Disconcerting choice in US election

Financial Review

PUBLISHED: 14 Jul 2012

Anna Bernasek

US unemployment is stuck at 8.2 per cent, so it’s time to look at a true story of two candidates vying for the same job. Each has impressive academic and experiential credentials. By most objective measures either one would be well qualified for the job. But this isn’t any job. It’s a very senior executive position. The folks deciding who to hire need to look deeper.

The first guy has experience in an analogous position in the same organisation. His performance was spotty – some impressive achievements but lacklustre, bordering on unacceptable, in dollars and cents results. The other talks a big game and freely criticises his rival. When asked for his ideas though, he avoids the question.

The job, incidentally, is President of the United States.

The first candidate, of course, is the incumbent Barack Obama. He’s personally stunning – brilliant, articulate and at times decisive. His signal achievement, healthcare reform legislation, hasn’t taken full effect but even passing it was a huge win. The economy is another matter. His presidency has been marred by sluggish growth and persistent high unemployment.

The other is Mitt Romney, a high-powered and successful financier who was governor of Massachusetts. Incidentally Romney did healthcare reform first, in Massachusetts, although he denies that now. His few ideas for returning the nation to prosperity amount to giving more tax breaks and benefits to the extremely wealthy in the hope it will somehow rub off on everyone else – a tried and failed Republican strategy for promoting widespread prosperity.

Elections, like hiring, sometimes turn on trivial issues of personality or likeability. But the real focus should be on how the next US president will tackle the biggest problem facing the nation – unemployment and its accompanying dead weight loss.

Jobs are the key to widespread prosperity. Unless the US economy starts creating jobs at a strong and sustainable pace, most Americans will remain under financial pressure and a sense the system is failing them will prevail. Sufficient job creation, on the other hand,ends the housing crisis and renders America’s debts manageable.

The latest jobs figures for June showed job growth has stalled, well behind population growth. In June a mere 80,000 new jobs were created, the third straight month of jobs growth under the 100,000 or so needed just to tread water. The jobless rate is stuck at 8.2 per cent, the same as Britain’s; it’s 11 per cent in the rest of the euro zone.

But those numbers are misleading. The real problem is twofold: high long-term unemployment and high youth unemployment.

It seems that a vast section of the population may never recover from the financial crisis unless policy action is taken. And a whole new generation may be left vulnerable to future shocks. A third of those out of work have been out of work for more than a year.

Among younger workers, the rate is 17.3 per cent, more than double the headline rate of 8.2 per cent. Although youth unemployment in the US is nowhere near the levels of Spain or Greece at 45 per cent, it is double Germany’s 8.5 per cent.

More troubling is that youth jobless rates for minorities is higher. For Latinos the rate is 20.5 per cent; for African Americans, 30.2 per cent.

There are reasons to expect job growth to remain weak or even falter. Corporate profits fell in the first quarter of 2012, the first decline in four years, due to a slowdown in growth globally. And the slowdown in China, India and Europe doesn’t look like it will reverse soon.

So how do the candidates rate on solving the jobs problem?

Obama has had a chance to tackle the jobs problem. Since he became president, he stopped the destruction of jobs that occurred in the immediate aftermath of the financial crisis but failed to make sustained headway on job creation. An analysis by Andrew Tanenbaum, who writes the political blog Electoral Vote, says Obama is to blame for the slow jobs growth.

While Romney’s policies are not fully fleshed out, there’s little doubt his basic philosophy is one of laissez faire. He has expressed his view that government should get out of managing the economy and he has not proposed widespread economic stimulus or mass hiring to promote jobs growth.

So Americans face a disconcerting choice in November: a guy who did about half of what he should have done on the most pressing issue and a guy who won’t do anything. Whoever wins, the real loser will be the American public.