On September 8, 2011, President Obama proposed the enactment of the American Jobs Act. Nearly everybody believes this proposal is not enough to return our economy to health but many believe it can be another restart. I believe there are some things the president could have said, and could have proposed, that would have considerably enhanced the core of his proposal. Additionally, these enhancements would have made his political base happier and could have put the Republican Party in a larger bind. My ideas follow in the balance of this essay and are based on seven underlying premises. The premises are:
1. The Republican Party wishes to create jobs. Let’s take them at their word, and the fact that H.R. 2 this year was entitled: Repealing the Job-Killing Health Care Law Act, should be understood to mean the Republican party favors job creation.
2. Republicans wish to expend as little as possible to create jobs.
3. In economics, the highest multiplier is when government expends money on goods and services. This is because all the money is spent and none is saved. Krugman I (http://krugman.blogs.nytimes.com/2011/09/03/the-austerity-economy/), Gordon Krenn Working Paper (http://faculty-web.at.northwestern.edu/economics/gordon/WPTheEndoftheGreatDepression.pdf)
4. Given the nature of President Obama proposed “American Jobs Act,” September 8, 2011, the vast majority of the benefits will come to an end by the end of 2012. While the CBO has not yet scored it, Macroadvisors, LLC reports (http://macroadvisers.blogspot.com/2011/09/american-jobs-act-significant-boost-to.html) it as follows: a) boost the level of GDP by 1.3% by the end of 2012, and by 0.2% by the end of 2013 and b) Raise nonfarm establishment employment by 1.3 million by the end of 2012 and 0.8 million by the end of 2013, relative to the baseline.
5. One of the problems with the fiscal stimulus in 2009, according to the Obama administration, was a lack of shovel-ready projects to create more jobs.
6. As the stimuli from 2009, and then late 2010, came to an end the economy began to sink again (http://krugman.blogs.nytimes.com/2011/07/29/stagnation-nation-2/) and, based on the projections of Macroadvisors, LLC, the same will happen when the stimulus created by the American Jobs Act comes to and end after 2012.
7. Even before September 2008, private industry was not creating enough jobs, and overall, unemployment rose during the years 2001-2008 (http://en.wikipedia.org/wiki/Economic_policy_of_the_George_W._Bush_administration#Unemployment). The seasonally adjusted unemployment rate rose from 4.2% in January 2001, peaking at 6.3% in June 2003 and reaching a trough of 4.4% in March 2007. After an economic slowdown, the rate rose again to 6.1% in August 2008 and up to 7.2% in December 2008. From December 2007 when the recession started to December 2008, an additional 3.6 million people became unemployed.
Using these premises, a slightly different address before Congress could have been given by President Obama on September 8, 2011.
The president would start by saying he will propose both short-term and long-term solutions for the lack of growth and employment in our country. These solutions need to be implemented before fiscal consolidation actually happens, but not before Congress can make plans for fiscal consolidation. This sort of strategy is consistent with what leading economists are suggesting, what the IMF has been suggesting [recent comments by Christine Lagarde (http://www.nytimes.com/2011/08/31/opinion/christine-lagardes-tough-message.html) and an IMF paper entitled Painful Medicine (http://www.imf.org/external/pubs/ft/fandd/2011/09/ball.htm)] and what Ben Bernanke is presently saying.
Both short-term and long-term solutions are needed in order to avoid past mistakes. The contours of the short-term, and especially the long-term, jobs solutions are informed by five facts. First, we know private industry has not created enough new jobs since 2008 as our unemployment rate remains 9.1 and over 14 million Americans are still out of work. Second, we also know private industry wasn’t consistently creating enough new jobs before the recession began in 2008. (Premise #7) Third, both Democrats and Republicans agree we need to create enough jobs to, once again, put our country back on sound footing and, obviously, it is best to do it as inexpensively as possible. (Premises 1 & 2) Fourth, our country’s most renown economists agree that, under the our present situation, the best, and cheapest, way for enough jobs to be created, is for government jump-starting the economy by creating the jobs through the direct purchase of goods and services. (Premises 3 & 4, Gordon Krenn Working Paper) Fifth, we didn’t have enough shovel-ready jobs ready in 2009, and we presently don’t have enough shovel-ready jobs to completely close the existing gap in unemployment. (Premise #1)
Given these five facts, the solution is actually fairly straightforward: Begin planning for the creation of shovel-ready jobs now so they are ready for implementation when the short-term stimulus begins to lose steam. If done right, this will truly close the unemployment and growth gaps. There are any number of ways to insure projects will be ready when needed, here’s mine.
The president asks each and every governor, from each and every state, to draft proposals for needed governmental jobs, service, works projects, etc. Think inside the box, think outside the box. Think big, think small. Then, after the first of the year, the president asks all the governors to come to Washington, D.C. for a two day conference on their ideas. This conference will be open to the public and can be broadcast on any cable/television station that wants to. The president will serve as moderator. This a great format for Barack Obama as he was stellar when he did this sort of thing with members of Congress about a month before the enactment of the Affordable Health Care Act.
While the majority of the time during the two days will be allocated to the requests from the governors, and discussions about many of their requests, the first three hours will be devoted to presentations from leading economists to simply explain our economic situation and what is needed. The value of this will become more evident by the end of this essay. Attendance by a governor, and proposals from a governor, are not mandated. But understand, no proposals, no opportunity for assistance from Washington, D.C. for jobs. And if this country’s leading economists are right, it will be a very nice experiment to compare in two or three years the employment rate in the states that participate and those that do not participate.
The virtues of this proposal should be apparent. First, it plans for the future so we are not back at this same place in 2013 when this next stimulus comes to an end. Second, to the extent possible, it hits the Republicans fairly hard. Private industry isn’t creating, and hasn’t created, enough jobs since 2001. Second, the Republicans say they want jobs, they say they want the most bang for the buck and this plan is what leading economists say will do the trick. Third, yes the stimuli tried before haven’t solved the problems, but each time the stimuli came to an end things got worse. This suggests that a larger “shock treatment” stimulus will have greater success (The economists will explain all this to the American public at the Washington, D.C. conference with the governors.). Fourth, there is little the Republicans can do to stop this and, from the point in time when the conference ends, the president will have months to sell the product of the conference to the American people.
