The Only Practical Way Out of Our Economic Doldrums

Both campaigns have one thing in common: Neither side has made the connection between their proposed policies and the robust growth rates we need.

In the forthcoming presidential debates, the issue of the federal debt and deficit is likely to come up. Just about everyone agrees that today’s trajectory is unsustainable, so the question is not whether the debt and deficit need to improve, but when, and by how much.  (For example, see a previous piece on this topic, "Why Growth Matters More Than Debt.")
America’s economic experiences during the presidencies of Eisenhower, Kennedy, Reagan, and Clinton demonstrate that growth is the most effective way to mitigate a debt burden, create jobs, and advance our standard of living. The current presidential campaign, however, lacks a clear growth message from either side.
Romney’s campaign highlights the truism that the deficit and the debt are unsustainable in the long run. Their solution is tax reform and spending cuts—but the campaign has not yet clarified the effect of tax reform or spending cuts on growth, let alone the positive effect growth would have on the deficit.
Obama’s campaign, on the other hand, says little about the deficit and debt, and instead blames income inequality for holding the economy back. Their solution is to revitalize the middle class by imposing higher taxes on the rich, and investing in infrastructure—but the campaign has yet to clarify how the income redistribution necessary for middle-class revitalization would subsequently fire up the economy’s private-sector growth engine, instead of triggering another recession.

In short, the two sides are proposing starkly contrasting economic policies, but both campaigns have some explaining to do. Our debt trajectory is not sustainable for the long run, and solving that problem will require deficit-reducing growth rates. Both campaigns need to explain more clearly how their policies would generate the growth rate we’ll need (over 4 percent, more than double the current rate) to create the permanent jobs we need and to make the debt sustainable.

Read more: http://www.american.com/archive/2012/october/the-only-practical-way-out-of-our-economic-doldrums