The clock is not our friend right now when it comes to the economic issues that our country faces, but we can change that.
No matter which candidate wins next Tuesday’s presidential election, he will be facing the same tough economic problems. And the clock strategy used to address them is as important as the decisions themselves.
A healthier economy would probably fix the worst of our jobs problems, so the principal economic issue is the anemic economic growth rate. To get back on course, though, several other problems have to be addressed as well. We cannot enjoy sustained economic growth unless we fix the federal budget deficit as well as the insolvency of our Social Security and federal entitlement programs.
Each of these problems requires a strategic decision. Which would be better, a dramatic change or a gradual one? There is room for both in this world, but economic policy shifts are more likely to succeed if there is less drama and more sustained effort.
The underlying reasons for the effectiveness of sustained effort go beyond economics to the fundamentals our psychological and sociological makeup. That is why the value of “sticking with it” is seen in homes, workplaces and classrooms.
A recent study of the effectiveness of the “Responsive Classroom” teaching method provides a very useful example. Armed with intensive training and follow-up coaching, teachers using this program were able to guide their students to 20-point increases in their scores on their state’s standardized tests.
Associate professor of education Sara E. Rimm-Kaufman, the lead author of the study, says, “The Responsive Classroom teacher training and subsequent classroom-based coaching create a comprehensive training process involving commitment to creating behavioral change in teachers. The program is designed to focus on incremental progress and improvement rather than overnight change.”
Classrooms, workplaces and economic policies have seen more than their share of dramatic and ineffective changes in recent years. This is what happens when the pressure for results collides with our need for instant gratification.
The consequences of these changes have been remarkably uniform throughout the public and private sectors. We have all seen businesses, for example, that grasp at changes the way some people grasp at relationships, with similar results. For government, businesses and individuals it is the same story. Change without commitment is futility.
In economic policy, change without long-term commitment is worse than futile. It is counter-productive for it creates uncertainty, the enemy of sustained economic growth.
In Washington, D.C., though, there is a decided tendency to elevate two factors above all others: constituencies and election cycles, and neither of them favor long-term thinking or commitments. Instead, then, we get futility; program after program driven by a kind of media-think in which there is neither past nor future.
Our president will face many demands for quick results, but there are practical reasons why our larger economic problems will respond better to commitment than instant solutions.
The federal budget deficit, for example, is more likely to be resolved through a commitment to winding it down over a period of, say, ten or more years than it is by putting federal spending on a crash diet. Our visible commitment to getting our spending rebalanced will boost our market credibility and credit rating a lot more than being unable to make up our minds.
Similarly, cleaning up the deductions side of the Internal Revenue Code would be much less of a shock to our economy if done over an extended time. Even eliminating the mortgage interest deduction, whose elimination has been widely discussed as a potential tax revenue source, would probably not overly disturb the fragile housing market if wound down over ten or more years.
Strategic use of the clock can also mean successful changes to Social Security and our entitlement programs that are needed to regain solvency.
Our economic policy decisions are not really a conflict between austerity and stimulus and never were. In fact, we should try to avoid that conflict.
What we most assuredly don’t want is to have austerity forced on us by our creditors. The view from a fiscal cliff can be sobering; getting pushed over it is another thing entirely.
Most of us dislike change to one degree or another, but we, and the economy, are more likely to accept it if it comes accompanied with an enduring commitment. In our economic policies, we need to get the clock on our side.
James McCusker is a Bothell economist, educator and consultant. He also writes a monthly column for the Herald Business Journal.
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