As part of our series “A Rooseveltian Second Term Agenda,” a way forward if Obama wants to really get things done.
I’m writing this under the following key assumptions: that President Obama actually wants to accomplish something and that he doesn’t want simply to play small ball. If these assumptions hold, then President Obama must (1) clear away the underbrush, (2) shore up short-run growth, and (3) acknowledge and prepare the country for the on-going economic transformation.
Clearing away the underbrush means confronting and solving the nation’s slow moving debt and deficit crisis. We do not have to turn ourselves inside out to solve this problem tomorrow, but we do have to put in place plausible, real policies to solve it over the next 10 years. Progressives insist on ignoring the problem but it is real and will not go away. Therefore, as his first step the president should immediately endorse Simpson-Bowles and ask, as I’ve written elsewhere, Simpson, Bowles, Rivlin, and Domenici to lead the effort to pass legislation by June 2013.
Shoring up short-run growth means putting in place a two-year modest stimulus program – roughly 2 percent of GDP each year – calculated to raise the growth rate of our economy to around 3 percent. This stimulus should consist roughly of 50 percent tax cuts and 50 percent budget support to states and cities. The right regards any stimulus as anathema; the left wants a reprise, but bigger, of the 2009 stimulus. Both of these alternatives would do more harm than good, and in any case, a presidential commitment to a very large stimulus would guarantee no stimulus after a protracted, enervating battle.
Preparing for our on-going economic transformation means first restructuring our tax system so that we invest more in the private sector and consume less. A swing of two or three percentage points would do wonders for our economy in the long run. To do this we should replace a part of our existing tax structure with a small value added tax, and substitute part of the payroll tax with a carbon tax. Next it means putting in place a 10-year public infrastructure investment program of about 1 percent of GDP annually. And finally, it means defining and starting the next revolution in American education.
Many Americans think the country is headed in the wrong direction. The president’s popularity has consistently hovered at barely 50 percent. And both presidential campaigns were almost unremittingly negative.
Just scraping by this way should occasion some soul searching. The president must see that the White House and the presidency were not managed tightly or strategically well enough in the first term. In particular, the president’s overall strategy was neither focused sufficiently or explained well (if at all) or advocated consistently. To accomplish anything at all, the president will have to provide a clear, simple, short plan to the American people, explain over and over why it matters, and design his White House so he can get this done.
Roosevelt Institute Senior Fellow Bo Cutter is formerly a managing partner of Warburg Pincus, a major global private equity firm. Recently, he served as the leader of President Obama’s Office of Management and Budget (OMB) transition team. He has also served in senior roles in the White Houses of two Democratic Presidents.