The economy is weak and the job market brutal. Nearly 13 million Americans can’t find work; the national unemployment rate is 8.1 percent, the highest level ever three years after a recession supposedly ended. A divided Washington has done little to ease the misery.
Where they stand
President Barack Obama wants to create jobs with government spending on public works and targeted tax breaks to businesses. Mitt Romney aims to generate hiring by keeping income taxes low, slashing corporate taxes, relaxing or repealing regulations on businesses and encouraging production of oil and natural gas.
Why it matters
The economy didn’t take off when the Great Recession ended in June 2009. Growth has never been slower in the three years after a downturn. The human toll is immense. Forty percent of the jobless — 5 million people — have been out of work for six months or more, their skills eroding and their chances of finding good jobs fading. Federal Reserve Chairman Ben Bernanke has declared long-term unemployment a “national crisis.” Millions of Americans have simply given up looking for work.
The agonizing recovery is the consequence of the deepest recession since the 1930s. The economy lost a staggering 8.8 million jobs and has only clawed back 4.1 million, or 46 percent. A financial crisis dried up credit. Collapsing house prices destroyed $6.5 trillion worth of home equity — the biggest source of wealth for most families. More than 1 in 5 homeowners is stuck with a house worth less than the mortgage on it. Feeling poorer because of the weak job market, pay hasn’t kept up with even modest inflation.
Weeks after he took office, Obama pushed $862 billion worth of tax cuts and government spending programs through Congress. The package was meant to generate economic growth and revive hiring. Obama proposed another $447 million plan last year to rev up hiring with increased spending on public works projects and tax breaks to small businesses, but it’s gone nowhere. Congressional Republicans say government programs to help the economy accomplish little other than swelling the $11.2 trillion federal debt — $16 trillion if you include money government agencies owe each other. They advocate lower taxes and fewer government regulations, specifically the health-care law and Dodd-Frank law that tightened regulations on Wall Street, to generate economic activity.
The Federal Reserve has pushed short-term interest rates to near zero and poured more than $2 trillion into financial markets by buying Treasury debt and mortgages. That may have kept the economy from slipping back into recession but has not stimulated healthy economic growth.
Republicans and Democrats will have to find some common ground before the year ends, when more than $600 billion in spending cuts and tax increases will start to kick in next year. The combination could send the economy back into recession and drive unemployment back to 9 percent next year, the Congressional Budget Office estimates.