The final component to this is the political necessity to explain to the American public that the actions to jump-start the economy with government spending will last only as long as necessary because, when the recovery becomes self-sustaining, the nation needs to address the remaining issue of bringing our debt down to better levels. I believe this means directly addressing the small government/big government debate within the context of our current economic situation.
Paul Krugman gave an address (http://www.palgrave-journals.com/eej/journal/v37/n3/full/eej20118a.html) in Moscow to the Eastern Economic Association the week of September 5, 2011. Towards the end he said:
But what became clear in the policy debate after the 2008 crisis was that many economists — including many macroeconomists — don’t know the simplest multiplier analysis. They literally know nothing about models in which aggregate demand can be determined by more than the quantity of money. I’m not saying that they have looked into such models and rejected them; they are unaware that it's even possible to tell a logically consistent Keynesian story. We’ve entered a Dark Age of macroeconomics, in which much of the profession has lost its former knowledge, just as barbarian Europe had lost the knowledge of the Greeks and Romans.
As long as monetary policy could bear the burden of macroeconomic stabilization, this didn’t seem to matter too much: even as equilibrium business cycle theory became increasingly dominant in graduate study, central banks, like medieval monasteries, kept the old learning alive. But once we were hit with such a severe banking and balance sheet crisis that monetary policy hit the zero lower bound, it was crucial that the economics profession be able to weigh in knowledgeably and coherently on other possible actions. And it turned out that it couldn’t.
Obviously, this is true. But there is another part to this that Krugman skirts around and it has to do with political philosophy and the small government/big government debate. In this country, we can generally lump people into two belief systems (I know over-simplification, but bear with me.). Some people believe in small government and some people believe in a more expansive role for government in solving the problems that face our nation. The monetary policy as the instrument of macroeconomic stabilization school of thought, that is a tenet of the Milton Friedman neo-classical school of economics, and that Krugman speaks about, is consistent with an overarching small government belief system. So, if one is a small government advocate, until this crisis, there could be unity between an overarching small government belief system and a small role for government in the realm of macroeconomics. However, once this crisis hit, a crisis that called for a Keynesian macroeconomics solution of a sizable governmental fiscal stimulus, people who possessed an overarching small government belief system couldn’t separate their overarching (small) role of government belief system from their macroeconomics views, despite the fact that macroeconomics isn’t so much a belief system as it is, or should be, a rigorous, empirical, endeavor. For this reason, they couldn’t see, or wouldn’t allow themselves to see, the difference between the two and how it could be possible to retain the overarching belief system of small government and, at the same time, allow for an exception to their belief system when it comes to macroeconomics when an economy descends into a liquidity trap.
For this reason, in order for President Obama to make head-way with the American public, he has to directly address this conflict and show how it is possible to have a rule (small government belief system) and an exception to a rule (The macroeconomic necessity of governmental fiscal stimulus in a liquidity trap. Krugman II (http://krugman.blogs.nytimes.com/2008/11/15/macro-policy-in-a-liquidity-trap-wonkish/), Krugman III (http://krugman.blogs.nytimes.com/2008/12/29/optimal-fiscal-policy-in-a-liquidity-trap-ultra-wonkish/) Note: Both of these were written in late 2008. Hence, the correct path forward was out there since that time.).
Krugman addresses this conflict at the ended of his address by saying:
What we really need is a change in the destructive social dynamics that brought us to this point. And I wish I knew how to do that. But my problem is obvious: I’m an economist, and it seems that we need some kind of sociologist to solve our profession's problems.
I admire Krugman greatly, but what is needed isn’t a sociologist but an educator and a great communicator to make sense for the American public what noted economists, like Paul Krugman, have been saying for the past three years. Fortunately, an educator and a communicator is living at 1600 Pennsylvania Avenue right now. Not only does the buck stop there, sometimes, it starts there too.
In conclusion, this whole matter is obviously more nuanced than what I have presented in this short essay. Further, the president will have to figure out a way to finesse his way around his mistakes of: 1) placing fiscal consolidation before job creating during the deficit ceiling debate and 2) the constraints he placed on fiscal expenditures for sufficient job-creation, that should bring to an end the gaps in unemployment and demand, when he agreed to creating a plan for fiscal consolidation before Thanksgiving of this year. Still, I firmly believe what I have written is an outline to a better approach than the one chosen by President Obama on September 8, 2011, And no reason exists that this approach can’t be added to the president’s approach.
9/10/2011
© Copyrighted by James N. Perlman. 2011 All Rights Reserved.
Friday, September 30, 2011
Saturday, September 3, 2011
ANYWAY YOU LOOK AT IT YOU LOSE – TWO METHODS FOR EVALUATING BARACK OBAMA’S LEADERSHIP ABILITIES
The first method for seeing the flaws in Barack Obama’s leadership abilities comes by way of considering what Niccolo Machiavelli wrote about leadership close to 500 years ago:
The prince "ought to be both feared and loved, but as it is difficult for the two to go together, it is much safer to be feared than loved.... Still, a prince should make himself feared in such a way that if he does not gain love, he at any rate avoids hatred...” The Prince, Niccolo Machiavelli, Chapter 19, 1532
At this point in Barack Obama’s presidency, there exists little support for a conclusion he is feared by anybody of significance, either in the United States or abroad. Similarly, while Obama arrived at the White House in 2009 with tremendous good will, not dissimilar from John Kennedy’s arrival in 1961, there now exists little support for a belief there is any widespread love for the man, even among members of the Democratic Party. Consequently, President Obama lacks both of Machiavelli’s primary leadership qualities.
However, it actually gets worse when we evaluate the third characteristic Machiavelli writes about, the one a leader should avoid at all costs: hatred. For whatever reasons, including displaced racism, Obama is genuinely hated by a fair segment of the electorate and inside Washington, DC. Therefore, summing-up Obama “the leader” from a Machiavelli perspective, what we see is a leader virtually no one fears and, for the most part, the best many of his supporters can muster is a “like” for him on a personal level. To make matters worse, Obama may be hated by more people than he is feared or loved. This is a far cry from Machiavelli’s ideal prince.
Of course, it can be argued much has changed in the 500 years since Machiavelli’s The Prince. Perhaps, a modern approach to presidential leadership will paint a more favorable picture. Sadly, this is not the case. Recently, a psychologist, Drew Westen, took a close look at the president and came to a similarly unfavorable conclusion: Obama lacks what it takes to be a great leader, particularly for these times. What Happened To Obama, Drew Westen, The New Your Times, August 6, 2011 http://www.nytimes.com/2011/08/07/opinion/sunday/what-happened-to-obamas-passion.html?_r=1&scp=1&sq=drew%20westen&st=cse Westen’s piece creates a strong argument that Barack Obama does not possess the psychological background, the predicate political skills or learning experiences to lead.
