07/12/2011 02:22 pm ET | Updated Sep 11, 2011

The Economy: Sorcery or Sacrifice?

The latest jobless numbers are not good, a conclusion admitted by Democrats and seized upon by Republicans. The solution, however, is something neither party seems able to deliver. The former argue for staying the course -- the notion that time will take care of the fact that eight million Americans still need jobs. After all, they note, it took us time to get into this mess so it will take us time to get out of it. Democrats would offer another stimulus package, except that a debt-ridden and deficit-dominated public won't go for it. And so they are left with a sort of benign neglect as official policy. For their part, the Republicans argue for -- surprise -- tax relief, at least for the wealthy and businesses in the form of continuing lowered tax rates for those who make more than $500,000 a year and maintenance of tax subsidies for business. The mantra that higher rates and the elimination of corporate subsidies would be "job killers" leaves unexplained how, ten years after the Bush tax cuts and with corporate accounts overflowing with cash, we still manage to have eight million fewer jobs than the "job creating" Republican policies guaranteed.

The economy thus seems mired in its own version of gridlock. We lack the resources to stimulate it, and every solution offered is blocked by entrenched interests. Breaking this cycle of debt and joblessness will be the dominant topic of the 2012 elections. We should listen carefully for two messages, one of which we are much more likely to hear than the other.

The most frequent message is likely to be of potential and promise. America can rise to new levels of prosperity, we will be told, "if only..." The "if only" will be followed by a mixture of hope and homilies. From Republicans, we will be asked to recapture the glorious (Republican) past of supply-side economics, where lower taxes, less regulation and less government were presumed to have brought a more balanced federal budget and great economic growth. Ronald Reagan redux. From Democrats, the campaign message is likely to focus around how much better off we are now than we were four years ago, how much worse things could have been, and how it was Democratic economic policy that produced the only budget surplus of the past two generations. Bill Clinton redux.

All this is sorcery. Reagan dramatically increased the debt. Supply-side economics has never worked, at least according to most economists. Clinton benefited from the dot-com boom, and his pro-business policy helped Wall Street and mortgage lenders take a free ride at the expense of millions who have suffered the consequences. If the only message we hear from presidential candidates next year is the need to hearken back to a mythic past, the future will be mythical too.

What both of these presidents did do, however, and this you are not likely to hear in 2012, is raise taxes. They knew that a spending-only policy was not consistent with America's long-term economic interests. Yet, the message that Americans need to sacrifice to right the economic ship is not likely to dominate the next election.

To be fair, millions of Americans have been sacrificing. They are out of work, and their families are paying the price. But that is unwilling sacrifice. It is painful but will not fix the economy. Willing sacrifice might.

First, the president we need must offer a message that he (or she) is almost convinced will lead to electoral defeat. That is the first kind of sacrifice -- to tell voters unpopular truths -- about what got us unto this mess and what it will take to get us out. Second, business and industry and all kinds of other groups, will need to offer concessions in the form of favored tax breaks, lower bonuses and perks for their leaders, smaller profit margins, and lower cash reserves so they can hire a few more workers and invest a little more in the R&D needed to create new business opportunities. Third, Americans will have to acknowledge that they need to get social security later in life (hence work longer), pay Medicare premiums on more of their earnings, and -- if they are wealthy -- pay more in taxes. Fourth, we will all need to pay for more infrastructure and R&D spending to generate future industrial growth -- at the expense of personal consumption. If the economy is truly two-thirds dependent on personal consumption, why has no one suggested that this dependence could be excessive. Shifting five percent of consumption to long-term and job creating investment -- about $700 billion -- might be a reasonable goal to set. If we truly want our children to have a better life than we do, we need to accept a lesser material life for ourselves to get there. Fifth, America needs to do a much better job at educating ourselves -- and the young must work a lot harder in school. That means more time on task and less on texting. Thomas Jefferson said two centuries ago that a society that "expects to be ignorant and free expects what never was and never will be." We might amend that to say "ignorant, prosperous and free."

Asking Americans for material sacrifice is not unimaginable. Presidents have done it before. FDR did it to win a war. Truman did it ("Meatless Tuesdays") to win the peace. Shared sacrifice can actually bind -- as well as build -- a nation. This will be a difficult message, however. We have built an economy based on consumption, pushing the bill out to the future. Sorcery, however, is not an option. It works for a while -- remember Mickey Mouse in the Sorcerer's Apprentice -- but eventually you get overwhelmed by your own untenable beliefs.