If the Economy Is a Football Game, We Need New Strategies

by: John M. Mason

Good teams find ways to win even when the calls go against them, even when the weather is bad, and even when their opponents change their strategy. Bad calls are a part of sports, business and politics. You have to go on; it is a part of the game. Yes, the ref missed the call, but you still have to play out the rest of the game. Sure, Standard & Poor’s may have not handled the ratings adjustment and timing in the best way possible, but the Obama administration knew that the government’s bond rating might be changed and it also knew that the United States had fiscal, political and economic problems.

The announcement on Friday evening was not a surprise, yet the administration chose to claim that Standard & Poor’s was “incompetent and not credible.” To some, this puts the United States right up there with Greece, Portugal, Spain and Italy. The blame rests elsewhere. This is what losing teams do.

The weather, the external environment, is a part of games, business and politics. Yet your opponent, others, has to face the same external environment that you do. The snow or wind or rain make playing rough, but the game continues. Sure, the economic conditions being faced by the United States are difficult, but the Obama administration has been facing them for two and a half years, as have many other countries, and blame cannot continually be placed upon the Bush (43) administration or the rest of the world.

Again, losing teams put the blame on somebody or something else, like speculators, rating agencies, and previous presidents. And then they keep on doing just what they have been doing in the past.

Opponents change their strategies during games, or they may change personnel. Given the refereeing, the weather, and the strategy you are pursuing, your opponents may alter the way they do things in order to take advantage of your strategy, personnel or the weather. Yes, the Republicans won the mid-term elections; sure, the Tea Party advocates came on very strong; and sure, the economy did not respond the way that the Obama administration expected -- but that is not a reason to blame these factors as reasons why the Obama team didn’t succeed.

Obama relied on the same strategy and game plan established at the start of his presidency. Every issue was addressed by a speech, after which the construction of a plan, whether for healthcare, financial reform, or debt control, was turned over to Congress. The opponents of Obama changed how they played the game and largely succeeded in their efforts because the Obama team played the game exactly as it had in the past.

It is obvious that there is great concern in the world over the financial affairs of governments in the United States and Europe, yet these governments continue to claim that others are imposing the problems upon them. As this attitude continues, we all are worse off for it. This is the way losers play the game.

The conditions are what they are. The people in power need to make adjustments to their game plans; they cannot continue to follow the same strategies they have been pursuing in the past. When is it going to become obvious to these people that what they are doing is not working? When are they going to realize that the past is the past and that maybe they need to listen to new voices? Politicians are supposed to be pragmatic so let’s see some of that pragmatism.

Where should they start? I believe that the United States government needs to change its economic objective. For more than 50 years, the primary economic objective has been to achieve high levels of employment and a low unemployment rate. Under this objective, the percentage of people working in a labor force has dropped to an historic low of about 55 percent and the underemployment rate has risen to about 20 percent of those of employment age. Furthermore, pursuing this policy objective has resulted in an income/wealth distribution skewed more toward the rich than ever.

To continue to maintain this policy as the number one priority of the United States government is like a football team continuing to run the same play over and over again even though the opponent has stacked the defense to stop that very play. To me, the primary objective of United States economic policy should be the maintenance of a strong dollar. Although every presidential administration for the past 50 years has supported a strong dollar, the policy of credit inflation followed by both Republicans and Democrats to achieve high levels of employment for the past 50 years has achieved exactly the opposite end. First, the United States dollar was taken off the gold standard on August 15, 1971 and its value was allowed to float. Next, the credit inflation policies followed by these Republican and Democratic administrations have resulted in a decline in the dollar in world markets of about 40 percent since 1971.

The game plan of credit inflation to achieve low levels of unemployment has not succeeded and the standing of the United States in the world has suffered for it. That game plan needs to be changed. A strong dollar is the foundation for a strong economy because the emphasis is placed upon the competitiveness and innovative capabilities of the businesses and workforce of the economy. The government must be concerned with education and training, with the ability of companies to innovate and change, and with incentives for people to start and grow companies. High levels of employment and labor participation are achieved in this way.

Putting all the emphasis on credit inflation to ensure high levels of employment works against the things mentioned in the previous paragraph. Credit inflation works to put people back in their old jobs rather than encourage innovation and training to raise productivity and change. Credit inflation puts emphasis on financial leverage and financial innovation and leads to the financial sectors of the economy becoming more important than the manufacturing sectors. And credit inflation results in the income/wealth distribution becoming more skewed toward the wealthy.

If the basic philosophy of the Obama administration continues to be one based on the further application of credit inflation to the economy, it will have fundamental problems going forward. Economic growth will continue to stagnate; the administration will face greater and greater opposition, both from its opponents because they will see that nothing has changed in the game plan and that the game plan is not succeeding, and because its supporters will become more and more dissatisfied with its performance; potential outside opponents, like China, Russia, Brazil, and so forth, will prepare much more aggressive game plans against the United States because they can smell the weakness. Note the responses of China, Russia and others to the Standard & Poor’s downgrade.

Winning teams focus on building strong organizations with the best personnel for the times and with the best game plans for the game they are playing. They adjust with the conditions. They find ways to win, and they do not make excuses.