While Westen says quite a lot about Obama, I wish to add two things. First, Westen begins his essay commenting on his unease following Obama’s Inaugural Address. I agree. The day following the address, I e-mailed a friend expressing similar views. It was clear Obama wanted to say this was a new beginning, just like John Kennedy did in 1961, and Obama’s structure was similar. But, unlike Kennedy in 1961, or Roosevelt in 1933, there was not one single memorable phrase or idea. Further, it was extremely tacky for Obama to attack George Bush, while the former president was sitting a few feet away from Obama. This is something Kennedy did not do in 1961 with respect to President Eisenhower, even though Kennedy was calling for the beginning of a New Frontier. I ended my e-mail to my friend with this line: “It is time for everybody to look at this man, and this presidency, without rose-colored glasses.”
Second, Westen observes if one looks at Obama’s background it is very unremarkable. Westen makes the observation that in Obama’s twelve years of teaching at a law school he published nothing other than an autobiography. What I find more to the point is, if you look at Obama’s career as a lawyer, he seems to have done very little in terms of actually being a lawyer. He only worked for four years as a full-time associate for a law firm here in Chicago. During those four years, he worked on only 30 cases and had only 3,723 billable hours. Early Life And Career Of Barack Obama http://en.wikipedia.org/wiki/Early_life_and_career_of_Barack_Obama#1992.E2.80.931996 If one thinks about it, even if an attorney is not a pure litigator, he or she, one way or the other, should end-up developing sophisticated skills at negotiation, whether it occurs with clients, other attorneys, business people, etc. However, if one takes a look at Obama’s background, there is no apparent place where he could have honed such skills. Certainly a person cannot develop keen negotiation skills, as an associate at a law firm working on only 30 cases and billing slightly less than 4000 hours over the course of four years.
What is noteworthy about this apparent paucity of negotiation skills is Obama has made a cornerstone of his presidency the concept of “compromise.” But compromise, or at least successful compromise, requires negotiation skills. And if a person is negotiating in Washington, D.C., with Congress, lobbyist or negotiating with world leaders, it would be desirable for a person to be a highly skilled negotiator. Yet, nothing in Obama’s background indicates he had much, if any, of an opportunity to learn negotiation skills. Furthermore, from what we have seen in the past two and three-quarters years from Obama, very little exists to suggest Obama is a natural negotiator.
One way to test the conclusion Obama is a poor negotiator is to use Game Theory to evaluate how he actually handled a negotiation. So let’s do that using the recent negotiation over raising the debt ceiling.
As I wrote nearly a year and a half ago, in evaluating Obama’s performance during the health care debate (which culminated in the passage of the Affordable Care Act), Using Game Theory To Analyze Barack Obama’s Conduct During The Health Care Debate, http://jamesnperlman.blogspot.com/2010/03/using-game-theory-to-analyze-barack.html, there exist five central rules under Game Theory. And, in passing, it is really quite interesting to see how well Machiavelli’s ideal prince would embody these five Game Theory rules. The five rules are:
1. Figure out what you want before you try to get what you want.
a. Payoffs Matter
2. Put yourself in other people’s shoes.
a. Understand what the other player’s desired payoffs are and what, if anything, the other player would accept as a payoff.
3. We are evil.
4. Rational choices can lead to bad outcomes.
5. Don’t play a strictly dominated strategy.
Further, there can be a number of types of players in Game Theory including : Evil Gits and Indignant Angels. Being an Evil Git is always advantageous if the payoff is large regardless of what strategy the other players choose. As for the Indignant Angel, this can be a losing strategy because often it is a dominated strategy. For this reason, when an Indignant Angel is playing against an Evil Git he should always choose a comparable Evil Git strategy, i.e., choose a dominant strategy, in order to obtain the best possible result.
With regard to the health care debate, the end-game strategy, as devised by Rahm Emanuel, was as follows:
"Emanuel wants to jam a wedge into the fissure inside the Republican Party between, as he frames it, the descending wing that believes in small government and the ascending wing that believes in no government. Republicans lose, in this theory, whether they cooperate with Obama or not. “We’ve got to drive the ball at them,” a senior White House official told me. “Driving the ball at them, making them pick between small government and no government, putting them in their responsibility-and-accountability box. You walk away? You’re walking away from responsibility, and the public’s angry at you. You participate? Your base hates you.” The Limits Of Rahmism, Peter Baker, The New Your Times, August 6, 2011, http://www.nytimes.com/2010/03/14/magazine/14emanuel-t.html?scp=2&sq=rahm&st=cse
This strategy worked and Obama got his Affordable Care Act. But, as I pointed out in my earlier essay, Obama came to this winning strategy late in the game and after he had squandered time and policy.
When it comes to the raising of the debt ceiling issue, it truly appears Obama forgot nearly all of the things that ultimately worked during the health care debate. First, he reverted back to his natural state, Indignant Angel. He was the outraged “adult” in the conversation. And, really, no one likes the outraged adult. Second, he didn’t drive the ball at the Republican’s at all. He remained largely passive/dominated, dropping in from time to time, mostly when things weren’t going well.
For instance, putting aside whether the Fourteenth Amendment to the Constitution confers upon the president the power to raise the debt ceiling on his own, by announcing he wasn’t going to exercise this option, at least two weeks before the deadline for a decision, Obama took off the poker table his only Ace-In-The-Hole card: “Fine, you don’t want to raise the debt ceiling, I’ll do it under the Fourteenth Amendment and let the United States Supreme Court be the one to tank the economy with a decision I was wrong.”**
Third, under the successful Emanuel health care strategy, the Republicans were forced to choose between small government and no government, both losing strategies when it comes to the electorate at large. However, with respect to the debt ceiling deliberations, where was the wedge? Over raising taxes, something none of the Republicans subscribe to. And because there was unity on not raising taxes within the Republican party, the Republican Party was able to remain unified and true to their entire constituency. Furthermore, once you take raising taxes off the table, a loss in terms of Obama’s constituency, nothing is left other than a tiny philosophical/policy contrast (wedge) between what Obama wanted and the Republicans wanted as it pertained to debt reduction. The only possible discernable difference was the size of debt reduction and where the cuts were to be made. But this is a difference too fine for most in the electorate at large to discern. So, the Republicans win this one too.
