Editorial: In making economic policy, remember importance of consistency

Editorial Board

Despite a fall in unemployment numbers, released last week, we should be careful before we say “Mission Accomplished” about the economy. The flurry of retail activity that follows Thanksgiving and precedes Christmas may be strong this year but slipping into the same old consumerist mold probably won’t help cure the economy much.

The unemployment rate dropped from October’s 9 percent to 8.6 percent for November, as 120,000 new jobs were added to payrolls. Coupled with revised estimates for job gains in October (100,000 instead of 80,000) and September (210,000 instead of 158,000), the numbers paint an initially rosy picture. So do the $6 billion in online sales from the Sunday after Thanksgiving through Saturday.

But then you have to account for some 315,000 individuals who have stopped looking for a job. And you have to remember that the holidays are one of the economy’s retail sector’s most profitable seasons anyways. Making a large part of their profit in the weeks before Christmas is a regular part of business.

Before we celebrate, we should see whether the growth was in sectors of the economy that actually produce durable goods — and jobs — or providing important services, or whether the growth was in jobs that will disappear as the holiday season ends at New Year’s Day.

Restoring economic stability will require sustainable economic output. Fleeting consumption of machines made to expire, die or become obsolete within a couple years will only fill landfills and provide work to unskilled laborers in developing countries. Where are all our TV sets, computers, cameras and toys manufactured? The designs and technologies may come from this side of the Atlantic and Pacific, but the products overwhelmingly do not.

As Congress considers extending the payroll tax cuts, they should act in such a way that will spur long-term economic growth, not profits that will not survive after another year has passed. Volatile taxes are worse than high taxes. At least in a system with high taxes, business owners and entrepreneurs can see the government policies that will affect them. But when taxes change from year to year, we compromise lasting growth.

One reason our Constitution was written was to provide that kind of security. Government policy under the Articles of Confederation, left to thirteen states and a powerless national congress, was unpredictable. Commerce suffered because of it. Consistency is the most essential part of any tax code, and real economic growth comes from predictability rather than low taxes.