November 2012 looms just over the horizon. For the last few days, Obama and Romney’s back-and-forth over “outsourcing” versus “offshoring” has dominated election headlines. Over in Europe, tomorrow’s two-day EU summit is yet another step in the continuing debt saga that shows no signs of abating.
Many of these debates center on economic policy – fiscal policy (tax rates and overall government spending) in particular. Citing the EU’s troubles, both the left and right have been quick to vilify each other’s policies. David Brooks, in his op-ed “What Republicans Think,” claims that “Democrats…don’t have the same sense that the current (welfare) model is collapsing around them,” and that the “collapse of the European project will profoundly influence which perception the country buys.” Paul Krugman, also writing in the New York Times, instead blames austerity-based fiscal policy for Europe’s troubles.
Whatever the case, it has become increasingly clear that something is wrong – economic models all around the world are failing. And continuing to frame today’s contemporary discourse along such lines won’t take us very far.
Looking to this November, one must wonder if a few Reagan-esque policies will lead to an “economic resurgence: manufacturing resurgence, high-tech, health care… [an economic] take off," as Romney promises if elected.
Instead, sensible (often long-term) strategies that promote competitiveness can provide an avenue for healthy economic growth. Take the economic resurgence of the ’80s for example. Although Reagan’s neoliberal policies are often cited as responsible for the “golden dawn” of the ’80s, it was really technology that led the way. The booming ’80s, characterized by explosive stock market growth, were led by tech firms like Microsoft and the financial services industry (also helped by computing technology).
One such strategy is government funding of science. Although it’s undeniably a case of the oft-decried “picking winners and losers,” this is one way the U.S can develop comparative advantages in today’s increasingly globalized world. Even in strict financial metrics, Fareed Zakaria’s recent op-ed highlights the federal government’s $3.8 billion human genome mapping over 15 years which has helped drive $769 billion in economic activity and raised $244 billion in tax revenue. Beyond these numbers, think about all the jobs created. Pretty good investment, no?
Another example is fracking – purportedly the "next big thing" for the U.S economy. Again, think comparative advantage. While one now only hears talk of onerous government regulation, early government spending was crucial for fracking to take off. To Penn State geologist Terry Engelder, one of Foreign Policy’s “Top 100 Global Thinkers,” early Department of Energy involvement “had a huge impact on the evolution of the industry." Such a strategy is not without its problems. Engelder claims that "there was no instant gratification in this funding. The length of time from the Ford-Carter ramp up of DOE funding in, say 1975, and the Marcellus breakout in 2008 (let's do a little math) was 33 years."
In today’s political environment, expediency often takes precedence over good policy making. As Robert Samuelson writes in his June 25 op-ed, moving beyond today’s model of “higher exports, more business investment and higher government spending” is likely to be “time-consuming, tortuous and, possibly, inconclusive.” This is certainly true. But the sooner we realize that there isn’t a magic bullet for fixing the economy, the closer we’ll get to fixing it.