Fourth, the only thing Obama stood firm on, and won, was raising the debt ceiling through the coming election cycle. Many, correctly, saw at least some selfishness on Obama’s behalf when it came to this. However, what the public wanted from its commander-in-chief was selflessness and leadership. They didn’t want Obama fighting for himself. They wanted Obama fighting for them. Instead, what they got, during the debt ceiling debate, was a president largely fighting for himself and chalking-up a total of one win. And that was a win for himself. There was no win for Obama’s Democratic constituency. For all these reasons, a fair perception of this is: Obama got what he wanted, less stress through the election cycle, the Republicans got what they wanted, debt reduction and no tax increase and the Democratic constituency, and the population at large, got...?
Some will argue Obama’s goal was to create a distinction between himself and Congress so he could run against Congress in some form of: “They’re bad and I’m better.” Again, that’s about Obama’s needs, not the country’s needs. Additionally, this is Obama’s inner Indignant Angel speaking. It may be true, given the current Republican presidential field, Obama’s strategy during the debt ceiling negotiations might get Obama reelected. But that’s only good for Obama, it certainly isn’t good for the country in the here and now.
Furthermore, there are a number of possible flaws with this strategy. First, running against Congress has a different meaning for Democrats than Republicans. As for Independents, the same is true, although it becomes more diffuse and on an issue by issue basis. Consequently, a contention that Congress is at fault has very different meanings for different people. This is why a recent poll found that 87% of Americans are pissed-off at Congress. http://www.nj.com/news/index.ssf/2011/08/87_percent_of_americans_disapp.html
Second, it is difficult to run against a group as opposed to a single person. In a sense, Sigmund Freud wrote about this phenomenon in his book Moses and Monotheism. In Part III, Section Two, Sub-Section 3, The Great Man, Freud writes:
[There exists] a significant discrepancy between the nature of our thinking-apparatus and the organization of the world which we are trying to apprehend. Our imperative need for cause and effect is satisfied when each possesses one demonstrable cause.
We are hardwired for this. This is why Rick Perry recently attacked Ben Bernanke, rather than the Fed as a whole, even though it is the Fed that makes the decisions, not Bernanke. It also bears noting that, when we dig deeper into what Freud writes, from the perspective of theism, western religions have deities that are both feared and loved. Sound familiar?
Along this line of overlap between Freud and Machiavelli, there is a flip-side to what Freud writes. Because we want to have singularity in terms of cause and effect, this can be a reason for certain expectations of a leader and for a belief a leader isn’t doing a good enough job when things go wrong or the leader doesn’t meet our expectations. My old school-mate, Jonathan Alter, wrote a piece recently challenging readers to actually come up with substantive examples of Obama’s failures: You Think Obama’s Been A Bad President?, Prove It. http://www.washingtonmonthly.com/ten-miles-square/2011/08/you_think_obamas_been_a_bad_pr031810.php# Part of my answer to Jon is: A president must accept what Freud writes as true and then prosecute his presidency cognizant of Freud’s truth, and Machiavelli’s truth for that matter. I’d bet the farm Harry Truman never even heard of Freud’s Moses and Monotheism. Nevertheless, Truman instinctively understood Freud’s truth, as proven by Truman’s most famous phrase: “The buck stops here!” This is something our current president really doesn’t get. Some of the other parts to a response to Jon are contained in this essay.
This is not to say campaigning against a group can’t be done. Hitler did this in terms of the Jews and the gypsies in the lead-up to, and during, World War II. The Republicans have had success with this strategy when it comes to issues like immigration. However, without going into detail, the psychology of this is different. The point is: Running against a group of people, an institution, is not a natural strategy and possesses the danger of discerning actual meaning. Furthermore, come some time next summer, Obama will have to run against one person. And, if either Romney or Perry is the nominee, neither one can be saddled with the sins of Congress. Consequently, it is by no means clear a strategy of running against Congress is a winning strategy in terms of Obama’s re-election campaign.
Still, the argument exists that what’s good for Obama’s re-election campaign will ultimate be good for the country once Obama is re-elected? So, let’s take a look at the possible scenarios for the future, commencing on January 20, 2013, the date when President Obama’s second term would begin.
The first scenario is the one where we have a Democratic/Republican breakdown similar to what we presently have in Congress. If this is the case, it is certain the Republicans will immediately start to run for their own re-elections, and the election of a Republican president in 2016, by hammering down the Democratic Party and Obama, just as the Republicans did during the previous four years. Their success at this, particularly since the election in November 2010, has been quite strong. Nothing exists to suggest Obama possesses the wherewithal to fight back, nor does it appear the Republicans will back-away from their winning strategy.
For instance, assume the draconian triggers take effect on defense and non-defense spending because no agreement comes out of the Congressional “Supercommittee”. As Richard Thaler recently observed, Washington Should Try a Little Prudent Self-Restraint, http://www.nytimes.com/2011/08/28/business/economy/washington-should-try-a-little-prudent-self-restraint.html?_r=1&scp=1&sq=%22richard%20thaler%22&st=cse, the cuts don’t actually take effect until 2013, and the new Congress in 2013 isn’t bound by the actions of the previous Congress. Consequently, the next Congress can simply vote to restore spending. Now, given the way Republicans are, and given the way Democrats are, who is going to fair better in restoring funds, Republicans (defense spending) or Democrats (non-defense)?
But beyond this, putting aside issues of actual efficacy of policy, when it comes to the overarching issue in this country, the economy, what will remain is: a) too little contrast between Obama and the Republicans and b) the real perception the Republicans have won, on substance, nearly all the battles with Obama. Of course, this is bound to happen when the distance between the players is small and one player is an Evil Git and the other player is an Indignant Angel.
