- By Joel Naroff

The election is over, the voters sent a strong message to Congress and the president that they have to start working on job growth, spending and the deficit. Interestingly, the most troubling issue, a weak labor market, may already be starting to resolve itself. But the deficit is different and reducing it will require something that has been in short supply: political courage.

The economy continues on its tortoise-like path to recovery. The biggest news over the past month was the October jobs report. A solid 159,000 new private sector positions were created. Over the past three months, businesses added 136,000 workers per month. Though that isn’t great we have to recognize how far we have come. Over the same period in 2009, firms cut over 220,000 jobs each month. That swing from firing to hiring is huge.

Unfortunately, the number of new jobs being added couldn’t reduce the unemployment rate, which remains way too high. We wanted rapid improvement but that was never going to happen given the collapse of the housing and financial sectors. What we got was the best we could reasonably have expected. Nevertheless, if the labor market makes the same progress over the next year, job growth will be strong and the unemployment rate will be falling.

There are other signs the expansion is gaining traction. Consumers are buying motor vehicles again. Except for the “cash-for-clunkers” period, October’s sale pace was the highest in two years. Businesses investment remained robust despite the sluggish third quarter growth rate. Home sales are improving and the frontline purchasing managers indicate both the manufacturing and services sectors are expanding faster. It really looks as if the economy has started to shift gears.

So why were voters so unhappy? Limited employment opportunities continue to weigh on workers minds as they fear that if they lose their jobs, they will not be able to find new ones. And the campaign ads pounded on the growing deficit and its impact on all of us. Jobs may be coming back but the budget problems are not going away quickly or easily.

There was a deficit reduction wakeup call as the National Commission on Fiscal Responsibility and Reform presented its proposals. The bi-partisan group made it clear that cutting waste and fraud would just not cut it. Instead, extremely hard decisions have to be made about many political sacred cows.

Here are just some of the proposals: Slowly raise the Social Security retirement age and reduce annual increases; cut $100 billion out of both defense and non-defense spending; reform and simplify the tax code getting rid of most special interest tax expenditures; change and reduce the mortgage interest deduction; reform Medicare by increasing recipients payments and cutting reimbursements to doctors and lawyers; and reform and trim entitlement programs of all kinds including farm subsidies.

There are special interest groups that oppose each and every one of those ideas. But if we are going to meet the challenge of growing the economy, reforming the tax structure and reducing the deficit, everyone will have to make major sacrifices. Most importantly, politicians will have to walk the walk after having talked the talk. And since tax cuts add to deficits in the short run, it will be interesting to see how Washington balances political desires with economic realities.