Class exercise

I was helping one of my granddaughters yesterday to collect information for a paper she needs to write – which of the two presidential candidates would be best for the economy and why.  It’s not an easy task, since Romney has been deliberately vague about what he would do (perhaps a wise strategic move – we will see), and President Obama has been pretty diffuse in what he has proposed, more focused on populist “sound bites” like increasing taxes on the rich or supporting unions than on any credible or comprehensive plan to improve the economy.

My own conclusions from this exercise are:

(a) In the long run, returning to a strong economy is the only thing that really matters.  Without a strong economy, there is not enough federal revenue to pay for either the Democrat’s social and entitlement programs or the Republican’s military spending, nor to reduce the deficit or begin to pay down the debt. Everything politicians want to do, and that their constituents want them to do, depends on having a strong economy to pay for it. Remaining a leading military and political force in the world depends on having a strong economy. Keeping American’s standard of living high depends on having a strong economy.  Everything, in the end, depends on the strength of the economy.

(b) In the long run, America’s economy will only be strong if we encourage risk-taking and innovation among entrepreneurs and corporations. Risk taking – trying to start up a new business or launch a new product – is a risky business.  Most such attempts fail.  So the potential rewards have to be great enough to encourage people to take the risk despite the high failure rates. Great enough to encourage bright people to leave a safe corporate job and risk a new startup, even though a failure of the startup may set them back years in their careers.  Anything which penalizes success reduces the incentives to take risks, and therefore hurts the economy in the long run.

(c) In the long run, America’s economy will only be strong if we have a workforce trained for the high-tech jobs of today’s world. Low-skill manufacturing jobs are not going to come back to America – it just isn’t going to happen in the face of automation and lower-wage labor markets elsewhere in the world, whatever politicians promise. It is increasingly difficult to make a living wage in America with a lifetime union job installing one part on an assembly line. The jobs that remain for Americans are the high-pay, high-skill jobs, which are the jobs we want in any case.  But to take those jobs, we need our workforce better educated than it is now. And throwing more money at education won’t help.  We already spend more per pupil on K-12 education than all but one nation (Switzerland), and yet our high school students rank toward the bottom of developed nations in reading, math and science .  Our K-12 educational system needs a complete overhaul if it is to produce the workforce we need to keep the economy strong.

(d) Neither candidate, and neither party, has proposed anything credible to address these issues. Oh, there are lots of nice-sounding sound bites about these issues from both candidates, but no concrete policies that look like they might make a real difference.