukee Journal Sentinel