The next three months will define the Obama Presidency. Right now, the potential for failure is high.
First the economy. Obama rushed into office with a massive stimulus package which was intended to lessen the impact on the recession on workers and communities. A lot of these funds are yet to be spent, but the recession is already “officially over” and the economy is beginning it long journey back to its new start point. However, unemployment remains high and the recovery looks increasingly jobless at this point. Unless unemployment declines, Obama’s stimulus package will not have succeeded on one critical litmus test.
The next economic test for Obama will relate to the handling of regulatory reform and the potential dangers of bank indebtedness. Obama is sensitive to the nuances here and is using rhetoric and his powerful communication skills to steer the financial services culture away from its “greed and feed on the weak” modus operandi to one of careful and cautious capitalism. In short, Obama has to find a pathway between encouraging risk taking (the core of capitalism) while at the same time moderating the rewards capitalist secure from taking these risks. He needs to do so in a culture that is still dominated by Milton Friedman rather than Milton Keynes.
Not an easy task. Underlying this is the fact that many of the needed regulations are in place, just poorly executed. The Bernie Madoff scandal and others like it show this to be true, as does the continuing struggle to track down where all the TARP money went.
Bank indebtedness – the bad debt sitting on the books of banks and financial services organizations which has to be managed if banks are to meet their corporate and legal obligations – pose a significant threat to the stability of the US financial system over time. Obama, working with Bernanke and others, needs to find the path to reduce the risk of these debts unduly slowing the recovery and affecting confidence without resorting to the socialist solution some European governments have pursued.
His final economic challenge is the rapidly growing scale of US budget deficits and debt. The Republicans are right to be concerned that his legislative agenda is likely to significantly increase public sector borrowing, raising interest rates and taxes while leading to cuts in government programs and services. Obama needs a convincing strategy to leave office after two terms with a manageable level of debt. Right now, this plan does not appear to exist.
His two other flagship activities –climate change and health care – are in serious trouble. The Democratic leadership in the Senate signaled recently that they are to postpone serious consideration of the climate change legislative until 2010 or, more likely, 2011. Meantime, legislators are looking to the Environmental Protection Agency (EPA) to do its work for them and use its existing powers to regulate CO2 emissions. There is growing speculation that climate change legislation will not pass the Senate in Obama’s fist term.
Health care reform, as is obvious to all, is showing the extent to which congressional governance is dysfunctional. Obama trusted congress to work out a reform package that would meet the need to extend health care coverage, reduce the burden of health care costs on families and companies, while improving the quality of life for Americans. What we have seen over the last four months is the lack of alignment even within the Democratic party on the nature of such reforms. Obama needs a convincing victory in this field – not just a rhetorical one – for his Presidency not to be damaged by the process and the paucity of reform. The loss of the automatic majority in the Senate following the death of Ted Kennedy puts the final outcome of the health care reform process in doubt.
Obama faces another challenge: overexposure. There is no doubt that, in comparison to several other US Presidents (Carter, both Bush’s, Nixon), Obama is a powerful orator and excellent communicator. But every day? Each time he appears in an interview, on Letterman or Conan or on the White House lawn he uses up some glitter. All Presidents have a certain amount of glitter to use and over use exhausts the supply quickly. He needs to learn the power of silence and patience if he is to be effective.
Obama has several opportunities to deliver on the promise of “change” he offered during his campaign for the Presidency, but boldness and brashness often do not lead to sustained change over time. When he says good night to his daughters on Pennsylvania Avenue one night, he might usefully pick up the story book of the turtle and the hare and remind himself that the turtle won. Its time for Obama to learn to be a better turtle.