11/08/2012 09:52 am ET Updated Jan 08, 2013

The Next Four Years: Higher Growth

President Obama should not allow conservatives to define the agenda for the next four years. The very high priority granted to dealing with the fiscal cliff is a distraction because it defines the issue in terms of how much spending to cut and how much taxes ought to be raised. The true issue Obama is facing is the same one he faced four years ago: How to make the economy grow at a higher rate and reduce unemployment. This in turn requires (a) more, not less, stimulus now and (b) fixing the housing market -- not adding drags to the economy by cutting spending and raising taxes at this point in time. Even taxing the rich a "bit more" (as the president put it) is of secondary concern. It will not raise much money nor bring much justice. In contrast, reducing unemployment and ending foreclosures, will be much more consequential on both fronts. (Though, of course, taking more from the rich to support public goods is called for).

All this does not mean that the president should ignore the fiscal cliff but, rather, should avoid it -- as Alice Rivlin put it -- smartly. This means that he should make strong commitments to reduce the deficit once the growth rate stays above say 3.5 percent and unemployment below 6 percent for at least six months. Such commitments would not be credible if the sequester is canceled; hence it is best if it stays -- however the date it will be implemented is delayed.

With respect to reducing unemployment, although investing in education is an essential idea, it pays off only over the long run, as kids become adults. For now, the focus should be on hiring more teachers, which directly reduces unemployment, increasing funding for not-for-profit community colleges, and retraining workers.

Investing in the infrastructure, too, is an essential idea, however, such investment generates relatively few jobs because much of the money goes to capital goods (e.g., steel), many of which are made overseas. For now, the focus should be on those projects that generate many new local jobs -- for instance, installing solar panels or making pathways for bikes.

Next, the president should commit to defending the social safety networks, rather than cutting them in order to reduce the deficit. Once the Democrats agree to cut into Medicare and Social Security, there will be no stopping the conservatives from demanding further cuts. And there are ways to ensure both programs get the funds needed by making other changes, such as reducing fraud, restricting procedures that are useless, and cutting paperwork among others. All of this includes implementing Obamacare so that the millions who are currently uninsured will have access to affordable health care.

At the same time, the president ought to scale back the social safety nets that have been created for "too-big-to-fail" financial institutions. As Gretchen Morgenson notes in the New York Times, despite the general perception that Dodd-Frank will protect Americans from having to bail out the banks again, the law has actually expanded the number of institutions that can draw upon the Federal Reserve if they get into trouble. To quote Morgenson, "the lucky [financial institutions] got the best of both worlds: access to the Fed's money and no penalty for failure."

Last but not least, Obama should temper his idealism and not preoccupy himself with building his "legacy." To focus on another treaty with Russia to stand down some more nuclear weapons in a vain attempt to get to zero and "inspire" other nations to give up their nukes as well would be to squander his political capital and leave little mark on history. He would be better off focusing on countering the pressure to abandon the Middle East in favor of a foreign policy centered around confronting China in the Far East. The Middle East is still where the hot spots are and framing China as a foe is a grave mistake. China has no global ambitions and is preoccupied with its domestic problems. It should therefore be allowed a greater regional role rather than be subject to an attempt to replay the Cold War and seek to contain it. If the president beefs up the economy and prevents the United States from being dragged into another war -- his legacy will take care of itself.

In contrast, if the economy continues to be sluggish in 2014, after six years of Obama, the narrative of "I need more time" will not play. It could turn 2016 into another 2004-like election which is about the last thing the nation needs.

Amitai Etzioni is a University Professor of International Relations at The George Washington University and author of Hot Spots: American Foreign Policy in a Post-Human Rights World, published by Transaction. For more on Hot Spots, see: