By Lee H. Hamilton
Recent economic news has been broadly reassuring. Retail sales are strong, November saw the best job gains in three years, the federal deficit is shrinking, the stock market is robust, and the Fed is expressing enough faith in the economy that an interest rate bump next year is considered a certainty.
Yet the public remains unconvinced.
This is partly because perceptions haven’t caught up to reality. For many middle- and lower-class families, economic circumstances have not changed very much.
Strong numbers do, however, offer one unambiguous piece of good news: The pressure on policy makers to focus on near-term or immediate problems has eased, which means they can now focus on the fundamental question of economic growth. As Princeton economist Alan Blinder, political strategist Al From and others have pointed out, now is the time for policy-makers to concentrate on creating the environment in the country for sustained, non-inflationary economic growth for all.
To begin with, we have a chance to get our fiscal house in order and pursue long-term deficit reduction. This means modernizing entitlement spending and shaping a tax-reform package that focuses on investments to boost productivity and help the economy to grow for everyone. It also means eliminating public subsidies to individual enterprises—money can be spent on boosting the economic skills of ordinary Americans through education and training.
There are other steps government policy-makers can take to improve broad economic growth. We need to expand trade through open markets and simplify the regulatory structure so that it protects Americans without burdening companies beyond reason. And we must address our nation’s deferred infrastructure needs, which hinder the smooth functioning of every business that relies on transporting its goods.
The same applies to reforming government itself. A government that does not work well — that wastes money, fails its regulatory responsibilities, and cannot make timely decisions — undermines economic growth. Finally, policy-makers need to remember that economic growth means providing a ladder out of poverty for the truly needy.
Free, competitive markets are the best way to deliver goods and services to Americans. Government must not get in the way of that system. Nor should it stand idle. The right response by government to our economic challenges is not to focus on the immediate economic problems of the day, but to invest in economic growth for all.
Lee Hamilton is Director of the Center on Congress at Indiana University. He was a member of the U.S. House of Representatives for 34 years.