The fact remains, Obama seems oblivious to the simple nature of the dialectic process (a process that should lead to Obama’s beloved “compromise”): The wider the gap between thesis and antithesis, the greater the number of possible syntheses. And, the greater the number of possible syntheses the greater the opportunity for a win in a zero-sum game or a win-win in a non-zero-sum game. However, because Obama nearly always narrows his options far too much by opening with what he believes is a “reasonable” plan (this is the thesis in the dialectic), particularly as it has pertains to the 800-pound gorilla in the room – the economy, Obama inherently narrows the number of possible syntheses. And, again, when one narrows the possible syntheses, one narrows the possible winning or win-win outcomes. This narrowing of the possible syntheses between himself (Indignant Angel-thesis) and the Republicans (Evil Gits-antithesis) nearly always results in Obama becoming the loser, as Evil Gits nearly always defeat Indignant Angels in a two player game.
But, if one thinks about it, in reality, the most important “player” in our game is a largely unrepresented player – the economy. Furthermore, if economists like Paul Krugman, Robert Gordon, Brad DeLong, Christy Romer, Jared Bernstein, Joseph Stiglitz, etc., are right, neither Obama, nor the Republicans, are pointing us in the right direction for the economy to recover. So, if this group is correct, in the non-zero-sum game of addressing the needs of the economy, it turns out everybody ends-up a loser, Obama, the Democrats, the Republicans and, the most important player of all, the economy. For an empirical study on the subject of what’s needed to turn this economy around, Robert Gordon’s and Robert Krenn’s working paper, The End of the Great Depression, http://faculty-web.at.northwestern.edu/economics/gordon/WPTheEndoftheGreatDepression.pdf (Downloadable .pdf file), is so well-documented that it presents a very persuasive case for at least two conclusions. First, had the fiscal stimulus during the first two years of the Obama presidency been far larger, both the unemployment gap, and gap between demand and capacity, presently in our economy, would be either quite small or nonexistent. Second, the right level of fiscal stimulus, along with proper monetary policy, would still bring an end to this downturn in a relatively short time.
Consequently, if the composition of Congress remains relatively unchanged, the scenario of some sort of replication of the past two or four years, for the two or four years starting in 2013, is, at best, not encouraging, and, at worse, disastrous in terms of the decision-making process in Washington, D.C.
The second scenario is a situation where the Republicans gain a veto-proof advantage in Congress as a result of the November 2012 general election. It is fairly clear what can happen if the Republicans obtain this level of control. To begin, we will get a balanced budget amendment to the Constitution (Raising a very interesting question: How does a country with debt, and a balanced budget amendment, prosecute a war? Inquiring minds want to know!). Additionally, not only will the Affordable Care Act be repealed, so will a whole slew of other “progressive” enactments of Congress. Finally, if the Krugman gang is correct, the economy will continue to deteriorate, or perhaps crater, assuming it doesn’t crater before January 20, 2013. Again, if we end-up with the worst case scenario, a cratered economy, the result will be a non-zero-sum game where everybody loses.
We don’t have to spend too much time on addressing the scenario where the Democrats retake the House, keep the Senate in 2013, but don’t possess a 60% majority in the Senate. The Republicans in the Senate will block anything meaningful from happening. So the outcome is akin to our first scenario.
The final scenario is the one where the Democrats possess a sizable lead in both the House and Senate to, on paper, pretty much do what they want. At this point in time, this is the least likely scenario. What can be said is this is something close to what we saw during the first two years of Obama’s presidency. During those years we did not see an actively engaged president in making the agenda happen (think an LBJ or an FDR). And, as we saw when it came to the enactment of the Affordable Care Act, or the 2009 stimulus package, most of the real work was done by Nancy Pelosi, Harry Reid, Joe Biden and Rahm Emanuel. Even when there exists a “bullet-proof” majority in Congress a president must often engage in actual negotiations to get votes for his agenda, including negotiations with members of the opposing party. From what we have seen to date from Obama, little exists to suggest he possesses the wherewithal, or even the desire, to make the most of a “bullet-proof” majority in Congress. In fact, it might be fair to say things would go better without his involvement as he tends to shoot too low and conceded too much. However, as this is the least likely scenario, we are not apt to find out if he learned anything about negotiation from a true position of power during his first term in office.
In conclusion, what it comes down to is this: 1) As Drew Westen shows in his essay, nothing exists in Barack Obama’s background to suggest actual greatness and true leadership or even the capacity for actual greatness and true leadership; 2) nothing we have seen in Barack Obama’s actual conduct during the first two and three-quarter years of his presidency has shown actual greatness and true leadership (actually the contrary is more true) and 3) whether one looks at Obama’s leadership abilities from a Machiavelli perspective, a Game Theory perspective, or a Freudian perspective, Barack Obama does not possess the capacity for actual greatness and true leadership. The presidency always requires the capacity for true leadership. Furthermore, the times in which we live require actual greatness from the president. Barack Obama can not make a legitimate claim to either. This is the reason he has largely failed, and will continue to fail, especially when it comes to the big issue of the day, and his presidency, the economy.
And to those who will claim Obama couldn’t have done any more because of the Republican opposition, or the changing nature of governing because of the twenty-four hour news cycle, cable TV, etc., the simple answer is: We don’t know that at all. What we do know, however, is, more often than not, throughout all of recorded history, great leaders, leaders who are cut in the image of Machiavelli’s prince and who can play politics at the highest level, find a way to prevail, even under adversity. We also know Barack Obama is not cut from this cloth. So, the only way to find out if the nature of the Republican opposition, etc., changes the calculus to such a degree that, even a great leader could not have prevailed under these circumstances, is to have a great leader and see what happens. Just a thought.
09/03/11
© Copyrighted by James N. Perlman. 2011 All Rights Reserved.
** And it’s because the United States Supreme Court wouldn’t want to tank the economy by ruling against the President on this that, more likely than not, the Court would find a way to write a narrow opinion affirming the president’s power to raise the debt ceiling.
The prince "ought to be both feared and loved, but as it is difficult for the two to go together, it is much safer to be feared than loved.... Still, a prince should make himself feared in such a way that if he does not gain love, he at any rate avoids hatred...” The Prince, Niccolo Machiavelli, Chapter 19, 1532
At this point in Barack Obama’s presidency, there exists little support for a conclusion he is feared by anybody of significance, either in the United States or abroad. Similarly, while Obama arrived at the White House in 2009 with tremendous good will, not dissimilar from John Kennedy’s arrival in 1961, there now exists little support for a belief there is any widespread love for the man, even among members of the Democratic Party. Consequently, President Obama lacks both of Machiavelli’s primary leadership qualities.
