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Polar opposites on fixing the economy

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Sunday, Sept. 30, 2012, 8:55 p.m.
 

Mitt Romney and Barack Obama don't disagree about everything when it comes to talking about the big things that are wrong.

Both say the economy is in sorry shape. They're right about that. It's the slowest economic recovery since World War II.

The U.S. Labor Department reported that 12.5 million people were unemployed in August — three years and two months after the recession reportedly ended in June 2009.

In addition to these unemployed workers — about 8.1 percent of the labor force — there were millions more who were counted as unemployed by the Labor Department but not included in its calculations of the unemployment rate.

By the Labor Department's own count, on top of the 12.5 million, there were 8 million people in August who were “involuntary part-timers” and not counted as unemployed and therefore excluded when determining the unemployment rate.

To be “involuntary part-timers,” either “their hours had been cut back” or they were looking for work and unable to find full-time jobs.

Additionally, the Labor Department reported that another 2.6 million people were unemployed in August but officially categorized as “discouraged” or only “marginally attached” to the labor force because they “had not searched for work in the four weeks preceding the survey.” They, too, are excluded in the calculations of the official unemployment rate.

In other words, a jobless person gets to be both unemployed and uncounted if he's insufficiently upbeat about his job chances — too “discouraged” to keep beating on the same doors.

Add the 8 million involuntary part-timers and the 2.6 million who were inadequately optimistic to the officially unemployed 12.5 million, and the unemployment rate for August jumps from 8.1 percent to 14.9 percent, not counting the jobless who've ended up in jail, returned to college, gone missing or have been sidelined to the couch by an early and involuntary retirement.

Romney and Obama agree about the need for higher levels of economic growth, more jobs and lower federal deficits. Both also acknowledge that current rates of growth in the federal debt are unsustainable.

Growth is the key, but the economy irrefutably is still moving in the wrong direction. It takes a 3 percent growth rate in gross domestic product to make a dent in the unemployment rate. In the first quarter of 2011, real GDP, adjusted for inflation, was expanding at an annual rate of 3.9 percent. That GDP growth rate was cut in half during the first quarter of this year, dropping to 2.2 percent. In the second quarter of this year, April through June, the GDP growth rate again declined — to 1.25 percent.

What Romney and Obama don't agree on is the fix. On solutions, they're polar opposites.

Obama sees economic advances coming by way of a bigger role for government, an improved infrastructure and higher taxes on the rich to pay for it — more roads, more renewable energy, a centralized health care system, more miles per gallon, more funds for education and, overall, more government-directed marshaling and allocation of resources.

Romney, in contrast, sees economic growth coming by way of smaller government, lower taxes, a larger role for private enterprise and individual incentive and an economy organized and directed by markets.

Ralph R. Reiland is an associate professor of economics at Robert Morris University and a local restaurateur. Email him at: rrreiland@aol.com

 

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