THE ECONOMY: OBAMA
SPECIFIC POLICY POSITIONS
Obama’s economic philosophy? The government “can help.” As he told Congress in September, “Our recovery will be driven not by Washington but by our businesses and our workers. But ... we can make a difference.” That was the idea behind the 2009 stimulus, which injected $787 billion into the economy. Since then, Obama has focused on creating “an economy built to last,” based on manufacturing, clean energy, innovation, tax reform, and skills training. He rejects the “social Darwinism” of the plan from House Budget Chairman and Romney running mate Paul Ryan, and decries the notion that prosperity trickles down from the top; the economy must grow, Obama says, “outward from the heart of the middle class.” He argues that his policies rescued the economy and steered it to today’s (slightly) calmer waters.
Obama plans to use a combination of infrastructure spending, skills training, tax cuts for small businesses, and hiring incentives to create jobs. His “We Can’t Wait” series of executive orders, which the White House says is aimed at supporting the middle class, contains a number of job-creation measures along these lines, including a summer-jobs program for young Americans; resources for start-ups and for companies that hire and invest in the United States; and help for veterans who are job hunting in the private sector. Education is a core component of Obama’s philosophy “When we know that most of today’s middle-class jobs require more than a high-school degree, we shouldn’t gut education, or lay off thousands of teachers, or raise interest rates on college loans, or take away people’s financial aid,” he said in April.
The housing market will be a drag on Obama’s legacy, as it is clearly the main drag on the recovery. The administration has introduced a patchwork of proposals to shore up the sector—such as the Home Affordable Modification Program and the Home Affordable Refinance Program—but has tended to sideline anything politically risky. The programs it did put in place haven’t eased much pain. Obama pledged a return to the drawing board last summer, and he has since activated some policies that had been percolating among experts, such as February’s $25 billion mortgage-servicing settlement and tweaks to HARP.
The Obama administration has repeatedly declined to designate China a currency manipulator, which could open the door to trade sanctions. Instead, the president simply urged China to play by global trade rules. On the European economic crisis, the administration has allowed the Federal Reserve Board to play the primary U.S. role. The Fed uses its dollar-swap lines to provide liquidity to the European Central Bank, which can in turn lend to struggling European countries. The administration has declined to intervene more directly by providing additional cash to the International Monetary Fund, the first line of defense for the European economy, as the crisis again rears its head.
Although President Bush kick-started the bailout with an initial infusion of money, Obama implemented long-term reforms that turned the industry around.
A desire to insulate the financial sector and avoid political risk kept the administration from truly tackling the housing crisis, which still dogs the country’s economic recovery.
The economy lost nearly 4.2 million nonfarm jobs during Obama’s first year. Since then, payrolls have grown by 6.6 million. The private sector added 4.5 million jobs over the past 29 months, but the unemployment rate remains at 8.3 percent.
Early data suggest that income inequality grew more under Obama than Bush. The top 1 percent of earners made 65 cents for every dollar created from 2002 to 2007. They made 93 cents during the 2009-10 recovery.
Gene Sperling: The Yale-educated Sperling runs the National Economic Council (as he did during the Clinton administration) and is assistant to the president for economic policy. Before Obama appointed him in January 2011, he was advising Treasury Secretary Timothy Geithner.
Alan Krueger: A labor economist, Krueger has chaired the White House Council of Economic Advisers since November. Like Sperling, he has a background at Treasury, and he worked at the Labor Department in the mid-1990s. He is on leave from his job as an economics professor at Princeton University.
Timothy Geithner: Before becoming Treasury secretary in 2009, Geithner was president and CEO of the Federal Reserve Bank of New York and vice chairman of the Federal Open Market Committee. He has held a number of positions at Treasury and also worked at the International Monetary Fund.
Jacob Lew: Lew left the Office of Management and Budget to become Obama’s chief of staff this year. He was a legislative aide in the 1970s and eventually became principal domestic-policy adviser to House Speaker Tip O’Neill. Later, he served in the Clinton administration and worked at Citigroup.
