I think I speak for everyone when I say thank heaven Election Day is finally here.
President Obama and Mitt Romney have spent months arguing over many things — but nothing more fundamental that the plight of the American economy. Now one of them is actually going to be responsible for fixing it over the next four years.
The big catch: Presidents don’t really fix economies. They can certainly make a difference. They can even play a central role in a few important issues like government finance and taxes. But no president can turn the American economy around with a series of policy decisions issued from the White House.
In fact, our economy over the next year or two will probably look a lot like what we’re living through right now no matter who wins the election. That means sluggish growth — nothing impressive but clearly headed forward. I’m betting our president will be able to claim progress but not victory on the economy over the next two years.
Where the economy goes from there is harder to predict, though many people get paid to make forecasts exactly like that. IHS Global Insight of Lexington anticipates the economy will start to pick up steam and grow at a pace that feels truly healthy, perhaps by as much as 4 percent a year.
That broad view — a stretch of slow improvement followed by accelerated growth — isn’t based on assumed presidential policies or even a presumption of who will be the commander in chief. It simply acknowledges some of the most basic facts about the economic hole we dug for ourselves and what it takes to get out.
That hole was a huge, financially driven recession, the kind that is characterized by far too many people borrowing way too much money. It takes a long time to recover — much longer than normal after recessions — because people and banks need years to get out from under those debts. They don’t buy things or lend much money in the meantime, and the economy barely stumbles along.
The good news is that the American economy has gone a long way toward healing itself, even if it doesn’t feel that way. Individuals and banks have made a lot of progress reducing levels of borrowed money.
“We make the argument that as that [debt level] winds down you’ll see consumer spending pick up and bank lending will increase,” says Nariman Behravesh, chief economist at Global Insight. The nation’s current slow-growth trajectory “doesn’t go on forever because the US is a fairly resilient economy, and there’s a lot of pent-up demand.”
That sounds like a simple timetable for presidential success — give the economy time to heal itself on your watch and declare victory as your term nears an end.
A reelected President Obama could walk away from office boasting eventual economic success. A President Romney could run for reelection very effectively on those results.
But real-world economies don’t necessarily work on steady schedules. Serious complications are inevitable over four years.
I had no doubt President Obama believed economic timing was on his side when he took office nearly four years ago. I’d bet Mitt Romney hoped for something very similar when he became governor of Massachusetts in another period of serious recession (our state’s economy got even worse before it got better during Romney’s years as governor).
Presidents can't dictate economies but they still have influence. The most important thing our next president can do to help the economy is negotiate a sensible federal deficit reduction plan.
Our current fiscal cliff and all the other federal budget complications wrapped up in the deficit debate are hurting business investment and jobs.
A sensible solution would be a big boost for business and the economy. The president can’t negotiate any deficit deal alone, but he will be the most important person at the table.
Behravesh says some kind of agreement along the lines of the Simpson-Bowles plan, from the National Commission on Fiscal Responsibility and Reform, would be well received.
“I think that would improve confidence among US businesses,” he says. “On the other hand, more of the same deadlock and you’ll see a bad outcome.”
The American economy has been the centerpiece of the presidential campaign for many months. Now we’ll find out who gets the chance to do something about it.