With the economy sputtering, President Obama would like voters to believe he faces tougher challenges than any president since Franklin Roosevelt and needs two terms to turn things around. Sadly, the president’s problems are so daunting only because his policies are not up to the task.
One need only look as far back as Ronald Reagan to find a fair but embarrassing comparison for Mr. Obama’s special brand of statism.
In 1980, Americans were bearing double-digit interest rates and inflation, growing trade deficits on oil and with export juggernauts Japan and newly industrializing economies in Asia, and stuck in a malaise of self-doubt quite similar to today.
Federal Reserve Chairman Paul Volcker, appointed in August 1979, pushed interest rates even higher to halt runaway inflation, the economy suffered two wrenching recessions, and unemployment peaked at 10.8 percent just 22 months into the Reagan presidency.
The Reagan recovery package emphasized putting money and decision making back into the hands of ordinary citizens and private businesses. Immediate tax cuts, followed by tax reform—just three personal income tax rates, a top rate of 28 percent, and fewer special breaks and loopholes.
He removed Carter-era policies that discouraged domestic oil production, and aggressively sought to right-size regulation—not slash and burn, but retaining what was needed to keep business honest and foster competition, and jettisoning the rest.
All, strikingly similar to Governor Romney’s platform.
When President Reagan faced voters in 1984, the economy was growing at 6.3 percent and unemployment was down to 7.3 percent—it ultimately fell to 5 percent, as Old Dutch engineered a 92 month economic expansion.
Not satisfied to rest on his laurels, he pursued free trade, called to task Japan and others for undervalued currencies, and negotiated the 1985 Plaza Accord, which increased the value of the yen by more than 50 percent and set the stage for export-led prosperity of the 1990s.
Similarly, Mr. Obama inherited an economy crippled by gaping trade deficits—this time with China and again on oil, and too much financial chicanery on Wall Street.
Sadly, President Obama has avoided confronting China on currency manipulation, and the deficit with the Middle Kingdom is up 50 percent since the recent recovery began.
President Obama has limited offshore drilling in the Gulf, the North Slope of Alaska and Atlantic and Pacific Coasts—no surprise the petroleum trade deficit is up nearly 70 percent since the recovery began.
Every dollar that goes to China or for imported oil that does not return to buy US exports is lost demand for US-made goods and services, and together those deficits are costing Americans 10 million jobs.
All this is exacerbated by Dodd-Frank financial reforms, whose bureaucratic burdens are forcing small banks to sell out to their larger brethren on Wall Street, where the deal making, sharp practices and gambling continue seemingly unabated.
Small businesses can’t get loans, and a day doesn’t seem to pass that the financial press doesn’t publish a story about federal and New York State regulators chasing some slippery scam or tax dodge begotten by Manhattan’s big-bonus aristocracy.
As President Obama faces the voters, the economy is growing at a 2.2 percent pace. Unemployment has fallen to 8.3 percent but only because so many adults have quit looking for work altogether. If the adult labor force participation rate was the same today as when he took office, the jobless rate would be 11 percent, and most economists see little room for improvement on that sad record.
Listen to Governor Romney closely—he’s offering Ronald Reagan’s "Morning in America" all over again—not a replay of the inept Bush administration, as Barack Obama would have voters believe.
Encouraging individual initiative and entrepreneurs, an understandable tax system, producing more American oil, getting a fair deal for American workers competing with China, lowering health care costs, and smarter regulation of Wall Street—it all makes sense.
It’s the smart choice.
Peter Morici served as Chief Economist at the U.S. International Trade Commission from 1993 to 1995. He is an economist and professor at the Smith School of Business, University of Maryland.