THE ECONOMY: ROMNEY
SPECIFIC POLICY POSITIONS
Romney takes a businessman’s approach to economic policy: The less the government intrudes, the better. He touts his experience in the so-called real economy—a contrast he is trying to draw with Obama. Romney’s 59-point economic plan, released last September, includes tax cuts, deficit reduction, and deregulation. He says that uncertainty about Washington’s intentions has hurt businesses and cost Americans’ jobs. Romney rejected stimulus spending to shore up the economy. In the foreword to Romney’s plan, adviser R. Glenn Hubbard asserted that the former private-equity manager’s policies are “unabashedly about long-term growth, not about papering over structural economic problems with ‘stimulus.’ ”
“Government cannot create jobs,” Romney’s economic plan says. “At least not productive ones that contribute to our long-term prosperity.” That’s among the biggest contrasts between the GOP hopeful and the incumbent. Romney doesn’t have job-creation plans; he has economy-growing plans, which in turn, he argues, will boost payrolls. “It is economic growth, not government growth, that provides productive opportunities for American workers,” he says, asserting that cutting taxes, reducing regulation, and decreasing the power of labor unions would bring the nation’s unemployment rate down. Government sets the stage for job creation, but it doesn’t meddle during the show.
Romney’s most famous comment on housing reflects his laissez-faire economic philosophy. He told the Las Vegas Review-Journal last fall that the best thing for the housing market would be to let the foreclosure process “run its course and hit the bottom.” More recently, he suggested that the Housing and Urban Development Department is among the agencies he would consider eliminating. “What I can tell you is, we’ve got far too many bureaucrats. I will send a lot of what happens in Washington back to the states,” he told donors in Florida. Romney has yet to release details of any policy beyond the general hands-off approach; his formal economic plan contained only two mentions of housing and no specific policy prescriptions.
Compared with GOP hopefuls Newt Gingrich and Ron Paul, Romney has been relatively mum on the Federal Reserve Board during his 2012 bid. The former Massachusetts governor says he would replace Fed Chairman Ben Bernanke—whom critics say risks running up inflation with his prolonged easy monetary policy—with a central-bank chief who would tighten monetary policy sooner. Romney would also label China a currency manipulator, which the Obama administration hasn’t done. Bernanke said in October that the Fed’s “concern is that the Chinese currency policy is blocking what might be a more normal recovery process in the global economy.”
Massachusetts payrolls grew by just 45,800 during Romney’s governorship, so his campaign instead focuses on the unemployment rate, which fell from 5.6 percent to 4.7 percent during his term. Still, he couldn’t reverse structural problems like the decline in manufacturing.
The firms that Bain bet on from 1984 to 1999 ran into trouble more frequently than rival buyout firms’ bets, but that may simply reflect Bain’s specialty in turning around smaller, troubled companies.
Romney made $43 million in the past two years, mostly from investments. The campaign says that his net worth is between $190 million and $250 million.
His health care law is the stickiest part of Romney’s Massachusetts record, often criticized as too costly. But a nonpartisan report said the law added just 1.4 percent in state spending last year.
Gregory Mankiw: Mankiw is on leave from an economics professorship at Harvard University. His career has been primarily in academia, but he also served as chairman of President Bush’s Council of Economic Advisers from 2003 to 2005.
R. Glenn Hubbard: Hubbard, too, served as CEA chairman under Bush. He is dean of the Columbia Business School, where he has taught since 1988. He is also a director at several companies: ADP, BlackRock Closed-End Funds, KKR Financial Corp., and MetLife.
Vin Weber: A former House member from Minnesota, Weber started this election cycle as an adviser to Tim Pawlenty. Weber is a managing partner at Clark & Weinstock, a Washington-based strategic consulting firm. He was an original acolyte of Newt Gingrich’s leading up to the 1994 GOP House takeover.
Kevin Hassett: Hassett is director of Economic Policy Studies at the American Enterprise Institute. He provided advice to George W. Bush and John McCain during their presidential bids. Before that, he held posts with the Treasury Department and the Federal Reserve Board.
This article appears in the August 25, 2012 edition of National Journal Magazine.