The federal deficit and debt are not our biggest immediate problems. Jobs and growth are.
The best economic news coming out of the election is that, unlike four years ago, the world is not on the brink of a second Great Depression. This is no small thing.
Indeed, the U.S. recovery has been looking more solid in recent months, averting the stall speed it faced last summer. Coming back from a recession caused by a banking crisis takes years, and we’re doing better than might have been expected.
Some of the healthier metros, including Seattle, are booming again, thanks to technology, trade and energy.
All this would have been true whether Barack Obama or Mitt Romney had won.
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Now, to the tough challenges ahead.
I’m going to bet that we avert the so-called fiscal cliff, $668 billion in spending cuts and tax increases that will automatically kick in Jan. 1 without a budget agreement. Both President Obama and House Republicans have strong incentives to avoid this recession-risking event.
The big question is whether the most combative members in Speaker John Boehner’s caucus are willing to once again bandy about the threat of default in another debt-ceiling fight. If so, this dangerous move would hurt the economy and reaffirm questions about whether we can govern ourselves.
This will not be the end of the debate over the size of the federal government. I can think of few people who want it to be bigger. The argument is over where to cut: for example, the social compact versus defense. This will take many elections to sort out. But we can’t afford a militarized, global empire on very low taxes, even if we toss the poor aside.
The deficit and debt are not our biggest immediate problems. Jobs and growth are. America has added almost 5 million jobs since the trough of the Great Recession, but it is 9 million jobs short of where it should be with the potential growth of the labor force.
Without stronger growth of the productive economy that reaches deep into the middle class, we will never be able to reach anything resembling fiscal balance.
The most profound imbalance is not between tax revenues and federal spending. It’s between potential and opportunity.
Some 60 million American workers are in service jobs paying an average of $30,000 a year. More and more jobs are part time. Since 2006, the retail and wholesale sector has eliminated 1 million full-time jobs and added 500,000 part-time jobs.
Even many in the economic elite worry. I heard a thirty-something software developer musing about how he expected to be pushed out when he reached 45, replaced by a younger, cheaper worker.
Young college-age Americans may get those jobs, but they generally pay less than the entry-level positions found by my generation in the 1970s, and today’s graduates carry unprecedented student debt.
At the other end of the age scale, older Americans may even want to work longer as part of a bargain on Social Security and Medicare. But good jobs must be available and employers must be willing to hire them.
Economic mobility is far lower for average Americans than it was 30 years ago. Income inequality is at levels not seen since the 1920s. Wages are continuing their stagnation and, in many cases, retrograde move. Human capital is wasted in the underfunded schools of poor neighborhoods.
Unaddressed, this is a combustible mix that should make any political party wary about drawing grand conclusions from last Tuesday’s results.
Genuine small businesses face head winds, too. Many are crowded out by decades of industry concentration and proto-monopolies and cartels.
These giants can pay for policies that ensure their continued dominance. Meanwhile, bank lending to small companies continues to lag.
If small companies suffer from Obamacare, which doesn’t fully kick in until 2014, it will have failed. On the other hand, Romneycare, on which it is modeled, is highly popular in Massachusetts.
The financial sector remains unreformed and dangerous, too often gambling rather than assembling capital for productive and innovative activities.
Climate change remains unaddressed and more dangerous still, promising ever-increasing costs. See: Sandy, Superstorm.
We’re not going to get a next New Deal from this cautious president. Perhaps we could see some infrastructure building, incentives for good financial behavior, intelligent regulatory reform and robust promotion of balanced trade. A carbon tax would be a start on climate change.
A healthy economy would do much of the rest to bring a better recovery. Ours lacks the resilience of the last half of the 20th century for a variety of reasons.
But, it is still the largest and most powerful on the planet.
It won’t remain that way without a growing middle class that shares in the prosperity.
Maybe Wall Street and the plutocrats that bet so heavily against Obama and lost will be stunned enough to realize this, too.
Once they rebalance their portfolios for slightly higher tax rates, we shall see.
You may reach Jon Talton at email@example.com