Q&A with U-M Ford School dean: Economy and midterm election campaigns

October 30, 2014
Contact:
  • umichnews@umich.edu

ANN ARBOR—In the battle for control of the U.S. Senate, economic issues such as tax and immigration reform are largely absent. Susan Collins, professor of public policy and economics at the University of Michigan and dean of the Ford School of Public Policy, explains why.

Q: Why do you think the economy is missing in the midterm election campaigning, despite it remaining the top concern for most voters in a recent Gallup poll?

Collins: There are two key reasons economic issues—like taxes and immigration— aren’t being addressed. First, they’re complicated and controversial. Complicated issues are not ones that are easiest to run on. Second, economic challenges are not making headlines right now. While the economy is certainly not booming, it is continuing to do better. The U.S. is growing faster than Europe or Japan. The crisis headlines at the moment focus on security issues related to the Islamic State and health issues such as Ebola. We are much more likely to see candidates grapple with complicated economic issues when there is a greater sense of urgency about the economic challenges.

Q: Which economic issues do you think ought to be talked about particularly in the battle for control of the U.S. Senate?

Collins: The big economic issues have to do with the U.S. growth trajectory. What are the opportunities for making a difference in long-term growth and living standards? Wages at the lower and middle levels have been growing so slowly. Senators, running for six-year terms, should particularly take a longer-term view. To what extent is the government going to be prepared to address longer-term issues?

Two of the big economic policy challenges are tax reform and immigration reform. Certainly not new topics, but as I noted above, each is complicated—as well as controversial.

The budget deficit declined significantly but that does not mean tax reform is any less urgent. Out on the horizon, the problems have not been solved. Those deficits are expected to begin growing again, and our debt is already too high. The time to address tax reform challenges is now, not while we are not in a crisis. Does our corporate tax structure create an environment that promotes competitiveness and growth in a global environment? There are also issues for household income taxes: loopholes and inclusiveness. We want to broaden the base to lower the rates, at both the corporate level and the household level.

In terms of immigration, it is generally understood that the current system is broken. The large undocumented population as well as periodic border crises, like the big inflow of children we saw last summer, present major challenges that need to be addressed. Immigration also has implications for longer-term growth. A more flexible, legal immigration system is likely to improve our growth prospects, for instance, by helping businesses address skilled labor shortages that arise.

Q: How much of an impact do you think the election will have on economic growth?

Collins: It seems that there is a longer time around each election that things don’t get done. The window is growing when people are in the election season and saying ‘we can’t do that because of the election.’

One of the challenges to economic growth in the U.S. is the lack of confidence that things are going to get done in Congress. That stifles growth. Firms are sitting on an awful lot of resources right now. The government’s inability to grapple with policy challenges and craft solutions doesn’t give them confidence to act.

Q: With unemployment at 5.9 percent, which is the lowest since the financial crisis of 2008, rising consumer confidence and a rise in job creation, it seems a good time to talk about the economy—particularly for Democrats. What’s holding them back despite Obama’s attempts to raise the subject earlier this month in speeches?

Collins: Those discussions are most likely to happen if there’s a crisis. The fact that we are doing better makes it less likely that we will talk about them because they are complicated and divisive. If there was more of a sense of urgency, we would be more likely to see people talking about the economy.

 

Collins is a member of the board of directors of the Detroit Branch of the Federal Reserve Bank of Chicago and a senior fellow with the Brookings Institution.

During 1989-90, she served as a senior staff economist on the President’s Council of Economic Advisers. Collins received her B.A. summa cum laude in economics from Harvard University and her Ph.D. from the Massachusetts Institute of Technology.

 

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