Saturday, October 2, 2010

Obama's Big Problem

The following is an excerpt from a much longer blog I posted nearly seven weeks ago. I am placing it here for two reasons:

1) Pundits keep finding putting forth a host of erroneous explanations for Obama's current political troubles. Some claim that they are due to the rise of the Tea Party movement, even though that group's undeniable right-wing proclivities makes it hard to believe that they are costing him any support that wouldn't have already gone against him in the first place; others argue that it's because Obama has taken a sharp turn to the left, in spite of the fact that history shows that Americans are generally less concerned with the ideology of their presidents than they are with their perceived effectiveness. Instead, the reason for Obama's problems, as shown not only in poll after poll but as verified by any cursory look at historical precedent, is that the poor economy which he inherited has not improved during his presidency.

2) As such, I want to elucidate both the mistakes Obama has made when it comes to economic policy, the origin of those mistakes, and what he can do to correct them.

The following is a passage from my August 15th post "Obama's Great Failure." Most of it remains unchanged from the original version; that which has been altered is noted with an asterisk.

Even though the start of the recession can't be ascribed to Obama's policies, the failure of our economy to turn around is entirely his own.

When he was inaugurated almost nineteen months ago, Obama had an abundance of political capital. He had been elected almost three months earlier with the largest popular mandate of any president in twenty years; as a result of his personal charisma and the enthusiastic grassroots movement that propelled him to power, he had a staggeringly high 64% approval rating; and he had majorities in both houses of Congress that, combined with his personal popularity and the nationwide demand for drastic action, were more than sufficient for him to successfully initiate even highly ambitious legislative measures.

Even better, Obama had templates from recent history to which he could refer for guidance. The last president who had to deal with a similar economic crisis, Franklin Roosevelt, recognized that the root of the problem was high unemployment and declining incomes; as such, he alleviated much of America's suffering during his first two terms with a series of programs known as the New Deal, which put millions of people to work (see the National Industrial Recovery Act of 1933) and helped raise average income levels by empowering labor unions (see the Fair Labor Standards Act of 1938). Indeed, the fact that unemployment and poverty weren't reduced even more during the first eight years of Roosevelt's tenure was due to the reluctance of even liberal Democrats to spend too much money on his New Deal policies. Once World War Two began, and Roosevelt was able to use the war effort as a pretext for increasing the budget and scope of his program of national economic mobilization so that it could reach its fullest potential, unemployment dropped dramatically, from as high as 14% in 1940 to less than 2% three years later.

Yet despite the fact that Obama knew what had to be done and had the tools at his disposal with which to do it, he failed.

The reason for this is as simple as it is devastating: Barack Obama's historical memory did not go back far enough.

To briefly elaborate:

1) From the beginning of Franklin Roosevelt's presidency in 1933 to the beginning of Ronald Reagan's presidency in 1981, the prevalent assumption in American economic life was that the government had an obligation to intervene in economic matters on behalf of middle-class and working-class citizens, from curbing the excessive power of big business and Wall Street to protecting the rights of consumers, stimulating job growth, and fighting for livable wages and humane working conditions. What's more, Democrats insisted on winning elections through the aggressive use of economic populism, depicting themselves as friends of the working and middle classes and characterizing Republicans as tools of the wealthy and a corporate oligarchy. As a result of the beneficence of their policies and the shrewdness of their political strategy, Democrats won two-thirds of the presidential elections from 1932 to 1976, dominated both houses of Congress during that same period with only a handful of brief interruptions, and presided after the end of World War Two over more than three decades of virtually unbroken economic growth (only briefly hiccuped by the oil crisis of the '70s). Roosevelt himself became so popular that he earned the distinction - never matched before or since - of being elected to more than two terms, each time with his popular support never falling below 55%.

