Given the sluggish U.S. economic recovery from the financial crisis, with high levels of joblessness and economic uncertainty, it is little wonder that economic policy is a critical feature of the presidential campaigns. Ten questions enable voters to understand the candidates' economic philosophy and evaluate their proposals.
Does the campaign's policy...
1. ... focus on the short term or the long term? The past three and a half years have seen an emphasis on short-term stimulus to jolt the economy back to a more robust long-term growth path. An alternative view would stress that eliminating policy uncertainty, focusing on enhancing long-term growth directly, and righting the fiscal ship will pay short-term dividends, too.
2. ... America's economic position in the world economy? In the postwar period, the United States has often played the lead role in advancing multilateral trade agreements, protecting intellectual property, and promoting global financial stability. Does the candidate advocate proposals for trade agreements? To make America a haven for investment and jobs?
3. ... emphasize economic growth and job creation? The pace of economic growth is a critical factor in job creation. Supporting economic growth requires clear, long-term policy about taxation, federal spending, and regulation. Regulatory clarity in financial services, energy, and health care will be particularly important. And tax and entitlement reform are perhaps the government's most potent tools for affecting growth and confidence.
4. ... bring sustainability to the U.S. fiscal situation? High deficits and rising public debt levels crowd out business investment. And an unsustainable fiscal trajectory raises expectations of higher future tax burdens, depressing household and business spending today. A sustainable U.S. fiscal policy must incorporate bringing shares of revenue and spending in GDP much closer to balance. Both spending restraint and tax increases could improve sustainability, though economic growth will be enhanced under a spending restraint approach.
5. ... draw sacrifices for fiscal adjustments disproportionately more from upper-income individuals? This concept of fairness can be borne on the tax side -- higher tax burdens for upper-income individuals - or on the spending side -- slower growth of Social Security and Medicare spending for those individuals. If a plan leaves large deficits will remaining, who will ultimately bear the burden of financing these deficits?
6. ... bolster lagging growth in incomes for middle-income households? Such an emphasis requires policies encouraging productivity growth, low marginal tax rates, and lower health care costs. Budget consolidation is important for middle-income tax burdens in the medium and long run, as failure to arrest future deficits will necessitate large tax increases on middle-income Americans.
7. ... provide support for training and skill development for unemployed individuals? Much of the Washington discussion about the labor market centers on unemployment insurance, in spite of economists' reservations about the adverse consequences for reemployment of reliance on unemployment insurance. Are there proposals for government training programs? Individual training and reemployment support?
8. ... advance fundamental tax reform? Most economists argue that a reformed tax system with a broad base and low marginal tax rates (especially on saving and investment) encourages economic activity. Are there proposals to reduce marginal tax rates? Alternatively, to raise revenue by simply increasing marginal rates?
9. ... move toward a strong financial system focused on the needs of the real economy? A healthy financial system is important for economic growth and well being -- matching savers with those who want to invest and providing options for future income. Are there proposals to end too-big-to-fail policy, encouraging competition and credit availability? Is regulation focused on safety alone or a balance between growth and safety?
10. ... advance 'value for money' in health care? While considerable discussion of health care 'cost' and 'access' rages in Washington, what about value? Are there proposals to enhance market forces in health insurance and health care to increase value per dollar spent? Do proposals simply double down on the current system, with weak incentives to enhance value?
These questions are important, but they need to be considered together.
There are strong interactions between fiscal sustainability and growth. Between growth and job creation. Between tax reform and growth. Between financial reform and growth. Between growth and America's standing in the world.
As voters consider carefully these key economic questions, Governor Romney's answers provide a compelling argument for a better economic future.
Short-term or long-term orientation?
Governor Romney: Clear long-run policy brings short run into focus
President Obama: Short-run stimulus brings long run into focus
America's role in the world?
Governor Romney: Advance free trade with countries abiding by the rules
President Obama: Begrudgingly approve individual agreements
Importance of growth and jobs?
Governor Romney: Starring role: tax reform, regulatory reform, policy clarity
President Obama: Supporting role: tax increases, health care and financial regulation first
Sustainable fiscal position?
Governor Romney: Yes -- with spending restraint and tax reform
President Obama: No -- even with tax increases on upper-income households and businesses, large budget gaps remain, leaving future tax increases
Sacrifices by upper-income households?
Governor Romney: Slower growth in Social Security and Medicare spending for the affluent
President Obama: Tax increases on work, entrepreneurship, and saving and investment, for these households
Improved positions of middle-income households?
Governor Romney: Yes -- tax reform (to bolster wages) and health care reform (to allow lower health care costs to raise take-home pay)
President Obama: No -- uncertain future tax policy and likely future tax hikes with large budget gap
Training and skill development for the unemployed?
Governor Romney: Personal reemployment accounts for training with bonus for quick reattachment to the labor force
President Obama: Longer period of unemployment insurance benefits and absence from the labor market
Governor Romney: Yes -- broaden the base, lower the rates
President Obama: No -- increases in marginal tax rates and ignoring of tax reform options from own commission
Financial system for the real economy?
Governor Romney: Promote competition and limit taxpayer exposure by eliminating "too big to fail"; balance growth and safety
President Obama: Double down on "too big to fail"; impose strict and uncertain regulation on new credit
Value for money in health care?
Governor Romney: Market-based incentives for cost control
President Obama: Rising costs with the Affordable Care Act
By Glenn Hubbard, Dean of Columbia Business School, former Chairman of the Council of Economic Advisers under President George W. Bush. He is an economic adviser to Governor Mitt Romney.