Posted by: dstieglitz | October 30, 2012

THE WHOLE TRUTH

After seeing three debates, reading hundreds of articles, and listening to endless ads, I don’t feel either candidate has told the whole truth about the country’s challenges or the solutions they propose. The half-truths are disappointing given that the national debt exceeds GDP and three fiscal crises are bearing down on us like 18-wheelers on I-95. The first crisis is the fiscal cliff when the Bush and other tax cuts expire, sequestration kicks in, and the new Medicare taxes begin. The second is an annual deficit that exceeded $1 trillion in 2012 for the fourth consecutive year. The third is the tsunami of financially unsustainable entitlements that people have come to expect from the government. In his own way, each candidate promises unrealistic improvements with no pain. Most voters would rather hear the whole truth even if it is uncomfortable.

That Makes Sense. While each candidate’s accomplishments and positions have been distorted by the other’s attack ads, they both propose ideas that make sense. Obama says we should invest in education, training, infrastructure, and research to stimulate growth and create jobs. That makes sense. Similarly, Romney says the economy is choked by government regulations and a tax structure that make it difficult for businesses to grow and create jobs. He wants to cut regulations, simplify taxes, and streamline government. That makes sense too. Merging the two strategies would be an effective course of action. However, both candidates failed to reconcile their strategy with deficit reduction, and neither of them was honest about how they would contain entitlement programs, increase revenue, and curtail spending. Voters are being forced to choose between Republicans who refuse to raise taxes and Democrats who refuse to cut spending and entitlements. Separately, neither approach makes any sense at all.

What the Next President Will Face. Regardless of who wins the election, the next president must revive the economy despite an anemic growth rate, persistent unemployment, and huge debts. Even if Congress postpones the fiscal cliff – which is likely – 2013 will be a tough year. Unfortunately, the fiscal-cliff crisis masks fundamental imbalances in the federal budget that could trigger even bigger future calamities. Neither party can blame the other for the crisis because they both contributed to it. According to polls, most voters don’t believe that either candidate has a viable economic plan. Perceptions about government leaders’ ability to solve problems matter because businessmen make hiring decisions and consumers make buying decisions based on their faith in the economy. When that faith evaporates, hiring, investments, and growth stagnate; and the gloom-and-doom attitude becomes a self-fulfilling reality.

Business Blames Washington, But… Business leaders lack confidence in Washington’s ability to perform basic governance tasks. They are frustrated with President Obama who sees big government as inherently trustworthy while strangling large companies with regulations and milking entrepreneurs for revenue. Republicans claim that tax increases would stifle job creation, but most executives say they would tolerate higher taxes if they were part of a plan that provided a stable growth platform. Dealing with disagreeable tax rates is easier than not knowing what is going to happen, which makes this an ominous time to hire new employees or buy new equipment. They see government as the problem – stunting growth with environmental, safety and labor regulations, an onerous new health-care law, and trade policies that undermine U.S. competitiveness.

The Voice of Business. Given the high stakes in this election, the silence of business leaders is deafening. Instead of grumbling about Washington, private-sector leaders must speak out on the issues – not just lobby for favors. Smeared by the Enron and WorldCom scandals, crucified for excessive executive pay, and wounded by the popular belief that the government bailed out firms that caused the economic mess, business has been hiding too long. In the past, business leaders not only helped formulate economic policies, they helped direct their successful implementation. The voice of business must make it safe for politicians to tell the whole truth, and unsafe for them to deny the undeniable and sustain the unsustainable.

Voter’s Choice. On November 6th the battle to become the world’=s most powerful leader will be decided. The candidates’ rhetoric makes it seem like we have two bad choices. Romney, who made $250 million or so in private equity, says Obama has no idea how the economy works or how jobs are created. Romney believes the best thing the government can do is to get out of the way by reducing regulations, cutting taxes, and helping people to build new businesses. By contrast, Obama, whose experience is in the public sector, academia, and community work, believes that government has an indispensable role in growing the economy. He sees a conflict between pursuing profits and creating jobs even though, in the long run, only profitable businesses hire new workers – unlike the Federal government which can consistently spend trillions more than it earns. Voters disagree only about which would make things worse: re-electing a president who believes that big government is an economic panacea, or swapping him for a private-equity executive whose policies are likely to favor business. The voters will choose and experience the results of their choice.

What Can Be Done? What can the next president really do to grow the economy? Not pushing it over the fiscal cliff would be a good start. Instead, implement a reliable 10-year deficit plan that includes tax increases and entitlement cuts. Second, rebuild America’s dilapidated infrastructure. No world-class economy can grow with crumbling roads, mediocre schools, the worlds’ most expensive health care, and fear-based immigration policies that drive the world’s best talent to other countries. Third, make the country energy independent by building the XL pipeline, authorizing more oil drilling, and approving gas exports. If he focuses on those things, we all will be delighted by how much the private sector can do for itself. Minor tweaks to our economic and political approaches won’t be enough – full recovery will take new ways of thinking. The changes are likely to be painful in the short term for everyone, but we can meet the challenge if we tell ourselves the whole truth and embrace the need for real change.

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