Faisal Rahman: Facts, myths and election-year spinning
By Faisal Rahman June 22, 2012 7:48PM
Updated: July 25, 2012 6:32AM
Every election year, the politicians play with economic numbers,
assign faults to the wrong person, promise the impossible and hope to sway voters.
Those of us who work with economic numbers, both as academicians as well as practicing businessmen (or women), are amazed such things can go on when everything can be easily verified.
Here are insights into some hot economic issues that should not come as a surprise to educated observers of the economy.
Allegation No. 1: The increase in gasoline prices is the fault of the president. Every president since Richard Nixon has warned about U.S. dependency on imported oil and called for an energy policy that includes sources other than fossil fuel.
Speeches aside, none of the presidents or the Congress has really moved the country in a significant way in the direction of real independence. Over the years, our influence on the market for imported oil has lessened.
The present increase in usage reflects greater use of energy by the Chinese and the Indians. All of the talk about unrestrained drilling and a pipeline from Canada is just talk that will have no impact on gas prices even by the 2016 presidential election date.
Also, Newt Gingrich’s promise to bring gas prices down to $2.50 a gallon if he became the president was an insult to the intelligence of the American voter. The president can do very little to change prices in the short to medium term.
Allegation No. 2: President Obama’s policies are responsible for high
unemployment. The president inherited an economy that was in a freefall. Jobs were being lost at the rate of about 700,000 a month when he was inaugurated.
Obama’s policies as well as the Fed’s intervention have stopped the rate of job loss and over time have reversed the trend. New jobs are being created in sectors such as manufacturing, which has historically lost jobs, and corporations are reporting record profits.
It is true that the rate of job creation is not fast enough, and the economy still suffers from uncertainty, which is a job killer by itself. And the cause of the uncertainty is the fault of both the president and the Congress.
Allegation No. 3: The budget deficit and national debt are the fault of President Obama. President Clinton left us with a surplus. President George W. Bush opened up the path to a deficit when he decided to embark on two wars (Iraq and Afghanistan) and hugely expanded Medicare spending (prescription drug coverage).
For a “conservative” Republican, Bush did not cut a single dollar or program from the federal budget. The House and Senate collaborated with him in looking the other way when the debt ceilings were raised time after time. Obama had to embark on deficit spending to prevent a collapse of the financial institutions and employment prospects.
Could we have managed the deficit spending better and prevented waste? Absolutely. But the born-again fiscal conservatives (pushed by the Tea Party) created gridlock in Congress, which contributed to the lowering of the AAA rating of U.S. bonds and largely froze investment funding by U.S. corporations.
So what are our prospects for the future? We have a slowly recovering, fragile economy. The path out of a recession is still fraught with danger — the European economy is probably headed toward a recession, which could slow the rate of growth and recovery here.
The real challenges for the U.S. include the following:
A crumbling infrastructure with highways built more than 60 years ago, power grids dating back 100 years, and a total absence of mass transportation in most big cities.
A failed education system producing a workforce not skilled enough to meet the demands of the new economy (there’s a huge mismatch between people seeking jobs and the jobs companies are offering).
A tax system that discourages successful companies from bringing back profits that could be invested at home, and escalating health care costs and litigation that make American businesses less competitive in the global environment.
We must do everything we can to preserve and encourage innovation in the American economy. We need more products such as the iPhone and iPad, which when introduced were beyond the imagination of the world consumer.
Lastly, our challenges require statesmanship on the part of the president and congressional leaders. A statesman is someone who’s willing to do the right thing without thinking about political consequences. Our challenges require difficult decisions by our elected leaders. I hope that statesmanship will emerge sooner rather than later as we head toward the fall election.
Faisal Rahman, Ph.D., is the
founding dean of the Graham School
of Management and a professor at
St. Xavier University in Chicago.