In a campaign marked by voter anxiety over the economy, both presidential campaigns avoid promises of a quick jolt to boost job creation and focus on long-term policies.
The prescriptions offered by President Barack Obama and Republican candidate Mitt Romney are a departure from the typical election season vows of immediate relief.
“There’s nothing waiting in January 2013 that either side has proposed that would really jump-start the economy,” said Joel Prakken, senior managing director of Macroeconomic Advisers LLC, a forecasting firm in St. Louis.
The budget proposals from Obama and Republican vice presidential candidate Paul Ryan both would start reducing the deficit next year, turning federal fiscal policy into a short-term drag on economic growth.
“The math in both their budget proposals has pretty significant tightening,” said Alec Phillips, a Goldman Sachs Group Inc. analyst in Washington. He calculated in an Aug. 14 report that fiscal contraction would be the equivalent of 1.4 percent of gross domestic product next year under the Obama budget and 2.6 percent of GDP under the Ryan budget.
Romney hasn’t released enough detail on his budget plan to determine how it would affect the economy in its first year, said Roberton Williams, a senior fellow at the Tax Policy Center, a nonpartisan research institute in Washington that has analyzed Romney’s campaign positions.
The presidential campaigns have emphasized their divergent visions of how to achieve long-term growth. Romney said he would unleash the private sector with less government regulation and lower tax rates, especially on corporations and high-income “job creators.” Obama would ask the wealthy to pay more in taxes while the government puts funds into infrastructure, education and clean energy technology.
The campaign debate reflects a shift in public attitudes toward the concept of economic stimulus following criticism of Obama’s 2009 recovery legislation.
“Stimulus has gotten a bad name,” said Martin Neil Baily, chairman of the White House Council of Economic Advisers from 1999-2001 under President Bill Clinton. “The Republicans are running ads basically saying Obama wasted $800 billion of taxpayer money on the stimulus.”
It also reflects the nation’s changed economic circumstances. While former Federal Reserve Vice Chairman Alan Blinder and Nobel Prize-winning economist Paul Krugman advocate more stimulus, few economists see a great need for a major package with the economy growing again, Baily said.
“Even traditional Keynesians like myself get a little bit nervous because deficits are so large and global financial markets are so shaky,” Baily said.
With the political branches of government gridlocked, the Federal Reserve has stepped into the breach with successive rounds of monetary easing. Members of its policy-setting Federal Open Market Committee signaled in minutes released Aug. 22 they are ready to inject more stimulus “fairly soon” unless the economy strengthens.
The unemployment rate, while down from a peak of 10 percent in October 2009, has remained stuck above 8 percent since February 2009 -- the longest stretch in the post-World War II era. Joblessness was 8.3 percent last month.
The economy has regained only 4 million of the 8.8 million jobs lost during the 2007-2009 recession and its aftermath. If the economy continues to add jobs at the 163,000 pace of last month, it would take another two and a half years to make up the loss.
Obama continues to press for provisions of the jobs plan he proposed a year ago and isn’t going to be passed by congressional Republicans this year. The plan includes public works spending, aid to state and local governments to prevent layoffs of teachers and money to rehabilitate schools and foreclosed homes.
Obama also has championed legislation that would make it easier for millions of homeowners to refinance mortgages at lower interest rates, which the White House estimates would save $3,000 for the average family affected.
“This is a president who has made very clear what he thinks are the smartest ways to get people back to work and increase the pace of job growth,” said Brian Deese, deputy director of Obama’s National Economic Council. “The president has on the table as his proposal a short-term jobs and growth package which is more substantial than anyone has proposed.”
Still, the White House has yet to say whether the president would seek an extension of a 2 percentage point payroll tax cut that expires on Dec. 31 -- and consequently would remove a $120 billion stimulus from the economy. The Obama budget plan assumes the payroll tax cuts expire on schedule and the jobs act provisions are enacted.
Romney has promised to lower income tax rates for corporations and individuals, cut non-security government spending by 5 percent, ease limits on oil and gas drilling and roll back government regulations, including the Obama-backed health-care law and financial regulatory overhaul.
Romney and his economic advisers argue that durable changes in the tax burden and government regulation will provide the most effective stimulus. Investors are more apt to build factories or start businesses if they can look forward to many years of higher after-tax profits, they say.
“Long-term reform can boost short-term confidence and growth,” Glenn Hubbard, a Romney economic adviser, said in an e-mail. “Short-term growth comes from reduced policy uncertainty and greater investment and employment accompanying tax reform.”
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