However, it actually gets worse when we evaluate the third characteristic Machiavelli writes about, the one a leader should avoid at all costs: hatred. For whatever reasons, including displaced racism, Obama is genuinely hated by a fair segment of the electorate and inside Washington, DC. Therefore, summing-up Obama “the leader” from a Machiavelli perspective, what we see is a leader virtually no one fears and, for the most part, the best many of his supporters can muster is a “like” for him on a personal level. To make matters worse, Obama may be hated by more people than he is feared or loved. This is a far cry from Machiavelli’s ideal prince.
Of course, it can be argued much has changed in the 500 years since Machiavelli’s The Prince. Perhaps, a modern approach to presidential leadership will paint a more favorable picture. Sadly, this is not the case. Recently, a psychologist, Drew Westen, took a close look at the president and came to a similarly unfavorable conclusion: Obama lacks what it takes to be a great leader, particularly for these times. What Happened To Obama, Drew Westen, The New Your Times, August 6, 2011 http://www.nytimes.com/2011/08/07/opinion/sunday/what-happened-to-obamas-passion.html?_r=1&scp=1&sq=drew%20westen&st=cse Westen’s piece creates a strong argument that Barack Obama does not possess the psychological background, the predicate political skills or learning experiences to lead.
While Westen says quite a lot about Obama, I wish to add two things. First, Westen begins his essay commenting on his unease following Obama’s Inaugural Address. I agree. The day following the address, I e-mailed a friend expressing similar views. It was clear Obama wanted to say this was a new beginning, just like John Kennedy did in 1961, and Obama’s structure was similar. But, unlike Kennedy in 1961, or Roosevelt in 1933, there was not one single memorable phrase or idea. Further, it was extremely tacky for Obama to attack George Bush, while the former president was sitting a few feet away from Obama. This is something Kennedy did not do in 1961 with respect to President Eisenhower, even though Kennedy was calling for the beginning of a New Frontier. I ended my e-mail to my friend with this line: “It is time for everybody to look at this man, and this presidency, without rose-colored glasses.”
Second, Westen observes if one looks at Obama’s background it is very unremarkable. Westen makes the observation that in Obama’s twelve years of teaching at a law school he published nothing other than an autobiography. What I find more to the point is, if you look at Obama’s career as a lawyer, he seems to have done very little in terms of actually being a lawyer. He only worked for four years as a full-time associate for a law firm here in Chicago. During those four years, he worked on only 30 cases and had only 3,723 billable hours. Early Life And Career Of Barack Obama http://en.wikipedia.org/wiki/Early_life_and_career_of_Barack_Obama#1992.E2.80.931996 If one thinks about it, even if an attorney is not a pure litigator, he or she, one way or the other, should end-up developing sophisticated skills at negotiation, whether it occurs with clients, other attorneys, business people, etc. However, if one takes a look at Obama’s background, there is no apparent place where he could have honed such skills. Certainly a person cannot develop keen negotiation skills, as an associate at a law firm working on only 30 cases and billing slightly less than 4000 hours over the course of four years.
What is noteworthy about this apparent paucity of negotiation skills is Obama has made a cornerstone of his presidency the concept of “compromise.” But compromise, or at least successful compromise, requires negotiation skills. And if a person is negotiating in Washington, D.C., with Congress, lobbyist or negotiating with world leaders, it would be desirable for a person to be a highly skilled negotiator. Yet, nothing in Obama’s background indicates he had much, if any, of an opportunity to learn negotiation skills. Furthermore, from what we have seen in the past two and three-quarters years from Obama, very little exists to suggest Obama is a natural negotiator.
One way to test the conclusion Obama is a poor negotiator is to use Game Theory to evaluate how he actually handled a negotiation. So let’s do that using the recent negotiation over raising the debt ceiling.
As I wrote nearly a year and a half ago, in evaluating Obama’s performance during the health care debate (which culminated in the passage of the Affordable Care Act), Using Game Theory To Analyze Barack Obama’s Conduct During The Health Care Debate, http://jamesnperlman.blogspot.com/2010/03/using-game-theory-to-analyze-barack.html, there exist five central rules under Game Theory. And, in passing, it is really quite interesting to see how well Machiavelli’s ideal prince would embody these five Game Theory rules. The five rules are:
1. Figure out what you want before you try to get what you want.
a. Payoffs Matter
2. Put yourself in other people’s shoes.
a. Understand what the other player’s desired payoffs are and what, if anything, the other player would accept as a payoff.
3. We are evil.
4. Rational choices can lead to bad outcomes.
5. Don’t play a strictly dominated strategy.
Further, there can be a number of types of players in Game Theory including : Evil Gits and Indignant Angels. Being an Evil Git is always advantageous if the payoff is large regardless of what strategy the other players choose. As for the Indignant Angel, this can be a losing strategy because often it is a dominated strategy. For this reason, when an Indignant Angel is playing against an Evil Git he should always choose a comparable Evil Git strategy, i.e., choose a dominant strategy, in order to obtain the best possible result.
With regard to the health care debate, the end-game strategy, as devised by Rahm Emanuel, was as follows:
"Emanuel wants to jam a wedge into the fissure inside the Republican Party between, as he frames it, the descending wing that believes in small government and the ascending wing that believes in no government. Republicans lose, in this theory, whether they cooperate with Obama or not. “We’ve got to drive the ball at them,” a senior White House official told me. “Driving the ball at them, making them pick between small government and no government, putting them in their responsibility-and-accountability box. You walk away? You’re walking away from responsibility, and the public’s angry at you. You participate? Your base hates you.” The Limits Of Rahmism, Peter Baker, The New Your Times, August 6, 2011, http://www.nytimes.com/2010/03/14/magazine/14emanuel-t.html?scp=2&sq=rahm&st=cse
This strategy worked and Obama got his Affordable Care Act. But, as I pointed out in my earlier essay, Obama came to this winning strategy late in the game and after he had squandered time and policy.
When it comes to the raising of the debt ceiling issue, it truly appears Obama forgot nearly all of the things that ultimately worked during the health care debate. First, he reverted back to his natural state, Indignant Angel. He was the outraged “adult” in the conversation. And, really, no one likes the outraged adult. Second, he didn’t drive the ball at the Republican’s at all. He remained largely passive/dominated, dropping in from time to time, mostly when things weren’t going well.
