IV: A FAILURE OF LEADERSHIP
A. The Test of Leadership:
The test of presidential leadership is not whether he can campaign and win an election. The test is can he govern? In order to govern, he must have the will and capacity to navigate the currents and eddies of the partisan divide, to avoid the temptation to be either a bystander or a dictator, and to forge a bi-partisan consensus on issues vital to our nation’s future. This has nothing to do with celebrity, speeches and access.
Fundamentally, it is a matter of character. Ronald Reagan was one of our greatest presidents, even though mainstream media sought to portray him as an amiable dunce. He had the demonstrable ability to forge a bi-partisan consensus, by working with leaders of the other party like Tip O’Neil. By contrast, Jimmy Carter was a brilliant man and one of our worst presidents. Where then does Mr. Obama fit in that continuum? Clearly, he is at the Carter end. His reaction to the leadership challenge is upside down, to wit: When Mr. Obama has the leverage, he is inclined to push partisan advantage to its bitter extreme, rather than forge a bi-partisan consensus. After all, that is the Chicago Way. However, when you try to do this on a national stage it does not work well. I can think of no better example than ObamaCare which was fatally flawed from the beginning. It has proven to be a disastrous piece of legislation, bitterly opposed by the American People, which led to a bloodbath for his political party, and a given the opposition no incentive to work with him. When Mr. Obama does not have the leverage, he is inclined to hold himself aloof from the process, and take cheap shots. Later, when he is compelled to intervene, he assumes a” my-way-or-the-highway” attitude, which leads to impasse. At that point, he is inclined to back out of the process and exploit the impasse for political advantage. I can think of no better example of this than the way he handled the debt crisis.
During the 2008 primary, Mr. Obama produced a campaign commercial claiming that he did not accept money from Washington DC lobbyists. (It was later pointed out that he did accept money from Chicago lobbyists with offices in Washington DC but he claimed that was okay.) Obama went on to criticize former Louisiana Congressman Billy Tauzin for passing legislation that prohibited government from negotiating drug prices and then going to work for the drug companies. Finally, during one of the primary debates Obama promised that when he became President, if he ever had to do business with Washington DC lobbyists, then those negotiations would be conducted in public on C-Span, to ensure that the public interest was not compromised. No more secret covenants secretly arrived at.
Shortly after he became president however Mr. Obama repudiated those promises. His goal was to snag Republican contributors. He met secretly with Billy Tauzin in the basement of the White House. He agreed that the new Health Care bill would continue the ban on government negotiating drug prices that he had condemned as a candidate. (Promises are like piecrusts—made to be broken—Lenin). In return, Obama got a firm commitment from Tauzin that the drug companies would reduce drug cost by $ 80 billion over 10 years, and the obligatory pay-to-play campaign contribution. Obama touted those savings and mainstream media cheered. But alternative media pointed out that Obama got conned by Tauzin. Why? Because the ban on government negotiating drug prices which Tauzin got in return was worth $155 billion, consequently the Obama deal cost taxpayers a cool $76 billion. Plus, the drug companies agreed to help fund the advertising for ObamaCare.
As for the ensuing process, the Washington Times explained it well: ObamaCare was slapped together hurriedly and without adequate staff – or lawmaker – review. It became a grab bag of regulations and loopholes favoring Democratic-leaning special interests. Republican suggestions for reform were never given a hearing and the GOP was unceremoniously shut out of the process. The bill was forced through the Congress in a riot of arm-twisting and secretive backroom deals. Few if any members of Congress read the bill before they voted on it. The American people were denied the transparency and open process Mr. Obama had promised during his campaign. Obamacare was the poster child for everything wrong with the contemporary legislative process.
The name of ObamaCare is “The Patient Protection and Affordable Care Act of 2010”–a very impressive title. However, when a law thus described reduces coverage and limits options it hard to see how that can be called “patient protection”. Likewise, when such a law causes premium costs to rise and increases the federal debt it is hard to know how it provides “affordable care”. The only way that is possible is if the English language has lost all meaning. With mainstream media it already has. They called ObamaCare “the most important civil rights victory since 1964”. (New York Times.) If this were anybody but Obama, the New York Times would be singing an entirely different tune.
1) The baited hook: one of the bill’s chief supporters John Dingell (D-Mi) was asked about the morality of waiting until 2014 for some of the bill’s provisions to take effect. The response he gave was at best idiosyncratic. He said it takes time to pass the legislation necessary to “control the people”.
At first blush, I assumed that all he meant was the goal of the law was to make sure people make wise health care choices. But if you read that statement in the context of the law he was referring to, then it becomes obvious what Dingell meant when he said control the people. He meant that the individual mandate embedded in the law would remove all limits on federal power over the individual. In other words, the intent is to take away liberty.
