- The Washington Times - Thursday, October 13, 2011


President Obama recently challenged House Majority Leader Eric Cantor, Virginia Republican, to explain what he didn’t like in the president’s jobs bill. Mr. Obama didn’t ask our opinion, but we’ll give it anyway: The bill wouldn’t have turned around the economy, and it wouldn’t have created meaningful jobs.

Forget, for a moment, whether you are Republican, Democrat, Libertarian, Tea Party, independent or none of the above. Ask yourself whether we have addressed during the past three years the root causes of our nation’s economic decline.

Have we changed the fiscal policies that played a major role in the crisis of 2008 and resulted in a historic downgrade of U.S. debt? Have we addressed the housing crisis and tended to mortgage giants Fannie Mae and Freddie Mac, without which there would not have been a mortgage crisis and all that followed? Have we tackled regulatory reform to create more effective and less obtrusive regulation of businesses? Have we reformed the credit-rating and regulatory agencies that allowed speculative growth to get out of hand?

Mr. Obama inherited a mess, to be sure. The economic and jobs pictures warranted his undivided attention. There should have been no higher priority for the president and Congress.

What we got instead was health care reform; the Dodd-Frank financial legislation; federal spending on a scale unprecedented in peacetime; monetary policies that give new meaning to the word “loose”; a depreciating dollar, causing higher commodity prices and sapping consumer discretionary income; and regulatory burdens that are suffocating the economy.

Health care reform was not an urgent priority. The legislation did little to fix the primary problems with health care delivery and will add at least $1 trillion to the federal deficit. The Dodd-Frank bill failed to address the problems that caused the financial crisis of 2008 and will make it more difficult to handle the next crisis.

Government has pursued one short-term fiscal stimulus gimmick after another for the past three years. Recall “cash for clunkers,” the first-time homeowners credit and “shovel-ready” projects. These and other short-term stimulus programs added to federal deficits that are unsustainable and among the worst in the world.

Our economy is very weak and at serious risk of another recession. The world economy is contracting, and Europe may already be in recession.

The president calls for even more short-term stimulus and proposes to pay for it by raising taxes permanently on the individuals and small businesses that produce jobs. We know of few, if any, reputable economists who would prescribe tax increases to promote economic growth.

It’s particularly disheartening that sound policy recommendations are sitting right before our eyes and receiving scant attention. Mr. Obama’s bipartisan commission on the fiscal crisis, headed by former Republican Sen. Alan Simpson and Erskine Bowles, former chief of staff to President Clinton, gives us the template.

Their report, appropriately titled “The Moment of Truth,” recommends deficit reduction of at least $4 trillion over 10 years through reduced spending and increased revenues. It recommends tax reform to lower marginal rates to stimulate economic growth while phasing out most tax deductions to produce a simpler and fairer tax code. Separately, a bipartisan group led by Rep. Paul Ryan, Wisconsin Republican, and Alice Rivlin, director of the Office of Management and Budget under President Clinton, is working to ensure that Medicare and Medicaid will be available to our children.

These types of bipartisan reforms are precisely what we need to restore confidence and stimulate economic growth and job creation.

President Carter pronounced during the late 1970s that Americans were suffering from “malaise.” Mr. Obama recently told us we have grown “soft” and have lost our competitive edge. They both got it wrong.

We have lost faith in our government and major private institutions. We do not believe the rules are fair to all Americans. We are frightened about the deficits, the viability of entitlement programs, potential inflation, stifling regulations, tax policies and our future.

We are not soft, but our political leaders are. We are angry, sad, disillusioned and scared that a dysfunctional political system is threatening what made America great. We want to extend a hand to those in need but are troubled about permanent income transfers from those who produce income to those who do not.

Our problems are real and will not be fixed by short-term gimmicks. It’s past time for our leaders to act in the best long-term interests of our nation by adopting sound fiscal, monetary and regulatory policies. Many Americans have their money in the proverbial mattress and will not take it out for spending or investment until our leaders get the policies right.

William M. Isaac is former chairman of the Federal Deposit Insurance Corp. and chairman of Fifth Third Bancorp. Richard M. Kovacevich is the retired CEO of Wells Fargo & Co.

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