2) The last Democratic president to be elected as an unabashed liberal was Jimmy Carter in 1976. Following the failures of his presidency - particularly his difficulty in solving the Iranian Hostage Crisis and fighting the economic effects of the oil shortage - Carter was defeated in the election of 1980 by a Republican named Ronald Reagan, who came from what was then the extreme right-wing of his party. Since that time, conservative economic assumptions had dominated American political life. The Republican Party abandoned the position of the moderates who had dominated their party post-FDR (as seen by every candidate from Alfred Landon to Gerald Ford, with only Barry Goldwater briefly interrupting that string) and instead subscribed to the notion that government spending on the economy to protect consumers and the jobs and wages of the working classes was always bad, if not downright un-American (although they did not object to spending increases for the military, the war on drugs, culturally conservative programs, and tax cuts and financial giveaways for wealthy individuals and businesses, and the consequent exploding of the budget deficit that came as an inevitable result of all of this). This philosophy was not inherently helpful for Republicans: Despite running against an incumbent who was reviled for his perceived ineptitude, Reagan only received 51% of the popular vote against Jimmy Carter during his first run for the presidency in 1980; when he implemented his conservative economic agenda during his first term, it triggered the worst recession in decades, one that lasted two years and was only relieved by the technological boom brought on by the PC revolution and its resultant temporary recovery; this stroke of good luck (unrelated to any Republican policies) helped Reagan recover his abysmal approval ratings and get resoundingly re-elected in 1984; and then his party had further good luck in 1988, when the Democrats nominated a weak candidate, Michael Dukakis, whose naivete about national politics caused him to turn a 17-point lead over Reagan's heir apparent (George H. W. Bush) into an eventual 9-point loss.

3) Then, in 1992, the Democrats chose as their standard-bearer Bill Clinton, who promptly waged a campaign based on the erroneous premise that the last three presidential elections had been lost because Democrats challenged the ascendant Reaganite economic assumptions as opposed to embracing milder versions of them. Because Clinton's opponent, President George H. W. Bush, was saddled with a terrible economy and a third-party spoiler who siphoned off huge chunks of his base, Clinton wound up winning the election despite receiving only 43% of the popular vote (the lowest amount to go to a victorious candidate in twenty-four years). Clinton in turn pursued economic policies from the center-right, in what he believed was a politically viable halfway point between the FDR liberalism that worked and the Reagan conservatism to which he believed Democrats had to make automatic concessions. Like Reagan before him, Clinton lucked out; a technological boom that had nothing to do with his own policies caused economic growth and led to his re-election (ironically, that techno boom was directly connected to the actions that his vice president, Al Gore, had taken while he was still a Senator from Tennessee; see the High Performance Computing and Communication Act of 1991). By the time Clinton's re-election in 1996 had given way to the scandals that marked his second term, the message had nevertheless been sent to Democrats with faulty historical memories - the way to win elections was to abandon, or at the very least serve as apologists for, economic liberalism.

Hence Barack Obama's mistake: He looked to history for guidance and learned from the age of Bill Clinton when he should have learned from the age of Franklin Roosevelt. As soon as he was sworn into power, Obama should have declared that he was pursuing a policy of national economic mobilization akin in structure and scope to that pursued by Franklin Roosevelt during World War II, or at least during the early stages of the New Deal. Instead he chose the Clinton strategy of finding a middle ground between what would work and what the prevailing Reaganite paradigm would accept.

The reasons for following in the Roosevelt path were great: It would undoubtedly have caused a significant reduction in unemployment, increased wages, caused an economic recovery, and gone a long way toward getting Obama re-elected in 2012. Because Democrats had supermajorities in both houses of Congress, Obama could easily have passed all of the legislation needed without any Republican support. The worst with which he would have had to grapple were the gripes of conservative Democrats, but (a) given his high popularity at that time, it is doubtful that many of them would have wanted to oppose him when he was at such a peak and (b) had they managed to thwart his initiatives, or had they fought too aggressively to water them down, Obama could have easily turned to his advantage by characterizing conservatives Democrats as obstructing recovery in the name of their allies on Wall Street, thus parlaying his own popularity and the growing hatred of Wall Street into populist pressure on conservative Democrats to tow the party line, which would have not only guaranteed the passage of the necessary legislation but enhanced Obama's image as a strong political leader. Finally, and perhaps most importantly, it would have solidified Barack Obama's place in history as a transformative president; since his actions would have undermined the ideological assumptions that had kept the previous dominant political coalition (i.e. the one forged by Ronald Reagan in 1980) in its ascendant position, he could have reshaped the American ideo-political paradigm in his image, as had the other transformative presidents before him (Thomas Jefferson, who shaped the political era from 1800 to 1828; Andrew Jackson, who shaped the political era from 1828 to 1860; Ulysses Grant, who after the interlude of the Civil War and the Andrew Johnson debacle shaped the political era from 1868 to 1901; Theodore Roosevelt, who shaped the political era from 1901 to 1920; Warren Harding who shaped the political era from 1920 to 1932; Franklin Roosevelt, who shaped the political era from 1932 to 1980; and Ronald Reagan, who shaped the political era since 1980).

