The bad news is that they seem to be heeding what they think they heard.
Made wise by strategists skilled at the craft of massaging and manipulating public opinion, our leaders apparently think you have been telling them: “Just tell me what I want to hear.”
That is the only plausible explanation for what they are saying and not saying, doing and not doing. And especially, what they are not demanding of us all.
Washington is racing recklessly into another game of economic chicken, a repeat of the disastrous debt-limit brinksmanship uncertainty that sharply curtailed job-creation in summer 2011. This time the fiscal-crisis deadline will hit at the end of the year, just after the November presidential election.
Of course, President Barack Obama and former Massachusetts Gov. Mitt Romney both know their bold leadership could be the best thing for America’s economic recovery. They could have set a remarkable step by convening a bipartisan summer of summitry, with Democratic and Republican leaders working to adopt a debt-limit compromise and avert a rerun of 2011.
Instead, they don’t even mention the coming crisis. And what looms at the 2012 year-end deadline is potentially worse than before: $600 billion in tax increases and massive arbitrary spending cuts that will hit heaviest in defense. Defense Secretary Leon Panetta warned the cuts would devastate U.S. preparedness.
But Obama and Romney are spending their pre-convention weeks striking bold stances while mainly playing it safe. The boldest thing Obama has talked about so far came in Monday’s announcement proposing a one-year extension of the George W. Bush-era tax cuts for families earning less than $250,000 a year, letting this tax break expire for all with incomes exceeding that threshold.
Actually, Obama’s plan is more old than bold. It has no chance of being enacted by Congress, where Republicans control the House, and it probably won’t carry the Senate, thanks to several Democratic defections.
But Obama’s real political motive was that his announcement was calibrated to solidify a populist, pro-middle-class theme for his re-election campaign. The $250,000 income level should appeal to many of the crucial independent voters in the suburbs who can be the difference between winning and losing in key swing states such as Ohio. And importantly, Obama’s position has put Romney and the Republicans, who want to extend the tax break for all brackets, into a position where they can be attacked for perpetuating tax breaks for millionaires and billionaires.
But in politics and economics, as in physics, for every action there is an equal and opposite reaction. So it is here.
The political warfare over Obama’s $250,000 threshold for continued tax cuts will inevitably propel Congress toward yet another game of economic chicken — a dangerous game that will not be resolved until the last minutes of the last day before the mandated cuts. Throughout summer 2011, as Washington politicked at the brink of debt default, jobs creation plummeted; it spiked again only after the debt agreement was reached.
Consider another economic-recovery truth: The hardest part of economic recovery has already happened. Since 2009, corporate profits have risen 58 percent. But private enterprise hasn’t plowed that money back into the economy by hiring new workers or purchasing new capital goods. Companies hyper-cautiously kept their profits in their banks. Corporate savings rates are twice the previous norm.
Why? It’s not because corporations are unpatriotic. It’s because they are in business to make profits and, as corporate leaders have said, Washington’s heightened uncertainty caused them to remain cautious. Example: The threat of huge defense cuts has led defense-related companies to slow, and even halt, hiring in 2012 until they know whether the government will stimulate or stifle their industry’s expansion.
The upcoming, but unspoken, Washington budget brinksmanship will surely create new, dire economic uncertainty. It may have already shattered the fragile prospects for job creation this year. Come November, it may also shatter the equally fragile prospects for Obama’s re-election.
Martin Schram writes political analysis for Scripps Howard News Service.