Oct. 15, 2012 at 1:40 PM ET
Nearly half of Americans think that no matter who is elected president -- President Barack Obama or Mitt Romney -- neither will have much of an effect on the U.S. economy. They have reason to be skeptical.
So far, both candidates have stuck to broad outlines of their proposals to get the economy back on track.
Romney has argued that government spending, including a massive stimulus program overseen by the Obama administration, is largely to blame for lackluster economic growth. He and his running mate, Wisconsin Congressman Paul Ryan, also argue that the White House has stunted the recovery with too much regulation and taxation.
Obama has countered that the economy he inherited when he took office in 2008 had been severely damaged by the worst financial storm in a half century, and that the slow but steady drop in unemployment to around 8 percent since the 2009 peak of above 10 percent demonstrates that his policies are working.
While the candidates disagree on the causes of sluggish growth and the policies needed to boost it, there’s no disputing that this is the worst economic recovery in 50 years. This far into the previous five recoveries, the economy was expanding at an average pace of 4.4 percent, twice the current average.
No wonder then, that, that most voters rank the economy as the number one campaign issue and they’re split fairly evenly over which candidate has the better plan to fix it.
But opinion polls also show “none of the above” is leading the pack. When Gallup asked voters late last month how the economy would fare in the next four years, 48 percent said it would be better under Obama while 50 percent said it would improve under a Romney administration.
“One of these two guys is going to win,” said Frank Newport, Gallup’s editor in chief. “What our data say is half or more think the economy’s not going to get better no matter which one is elected.”
It's not hard to understand why a large pool of voters aren’t buying either candidate's proposals to revive growth. No matter who ends up occupying the White House in January, many of the forces that have held back hiring and slowed the growth of wages will be beyond his control.
Many employers say their reluctance to hire stems from uncertainty over policies that will be implemented by the next occupants of the Capitol and the White House – whoever wins.
Business confidence has fallen to its lowest point since the third quarter of 2009, according to a recent survey of American CEOs by the Business Roundtable. Though more than half of those who responded expect their sales to rise over the next six months, about a third said they plan to cut U.S. jobs over that period, up from 20 percent a quarter ago. Just 30 percent plan to boost spending on new equipment, down from 43 percent three months earlier.
That uncertainty, and reluctance to hire, will continue to be fed by a series of other forces holding back the four-year-old recovery.
The most immediate concern is a disastrous combination of automatic year-end tax increases and spending cuts known as the “fiscal cliff.” Unless defused, the fiscal hit will almost certainly plunge the economy back into a nasty recession. But no matter who wins the election, it’s far from clear that either party will be able to resolve the budget impasse.
Much of the debate has focused on whether, and how much, to cut spending and/or raise taxes. But neither solution will address the underlying cause of massive budget deficits: the huge, and rising, cost of providing health care, pensions and other financial transfers to an aging population. Deep cuts in those programs, along with a dearth of private retirement savings, would bring a slowdown in consumer spending as baby boomers continue to tighten their belts.
While debate over the federal budget remains deadlocked, state and local government s have been busy slashing spending. Amid the slow pace of hiring by private employers, state and local governments trying to bring their budgets into balance have slashed workers.
Those layoffs appear to be slowing, but the local government budget squeeze continues. Many municipalities got some temporary relief from the Obama administration’s massive federal stimulus program, now criticized by Republicans for failing to produce the number of jobs originally projected. As those funds have dried up, local governments are stuck trying to make ends meet with lower sales and property tax receipts, cuts in state aid and, in some cases, mandated tax caps. Those forces will continue to hold down their spending and hiring.
While subpar economic growth feels like a recession to many Americans, Europeans are already coping with the real thing. The economic contraction that began in Greece and Spain is now spreading to Germany, the world's fourth largest economy. As the flywheel of Europe’s growth continues to slow, and European governments remain deadlocked over ongoing bailout programs and short on new proposals, the eurozone recession is expected to deepen.
Global trade is slowing. Though the world's economy continues to expand slowly, forecasters are marking down estimates for the rest of this year and into 2013. The American economy relies on exports less than other developed economies, but slower trade volumes will create headwinds for U.S. companies that operate overseas.
The next occupant of the White House will have little control over that trade slowdown. The latest threat to global growth, for example, is coming from a decades-old dispute between China and Japan over a handful of tiny islands in the East China Sea. The early stages of a trade war between the two countries is already rippling through the Asian economy,
"(We expect) a more sustained impact from a slowing global economy and what we assume will be a trimming of U.S. inventory levels of all goods -- including imports -- into the January fiscal cliff,” said Michael Englund, chief economist at Action Economics.
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