The arguments for avoiding the Roosevelt path were almost pathetically weak: Those who asserted that it would deny Obama bi-partisan support ignored that the post-Gingrich Republican Party has made refusing to work with Democratic chief executives a tactical imperative, thus making any effort to win their support inherently doomed; those who claimed that it would have led to Obama being accused of socialism forgot that (a) the regular voters who would say that are right-wingers who would never vote for a Democrat anyway and (b) conservatives make that charge of Democrats regardless of their ideology, as seen by the fact that they claimed this of the centrist Bill Clinton just as they did of left-wingers from Franklin Roosevelt to Jimmy Carter, which means that Obama was guaranteed to be attacked on that basis no matter what he did; and finally, those who pointed out that Obama's policies would have raised the budget deficit (the one quasi-legitimate claim) overlooked that (a) the long-term harm caused by increasing our budget deficit is much less than that caused by persistent high unemployment and low incomes and (b) once the economy had recovered, taxes could be increased (especially on big businesses and the wealthy) so as to gradually pay off the deficit, since by then the economy would be able to afford it.

Yet instead of following both common sense and the lessons of recent history to their logical conclusion, Obama chose the Clinton path instead of the Roosevelt one:

1) Although he passed a stimulus package to create jobs, he watered it down in order to win the support of conservative Democrats (which he mostly got) and Republicans (which he did not get), thus reducing it to a size that still guaranteed its ability to prevent more severe economic decline (which it did indeed do, a feat that has not received adequate credit from either ideological side) but rendered it woefully inadequate to the task of fostering actual economic growth and recovery.

2) He shifted his focus away from the issue of creating jobs and improving working class conditions and instead spent the remainder of his political capital on health care reform. Although this was undeniably an important issue, and one to which Obama's ultimate legislation has made great strides toward resolving (once again, much more so than many on the left as well as the right are willing to acknowledge), it was not the central issue confronting his presidency, and as such should have been tackled by him later in his administration.

As a result of Obama's failure, the economy is still faltering, the American people are still suffering, and the likelihood that these variables will lead to the nomination and election of Mitt Romney* becomes larger every day.

This doesn't mean that political salvation is impossible for Barack Obama. A recovery could occur at the last minute for him, due to a technological revolution or some other external stimulus, much as one did just in time to get Ronald Reagan re-elected in 1984 and Bill Clinton re-elected in 1996; an unrelated crisis could cause people to rally around Obama and overlook his failures on the economic front; he could, after suffering terrible losses in the mid-term elections of 2010, be confronted with a Congress so bloodthirsty in hounding him that he could receive de facto support from a sympathetic public, or likewise have a Congress so radical and/or obstructionist in its actions that he can then pass blame for our economic woes onto them, a la Harry Truman in 1948 or Bill Clinton in 1996*.

Of course, the sad truth made evident in all of these hypothetical scenarios is that none of them would be the result of any actions Obama himself had taken. When an individual in power finds that his actions can no longer impact his fate, it is proof that he has failed as a leader.

* - In the original draft I did not mention that Obama's potential ability to be reelected in 2012 by running against an obstructionist Congress would be comparable to the ability of Harry Truman and Bill Clinton to successfully do the same thing in their campaigns of 1948 and 1996.

Likewise, although the original draft assumed that Republicans would err on the side of pragmatism and nominate Mitt Romney, I have since then come to the conclusion that Mike Huckabee will be their pick. I elaborate on this point here:

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