For instance, putting aside whether the Fourteenth Amendment to the Constitution confers upon the president the power to raise the debt ceiling on his own, by announcing he wasn’t going to exercise this option, at least two weeks before the deadline for a decision, Obama took off the poker table his only Ace-In-The-Hole card: “Fine, you don’t want to raise the debt ceiling, I’ll do it under the Fourteenth Amendment and let the United States Supreme Court be the one to tank the economy with a decision I was wrong.”**
Third, under the successful Emanuel health care strategy, the Republicans were forced to choose between small government and no government, both losing strategies when it comes to the electorate at large. However, with respect to the debt ceiling deliberations, where was the wedge? Over raising taxes, something none of the Republicans subscribe to. And because there was unity on not raising taxes within the Republican party, the Republican Party was able to remain unified and true to their entire constituency. Furthermore, once you take raising taxes off the table, a loss in terms of Obama’s constituency, nothing is left other than a tiny philosophical/policy contrast (wedge) between what Obama wanted and the Republicans wanted as it pertained to debt reduction. The only possible discernable difference was the size of debt reduction and where the cuts were to be made. But this is a difference too fine for most in the electorate at large to discern. So, the Republicans win this one too.
Fourth, the only thing Obama stood firm on, and won, was raising the debt ceiling through the coming election cycle. Many, correctly, saw at least some selfishness on Obama’s behalf when it came to this. However, what the public wanted from its commander-in-chief was selflessness and leadership. They didn’t want Obama fighting for himself. They wanted Obama fighting for them. Instead, what they got, during the debt ceiling debate, was a president largely fighting for himself and chalking-up a total of one win. And that was a win for himself. There was no win for Obama’s Democratic constituency. For all these reasons, a fair perception of this is: Obama got what he wanted, less stress through the election cycle, the Republicans got what they wanted, debt reduction and no tax increase and the Democratic constituency, and the population at large, got...?
Some will argue Obama’s goal was to create a distinction between himself and Congress so he could run against Congress in some form of: “They’re bad and I’m better.” Again, that’s about Obama’s needs, not the country’s needs. Additionally, this is Obama’s inner Indignant Angel speaking. It may be true, given the current Republican presidential field, Obama’s strategy during the debt ceiling negotiations might get Obama reelected. But that’s only good for Obama, it certainly isn’t good for the country in the here and now.
Furthermore, there are a number of possible flaws with this strategy. First, running against Congress has a different meaning for Democrats than Republicans. As for Independents, the same is true, although it becomes more diffuse and on an issue by issue basis. Consequently, a contention that Congress is at fault has very different meanings for different people. This is why a recent poll found that 87% of Americans are pissed-off at Congress. http://www.nj.com/news/index.ssf/2011/08/87_percent_of_americans_disapp.html
Second, it is difficult to run against a group as opposed to a single person. In a sense, Sigmund Freud wrote about this phenomenon in his book Moses and Monotheism. In Part III, Section Two, Sub-Section 3, The Great Man, Freud writes:
[There exists] a significant discrepancy between the nature of our thinking-apparatus and the organization of the world which we are trying to apprehend. Our imperative need for cause and effect is satisfied when each possesses one demonstrable cause.
We are hardwired for this. This is why Rick Perry recently attacked Ben Bernanke, rather than the Fed as a whole, even though it is the Fed that makes the decisions, not Bernanke. It also bears noting that, when we dig deeper into what Freud writes, from the perspective of theism, western religions have deities that are both feared and loved. Sound familiar?
Along this line of overlap between Freud and Machiavelli, there is a flip-side to what Freud writes. Because we want to have singularity in terms of cause and effect, this can be a reason for certain expectations of a leader and for a belief a leader isn’t doing a good enough job when things go wrong or the leader doesn’t meet our expectations. My old school-mate, Jonathan Alter, wrote a piece recently challenging readers to actually come up with substantive examples of Obama’s failures: You Think Obama’s Been A Bad President?, Prove It. http://www.washingtonmonthly.com/ten-miles-square/2011/08/you_think_obamas_been_a_bad_pr031810.php# Part of my answer to Jon is: A president must accept what Freud writes as true and then prosecute his presidency cognizant of Freud’s truth, and Machiavelli’s truth for that matter. I’d bet the farm Harry Truman never even heard of Freud’s Moses and Monotheism. Nevertheless, Truman instinctively understood Freud’s truth, as proven by Truman’s most famous phrase: “The buck stops here!” This is something our current president really doesn’t get. Some of the other parts to a response to Jon are contained in this essay.
This is not to say campaigning against a group can’t be done. Hitler did this in terms of the Jews and the gypsies in the lead-up to, and during, World War II. The Republicans have had success with this strategy when it comes to issues like immigration. However, without going into detail, the psychology of this is different. The point is: Running against a group of people, an institution, is not a natural strategy and possesses the danger of discerning actual meaning. Furthermore, come some time next summer, Obama will have to run against one person. And, if either Romney or Perry is the nominee, neither one can be saddled with the sins of Congress. Consequently, it is by no means clear a strategy of running against Congress is a winning strategy in terms of Obama’s re-election campaign.
Still, the argument exists that what’s good for Obama’s re-election campaign will ultimate be good for the country once Obama is re-elected? So, let’s take a look at the possible scenarios for the future, commencing on January 20, 2013, the date when President Obama’s second term would begin.
The first scenario is the one where we have a Democratic/Republican breakdown similar to what we presently have in Congress. If this is the case, it is certain the Republicans will immediately start to run for their own re-elections, and the election of a Republican president in 2016, by hammering down the Democratic Party and Obama, just as the Republicans did during the previous four years. Their success at this, particularly since the election in November 2010, has been quite strong. Nothing exists to suggest Obama possesses the wherewithal to fight back, nor does it appear the Republicans will back-away from their winning strategy.
For instance, assume the draconian triggers take effect on defense and non-defense spending because no agreement comes out of the Congressional “Supercommittee”. As Richard Thaler recently observed, Washington Should Try a Little Prudent Self-Restraint, http://www.nytimes.com/2011/08/28/business/economy/washington-should-try-a-little-prudent-self-restraint.html?_r=1&scp=1&sq=%22richard%20thaler%22&st=cse, the cuts don’t actually take effect until 2013, and the new Congress in 2013 isn’t bound by the actions of the previous Congress. Consequently, the next Congress can simply vote to restore spending. Now, given the way Republicans are, and given the way Democrats are, who is going to fair better in restoring funds, Republicans (defense spending) or Democrats (non-defense)?
