9/27/2010 8:00 PM ET|
How Obama can fix the US economy
Some advice on filling that economic-adviser job at the White House: Think big, get tough in the global economy, and invest in America's future. Oh, and call Jim Jubak.
Why doesn't my phone ring? I'm eating with it at my elbow. I've changed the way I walk to work to avoid cell phone dead zones. I'm even sleeping with the phone. And still no one has called to offer me the post.
I know the phone's going to ring, though, and I want to be prepared for the Big Question: What would you do to turn around the U.S. economy?
I've quickly worked up this draft of an answer. I don't know how much more time I have before the president calls.
Change the way we define the problem
No more baby steps. You don't fix a crisis this big by tinkering around the edges. I had this drummed into me in a business school class in 1984. My assignment was to come up with a budget to fix the New York City economy. The professor read my carefully prepared solution and laughed. Well, actually he guffawed. You think you can fix this budget, he asked, by closing firehouses?
Now I'm looking at a $14 trillion U.S. economy with an unemployment rate pushing 10%. Tinkering with the tax code or offering a FICA tax holiday isn't going to fix this crisis.
Admit that as bad as things are now, they weren't exactly swell before the crisis. Incomes for the average family have been stagnant for the past 30 years -- especially if you take out extra dollars that come from having more moms in the work force and having one or both parents work extra and/or temporary jobs. For some workers -- blue-collar industrial workers and workers without high school degrees -- the Great Recession began not in 2007 but in the 1980s and hasn't ever ended.
Even the great job-creation surge in the Clinton years doesn't look like the best of times when you consider the kinds of work created -- lower-paying, predominantly service-industry jobs -- to replace the higher-paying manufacturing jobs that had been lost.
Let's admit that the ideas now getting recycled in the midterm election campaigns from both parties haven't prevented or reversed that long income stagnation -- and they aren't likely to. It's not because tax cuts, tax increases, education credits, No Child Left Behind, spending cuts, spending increases and the other patent medicines peddled by politicians don't have any effect but because they're too narrowly focused to end a 30-year problem.
As Larry Summers would say -- if we transplanted James Carville's brain into the Harvard economist's body (and that would sure be fun) -- "It's the global economy, stupid." Fixes that ignore the global economy are going to be too small or completely misguided. And those of us who live in the United States will have to give up some of our economic illusions. (Come on, you can do it. It's not nearly as painful as giving up "Mad Men.")
For example, it's time to concede that when it comes to exports, the U.S. has become essentially a commodity economy. We export corn, coal and scrap paper, and we import TVs, cars and solar cells. Export our way out of this mess with an extra paragraph here or there in our trade treaties? Oh, puleez!
Play hardball (or insert your own sports cliché here)
Let me give you an example ripped from the headlines, as we say here in New York. China has slapped quotas on its exports of rare-earth minerals essential for building hybrid cars, wind turbines, amplifiers for optical cable communications networks and the newest fluorescent lights. If companies want to build these products and are worried about their sources of these raw materials, they can make sure they have plenty to work with quite simply -- by moving production to China.
And we're going to fight back against this sort of globalism by creating a $30 billion loan fund for small businesses or lowering mortgage rates (by having the Federal Reserve run up its balance sheet)?
It's war out there in the global economy, and the battle is to secure the world's scarcest commodity: good jobs. That's way better than real war, let me remind you. But to stand a chance in this war, the U.S. has got to at least match the firepower of the other countries.
In this competitive economic war, we can't afford to have all the battles fought on our turf, and we can't always be on the defensive. European and Chinese makers of high-speed trains are going to fight it out to see who gets billions in U.S. taxpayer money to build a high-speed line in California.
Where's General Electric (GE, news)in that competition? And if we don't have the team that can play in the big leagues in high-speed trains, how about we go after China's market for freight cars or freight locomotives?
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