America’s Constrained Choice

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The conventional wisdom about the November presidential election in the United Statesis only partly correct. Yes, economicissues will play a large role in determining the outcome. But the next stepin the argument – that the winner of an increasingly ugly contest will have theluxury of pursuing significantly different policies from his opponent – is muchmore uncertain.

By the time the next presidential term starts in January 2013, andcontrary to the current narratives advanced by the Obama and Romney campaigns,the incumbent will find himself with limited room for maneuver on economicpolicy. Indeed, the potential differences for America are elsewhere, and have yetto be adequately understood by voters. They centeron the social policies that would accompany a broadly similar set ofeconomic measures; and, here, the differences between the candidates are consequential.

Whoever wins will face an economy growing at a sluggish 2% or less next year, with a naggingrisk of stalling completely. Unemploymentwill still be far too high, and almost half of it will be hard-to-solve, long-term joblessness – and even more if we count(as we should) the millions of Americans who have dropped out of the laborforce.

The financial side of the economy will also be a source of concern. The fiscal deficit will continue to flirtwith the 10%-of-GDP level, adding to worries about the country’s medium-termdebt dynamics. The banking sector will still be “de-risking,”limiting the flow of credit to small and medium-size companies and undermininghiring and investment in plant and equipment. And the household sector will beonly partly through its painful de-leveraging phase.

The policy front will be equally unsettling.Having dithered and bickeredfor too long, the US Congress will find it increasingly difficult to postponeaction on these challenges. Meanwhile, the Federal Reserve’s unusual activism,including an ever-expanding list ofexperimental measures, will yield fewer benefits and entail growing costs andrisks.

The USeconomy will also be operating in a more difficult global environment. In thenext few months, Europe’s debt crisis willmost likely worsen. With emerging economies (including China) slowing,and with meaningful multilateral policy coordination remaining inadequate,protectionist pressures will mount as majortrading powers compete for a stagnant pie.

So, whether President Barack Obama or Mitt Romney prevailsin November, the next president will be constrained by the twin need for urgenteconomic stabilization and longer-term reforms. And, with headwinds from Europeand a synchronized global slowdown, thecandidates will have no choice but to pursue, at least initially, similareconomic policies to restore dynamic job creation and financial stability.

In striking the right balance between immediate economic stimulus andmedium-term fiscal sustainability, the most urgent step will be to counterproperly the looming fiscal cliff, as temporary tax cuts expire and deep, across-the-board spending reductions kick in automatically. Failure to do so wouldsignificantly increase the risk of an outrightAmerican recession.

Serious medium-term budget reforms are needed to deal with the legacy ofrepeated congressional failures. And, if provided with realistic numbers, thenext president will soon recognize that the right mix of tax and spendingreforms falls into a much narrower range than today’s competing politicalnarratives suggest. It is certainly not an either/or proposition.

Fiscal reforms work best in a dynamic economy. To this end, Obama andRomney will need to lift the impediments togrowth and job creation. Here again – in areas like housing, the labor market,credit intermediation, and infrastructure – there is less room for maneuverthan most politicians would like us to believe.

But this does not mean that there is no scope for differences. There is,and they reflect the fact that general economic tendencies will be accompaniedby multi-speed dynamics at many levels. From persistent differences inunemployment rates depending on skills and education to record-high income andwealth inequalities, each economic decision will be accompanied by the need forsocial judgment – whether explicit or, more likely, implicit – regarding itsdistributional impact.

After an “age” of excessive leverage, debt creation, and credit entitlementthat culminated in the 2008 global financialcrisis, Americastill faces the tricky challenge of allocating cumulativelosses that continuously inhibit investment, jobs, and competitiveness. Untilnow, Congress’s excessive political polarization has translated into anapproach that has pushed more of the burden of adjustment onto those who areless able to bear it.

In an ideal world, America’snext president would rapidly embark on a two-step approach to restoring jobdynamism and financial soundness. First, he would devise a comprehensive set ofeconomic-policy initiatives that are both feasible and desirable – and, again,the scope for major differences here is limited. Second, he would accompanythis with an explicit set of social policies – and here the potentialdifferences are profound – that addresses the need for equitableburden-sharing.

This is not really an election about such hotly-debated issues asoutsourcing, tax increases versus entitlement reforms, government control ofproduction versus unfettered private sectoractivity, or job creators versus free riders. It is much more about theaccompanying concepts of social fairness, entitlement, equalityand, yes, standards of behavior for a rich and civilized society.

This is an election about social responsibility – a society’s obligationto support those who are struggling, through no faultof their own, to find jobs and make ends meet.It is about protecting the most vulnerable segments of society, including byproviding them access to proper health coverage. It is about reforming aneducation system that fails America’syoung people (and about providing appropriate retraining to those who need it).Among the numerous issues of fairness and equality, it is about the rich givingback to a system that has brought them unimaginablewealth.

It is here where the differences between Obama and Romney are important. Thesooner the campaign debate pivots to this,the greater the probability that Americans will make a more informed choiceand, thus, buy into the collective effort needed to escape national malaise.

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关键词：Constrained constrain America Strain Choice different correct current Choice about

Theconventional wisdom about the November presidential election in the United Statesis only partly correct. Yes, economicissues will play a large role in determining the outcome. But voters center on the social policies that would accompanya broadly similar set of economic measures; and, here, the differences betweenthe candidates are consequential.(mainideas,economics count but social issues matter)

Whoeverwins will face an economy growing at a sluggish 2% or less next year, with a naggingrisk of stalling completely. Unemploymentwill still be far too high, The fiscal deficit will continue to flirtwith the 10%-of-GDP level, The banking sector will still be “de-risking,”, limiting the flow of credit to smalland medium-size companies and undermining hiring and investment in plant andequipment.the household sector will be only partly through its painfulde-leveraging phase. the Federal Reserve’s unusual activism, including an ever-expanding list of experimental measures, willyield fewer benefits and entail growing costs and risks. The US economy will also be operatingin a more difficult global environment.(economic situation)

So,whether President Barack Obama or Mitt Romney prevailsin November, the next president will be constrained by the twin need for urgenteconomic stabilization and longer-term reforms. And, with headwinds from Europeand a synchronized global slowdown, thecandidates will have no choice but to pursue, at least initially, similareconomic policies to restore dynamic job creation and financial stability.(littleroom for the difference on economics)

Butthis does not mean that there is no scope for differences. From persistentdifferences in unemployment rates depending on skills and education torecord-high income and wealth inequalities, each economic decision will beaccompanied by the need for social judgment – whether explicit or, more likely,implicit – regarding its distributional impact.

(wherethere is room for difference ,social issues)

Inan ideal world, America’snext president would rapidly embark on a two-step approach to restoring jobdynamism and financial soundness. First, he would devise a comprehensive set ofeconomic-policy initiatives that are both feasible and desirable – and, again,the scope for major differences here is limited. Second, he would accompanythis with an explicit set of social policies – and here the potentialdifferences are profound – that addresses the need for equitableburden-sharing.

Thisis not really an election about such hotly-debated issues as outsourcing, taxincreases versus entitlement reforms, government control of production versus unfettered private sector activity, or jobcreators versus free riders. It is much more about the accompanying concepts ofsocial fairness, entitlement, equality and,yes, standards of behavior for a rich and civilized society.(put emphasis onsocial issues or distributional effect)