But beyond this, putting aside issues of actual efficacy of policy, when it comes to the overarching issue in this country, the economy, what will remain is: a) too little contrast between Obama and the Republicans and b) the real perception the Republicans have won, on substance, nearly all the battles with Obama. Of course, this is bound to happen when the distance between the players is small and one player is an Evil Git and the other player is an Indignant Angel.
The fact remains, Obama seems oblivious to the simple nature of the dialectic process (a process that should lead to Obama’s beloved “compromise”): The wider the gap between thesis and antithesis, the greater the number of possible syntheses. And, the greater the number of possible syntheses the greater the opportunity for a win in a zero-sum game or a win-win in a non-zero-sum game. However, because Obama nearly always narrows his options far too much by opening with what he believes is a “reasonable” plan (this is the thesis in the dialectic), particularly as it has pertains to the 800-pound gorilla in the room – the economy, Obama inherently narrows the number of possible syntheses. And, again, when one narrows the possible syntheses, one narrows the possible winning or win-win outcomes. This narrowing of the possible syntheses between himself (Indignant Angel-thesis) and the Republicans (Evil Gits-antithesis) nearly always results in Obama becoming the loser, as Evil Gits nearly always defeat Indignant Angels in a two player game.
But, if one thinks about it, in reality, the most important “player” in our game is a largely unrepresented player – the economy. Furthermore, if economists like Paul Krugman, Robert Gordon, Brad DeLong, Christy Romer, Jared Bernstein, Joseph Stiglitz, etc., are right, neither Obama, nor the Republicans, are pointing us in the right direction for the economy to recover. So, if this group is correct, in the non-zero-sum game of addressing the needs of the economy, it turns out everybody ends-up a loser, Obama, the Democrats, the Republicans and, the most important player of all, the economy. For an empirical study on the subject of what’s needed to turn this economy around, Robert Gordon’s and Robert Krenn’s working paper, The End of the Great Depression, http://faculty-web.at.northwestern.edu/economics/gordon/WPTheEndoftheGreatDepression.pdf (Downloadable .pdf file), is so well-documented that it presents a very persuasive case for at least two conclusions. First, had the fiscal stimulus during the first two years of the Obama presidency been far larger, both the unemployment gap, and gap between demand and capacity, presently in our economy, would be either quite small or nonexistent. Second, the right level of fiscal stimulus, along with proper monetary policy, would still bring an end to this downturn in a relatively short time.
Consequently, if the composition of Congress remains relatively unchanged, the scenario of some sort of replication of the past two or four years, for the two or four years starting in 2013, is, at best, not encouraging, and, at worse, disastrous in terms of the decision-making process in Washington, D.C.
The second scenario is a situation where the Republicans gain a veto-proof advantage in Congress as a result of the November 2012 general election. It is fairly clear what can happen if the Republicans obtain this level of control. To begin, we will get a balanced budget amendment to the Constitution (Raising a very interesting question: How does a country with debt, and a balanced budget amendment, prosecute a war? Inquiring minds want to know!). Additionally, not only will the Affordable Care Act be repealed, so will a whole slew of other “progressive” enactments of Congress. Finally, if the Krugman gang is correct, the economy will continue to deteriorate, or perhaps crater, assuming it doesn’t crater before January 20, 2013. Again, if we end-up with the worst case scenario, a cratered economy, the result will be a non-zero-sum game where everybody loses.
We don’t have to spend too much time on addressing the scenario where the Democrats retake the House, keep the Senate in 2013, but don’t possess a 60% majority in the Senate. The Republicans in the Senate will block anything meaningful from happening. So the outcome is akin to our first scenario.
The final scenario is the one where the Democrats possess a sizable lead in both the House and Senate to, on paper, pretty much do what they want. At this point in time, this is the least likely scenario. What can be said is this is something close to what we saw during the first two years of Obama’s presidency. During those years we did not see an actively engaged president in making the agenda happen (think an LBJ or an FDR). And, as we saw when it came to the enactment of the Affordable Care Act, or the 2009 stimulus package, most of the real work was done by Nancy Pelosi, Harry Reid, Joe Biden and Rahm Emanuel. Even when there exists a “bullet-proof” majority in Congress a president must often engage in actual negotiations to get votes for his agenda, including negotiations with members of the opposing party. From what we have seen to date from Obama, little exists to suggest he possesses the wherewithal, or even the desire, to make the most of a “bullet-proof” majority in Congress. In fact, it might be fair to say things would go better without his involvement as he tends to shoot too low and conceded too much. However, as this is the least likely scenario, we are not apt to find out if he learned anything about negotiation from a true position of power during his first term in office.
In conclusion, what it comes down to is this: 1) As Drew Westen shows in his essay, nothing exists in Barack Obama’s background to suggest actual greatness and true leadership or even the capacity for actual greatness and true leadership; 2) nothing we have seen in Barack Obama’s actual conduct during the first two and three-quarter years of his presidency has shown actual greatness and true leadership (actually the contrary is more true) and 3) whether one looks at Obama’s leadership abilities from a Machiavelli perspective, a Game Theory perspective, or a Freudian perspective, Barack Obama does not possess the capacity for actual greatness and true leadership. The presidency always requires the capacity for true leadership. Furthermore, the times in which we live require actual greatness from the president. Barack Obama can not make a legitimate claim to either. This is the reason he has largely failed, and will continue to fail, especially when it comes to the big issue of the day, and his presidency, the economy.
And to those who will claim Obama couldn’t have done any more because of the Republican opposition, or the changing nature of governing because of the twenty-four hour news cycle, cable TV, etc., the simple answer is: We don’t know that at all. What we do know, however, is, more often than not, throughout all of recorded history, great leaders, leaders who are cut in the image of Machiavelli’s prince and who can play politics at the highest level, find a way to prevail, even under adversity. We also know Barack Obama is not cut from this cloth. So, the only way to find out if the nature of the Republican opposition, etc., changes the calculus to such a degree that, even a great leader could not have prevailed under these circumstances, is to have a great leader and see what happens. Just a thought.
09/03/11
© Copyrighted by James N. Perlman. 2011 All Rights Reserved.
** And it’s because the United States Supreme Court wouldn’t want to tank the economy by ruling against the President on this that, more likely than not, the Court would find a way to write a narrow opinion affirming the president’s power to raise the debt ceiling.
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