After this month's resolution of the debt-ceiling crisis, Washington's new focus is on jobs, unemployment and what Congress and the Obama administration can do to reassure the American public, restore economic growth, and get people back to work.
The current period is characterized by persistent and far-reaching uncertainty. Markets are uncertain (look at the extreme volatility here and around the world), consumers are uncertain (look at their sluggish spending), businesses are uncertain (they are sitting on huge amounts of cash and are not investing -- either in equipment and infrastructure, or human capital), and government policymaking is uncertain (the prolonged hassling that led to the debt-ceiling resolution and, now, the uncertainty about what will happen with this new select committee by Thanksgiving).
What I'm hearing from business leaders is that this is now the period when they are making their capital-allocation and human-capital decisions for 2012. With this much uncertainty, they tend to be hesitant, conservative. If this is the case, we can expect both economic growth and hiring to be very slow between now and the end of 2012.
President Obama is seen as delegating major issues and not leading until the very end. His effectiveness will improve if he can learn to be a conviction President -- like Ronald Reagan or FDR, both of who excelled at crafting narratives for the American public. These narratives were important in explaining what the country has been through and where it is going. People quickly see through platitudes and pep talks.
Economics is, fundamentally, about psychology, and the president can play a significant role in altering the nation's psychology. Our political and economic leaders, therefore, need to change the psychology of expectations in a way that promotes greater certainty about the future.
So here are some specific suggestions that might change the current economic dynamic:
- An unprecedented joint press conference with the president, treasury secretary and federal reserve chairman in which they explain clearly why the recovery from a financial crisis (as distinguished from the typical business-cycle downturn) takes longer and what they are each doing to promote a faster recovery.
- Obama should explicitly embrace structural reform of the tax code. He headed this way with Boehner, but he should commit by September 6 to a plan outline that lowers rates, broadens the base, and simplifies the code in the way that Reagan and Senator Bill Bradley did in 1986. Waiting until November is not an option, especially since the select committee could deadlock and produce nothing except the automatic spending cuts.
- Obama should announce all the "dumb rules" he is eliminating (as per his January 2011 Executive Order) and then, following the approach of President George H.W. Bush, impose an immediate regulatory moratorium on all federal regulations that might slow economic growth and hiring. That moratorium should remain in place until growth gets back to 3 percent and unemployment goes below 7.5 percent.
- Stabilize the housing market, which is still in a deflationary spiral. Until that happens, the entire economy will remain sluggish. Obama should be working with every member of his administration, the Federal Reserve, and Congress who have ideas about this matter. We used to pressure the Japanese to have their banks get all of their nonperforming loans off their balance sheets. Have we followed our own advice?
- Launch an "America Works!" initiative, possibly through the Commerce Department with high visibility and support from the White House. Encourage Americans to buy goods made in this country and highlight companies that are expanding their U.S. manufacturing and repatriating jobs that once went overseas. If Americans want more jobs in America, then we should buy from Americans. (Note: this is a matter of consumer preference and not protectionism.)
- Highlight what is happening at DARPA -- the Defense Advanced Research Projects Agency. DARPA gave us the Internet. What is it doing now that could sound a positive note about our future and demonstrate why these types of basic research investments matter?
- Obama should not give up on the "Grand Bargain" with House Speaker Boehner.
- Prepare a legislative package for early September with the "low-hanging fruit" like the payroll tax cut, the infrastructure bank, etc. Such a bill will be helpful but, standing alone, will not be sufficient to alter current psychology.
Undoubtedly, many others will offer ideas in the weeks ahead. The key point is that our leaders must find ways to work together for the country's common good.
Former Education Secretary William J. Bennett used to say that in Washington, you're either on offense or on defense, and it's a whole lot better to be on offense. Congress has perhaps the lowest public approval in history, and President Obama's effectiveness and leadership are being questioned not just by Republicans but also by a growing number of Democrats. We need an all-out effort to put Americans back to work. Our leaders need to lead now; waiting for autumn is unacceptable.
Charles Kolb is president of the nonpartisan, business-led Committee for Economic Development in Washington, D.C. He served in the George H.W. Bush White House as Deputy Assistant to the President for Domestic Policy. The above views are solely the author's.