It is no surprise to anyone who has paid much attention to politics that the state of the economy has quickly surpassed the wars in Iraq and Afghanistan as the predominant issue in the presidential campaign. People from all walks of life have voted their pocketbooks from time immemorial. As Stephen Foster wrote back in 1854 in a song that still lingers, the constant wish is that "hard times come again no more."
Hard times do seem close at hand and are certainly upon many Americans. The economy does face multiple stresses: a poor housing market, the subprime mortgage collapse, high energy prices, slowing employment growth, rising food costs, the weak dollar, the continuing trade deficit, and more.
The nation's gross domestic product grew at a paltry 0.6 percent annual rate in the fourth quarter of last year, according to the advance estimate by the Bureau of Economic Analysis. The Conference Board, which issues a monthly index of consumer confidence, said in January that consumers were "quite downbeat" about the short-term future, expecting business conditions and employment to falter further in the months ahead. Gloom seems the order of the day.
It is not all bad news. Orders for manufactured durable goods jumped 5.2 percent in December, the Census Bureau reported. Orders for nondefense capital goods grew by 5.4 percent.
We may yet avoid a recession. What worries me more is the longer-term ability of the economy to prosper. We've written and read a great deal in the last few years about how businesses need to build resilience into the way they organize. We've heard far less about building resilience into the national economy. Certainly, the way the U.S. economy has evolved and diversified has helped create some of that needed resiliency. Woes in any one sector won't likely sink the overall economy. More worrisome in the long term is the level of personal and public debt and how it affects the ability of individuals and the nation to respond to difficult times.
To get some insight into this issue, I turned to the Concord Coalition, a nonpartisan organization focused almost entirely on fiscal policy. Its perspective is not encouraging.
In a white paper titled "America's Economy - Headed for Crisis: Realistic Approaches Are Essential" prepared for the Brookings Institution's Opportunity 08 project, the coalition's leaders write, "The next President will inherit a fiscally lethal combination of changing demographics, rising heath care costs, and falling national savings." They contend that the nation's economic health will depend on a president willing to take the political risks necessary to balance the budget, rein in health care and retirement costs, and stand up to the fact that taxes cannot be cut without cuts in spending.
Politically, that sounds like a formula for a one-term presidency, whatever economic sense it makes. That's a problem the authors, including former senators Warren Rudman and J. Robert Kerrey, certainly recognize.
Yet they argue that current practices are untenable. "No reasonable person … would argue that the government should tax at 18 percent and spend at 30 percent," they write. "The resulting annual deficits and accumulated debt would shatter the economy. Yet, this is the future we will get if we try to fund the spending required by current law with today's level of taxation." Avoiding that trap demands political tradeoffs that few in Washington seem willing to even consider.
I'm not persuaded of all the prescriptions suggested by the Concord Coalition. But the group does portray in the starkest terms what the nation faces. The health and resilience of the economy depend on finding leaders willing to grapple with those facts sooner rather than later. We can only hope.