Mitchell suggests creating a commission, modeled on the process that Congress has used to determine which military bases to realign or close, to weed out and eliminate federal spending that benefits certain businesses at the expense of others. Economist Michael Mandel of the Progressive Policy Institute suggests a similar body to reduce the government’s impact on business growth by identifying federal regulations to repeal or modify.
Even the deficit-reduction deal that Obama and Republicans are seeking could bear fruit for growth, economists at the Brookings Institution’s Metropolitan Policy Program say. (It’s not a natural connection, especially since borrowing costs are low now and there’s no evidence that debt is crowding out private investment.) In a research project, the Brookings economists contend that even when lawmakers slash spending, they can buoy growth by prioritizing spending on infrastructure, job training, and research and development. The authors of this project, too, would start with a BRAC-style commission to identify at least $200 billion in cuttable spending, half of which would reduce the deficit and half of which would go back into programs feeding job creation and growth.
Both casting off economic anchors and taking up growth-fueling reforms raise the likelihood that the American economy could finally hit a virtuous cycle of expansion in the next few years. Faster U.S. growth would help Europe escape recession by creating new demand for European exports. It would drive new household formation—young adults who finally get the jobs that allow them to move from their parents’ basement—and further lift housing prices.
Growth is the chief ingredient in balancing the federal budget. It is the chief defense against a European meltdown, a harder-than-expected landing in China, and a scenario in which prolonged long-term unemployment could permanently raise America’s natural unemployment rate. It should be, as the president says, the top priority.
Timothy Geithner: The last remaining member of the core economic team that guided Obama through the recessionary months of his first term, the Treasury secretary is widely expected to leave the administration.
Jacob Lew: Obama’s chief of staff is a top contender to succeed Geithner. In the meantime, he’ll lead negotiations with Republicans over how to resolve the fiscal cliff.
Alan Krueger: If he stays on as chairman of the Council of Economic Advisers, he could spearhead a legislative push dear to his academic heart (and Obama’s campaign rhetoric): reducing America’s income inequality.
Lael Brainard: Another possibility to take over Treasury, where she currently works as Geithner’s point woman on what has perhaps been the president’s thorniest combination of economics and diplomacy: the euro crisis.
Housing initiatives: Edward DeMarco, acting head of the Federal Housing Finance Agency, stymied Obama’s late-term efforts to help underwater homeowners. Look for Obama to put someone more sympathetic in that post.
Fiscal policy: The economy could still use more aggregate-demand juice to get millions of unemployed Americans back to work. But so far Obama has not pushed hard for new infrastructure spending.
Europe and China: Their economic slowdowns have crimped U.S. export growth. Neither seems set to roar back to previous levels. Best-case scenario for the U.S.: Their economies don’t worsen.
This article appeared in print as "Anchors Aweigh."
This article appears in the Nov. 17, 2012, edition of National Journal.