When 26 State Attorneys General filed suit against ObamaCare, this mega-political concern was drawn into high relief. It has clearly enunciated in the dissenting opinion at the US Court of Appeals: The individual mandate (in the Patient Protection and Affordable Care Act, i.e. ObamaCare, which forces American citizens to purchase insurance against their will) is a novel exercise of the Commerce Clause power. If it is held to be constitutional then it is difficult to see any limits on what Congress can legislate. Indeed, what aspect of human activity would escape federal power? Only through a Constitutional Amendment could a structural shift of that magnitude be accomplished legitimately. —James Graham, Judge U.S. Court of Appeals for the 4th Circuit. (Emphasis Added) The case is now before the Supreme Court. It will be heard this spring and a decision will issue prior to the election in November.
C. The Debt Crisis:
The Federal Government budget is essentially an Income Statement. It compares government revenues (primarily personal and corporate taxes) to government spending (primarily military (25%), social security (23%) Medicare (22%), and welfare–includes unemployment (12%) for the year in question. (Note: pork projects account for 1%). In 2011 the budget deficit was 8.7% GDP. (Note: the safe level is 3% according to most economists). The national debt was $15 Trillion which is 100% GDP. (Note: Obama is increasing that debt to 16.2 Trillion, pursuant to a Congressional deal worked out last August.).
At this point, the two biggest concerns are i) first, the prolonged recession which has caused massive unemployment and lower tax revenues, and ii) second, the demographic factors which impact social security and Medicare, just as they impacted the housing market. The annual interest on the debt is running 9% of GDP. Niall Ferguson is a British historian who specializes in financial and economic history, particularly hyperinflation and the bond markets. He points out that it could increase to 25-30% rather quickly if it is not properly managed. If it reaches that point then we will be faced with two unpalatable choices: default or hyper-inflation.
The American People are aware of the problem and they look to their political leaders to manage it in a prudent manner. They realize that there is a philosophical difference between Democrats and Republicans on how to approach the deficit. Democrats are Keynesians, hence they favor an approach which combines tax increases and spending cuts—in defense not social programs. Republicans are Supply-Siders, hence they favor an approach which emphasizes spending cuts in social programs not defense and no increase in taxes.
That philosophical disagreement, plus the interests of their respective coalitions is the partisan divide, which the President must navigate in order to achieve a bi-partisan solution, which is the only kind of solution that has stability.
If you examine the record as a whole, from the Simpson Bowles report to the downgrading of bond rating by Standard and Poor’s roughly a year later two factors are salient: first, political jockeying on both sides by people like Chuck Schumer who has spent his career doing only that—and backstabbing; and, second, a leadership failure by Mr. Obama writ large. In fact, it was Mr. Obama’s lack of leadership at critical points in the attenuated process that caused the disaster. Those points are as follows:
2010: In April, Mr. Obama appointed the Simpson-Bowles Commission to study the debt crisis and come up with a set of recommendations on how to address it. Mr. Obama received their report in November, and did nothing effective with it. April 2011: Mindful of the serious nature of the deficit problem, Senator Paul Ryan (R-WI) introduced a bill which was intended to address it. The Ryan plan was based on a cost cutting approach consistent with Republican dogma. Thus, it called for a $4.4 trillion over ten years based on reforming entitlements, caps on spending and cuts to national defense approved by Obama’s Defense Secretary Gates, with no tax increases. The Ryan Plan was voted down on party lines (57-40).
May 2011: Mr. Obama could have engaged with Ryan. Instead, he chose to trash him personally and introduce a bill calling for massive tax and spend initiatives in the middle of a recession. He knew or should have known that would not sell to Republicans. It was antithetical to what he said as a Senator, i.e. never raise taxes in a recession. And, after he introduced it he found it would not sell even to his own party. Hence, it was voted down unanimously by both parties (97-0). Thereafter, Mr. Obama backed away from the problem and went on the campaign trail.
July 2011: Mr. Obama was dragged back into the fray. In July he sat down with Congressional leaders to mediate. But when the Republican Majority Leader Eric Cantor (R-VA) offered to support two separate debt ceiling votes—a proposal Obama had said he would veto, Obama lost it and shouted “Don’t call my bluff Eric! I am going to take this to the American People!!!” And with that, Mr. Obama staged a walk-out. True to form, mainstream media blamed the Republican, Cantor.
July 2011: thereafter, Mr. Obama reached out to Speaker Boehner. They agreed to settle their dispute at high noon on a golf course. The goal was to achieve what Obama called a “grand bargain” on the deficit. Boehner agreed to raise taxes by closing loopholes, which he claimed would not violate his tax pledge. He told Obama the Tea Party would not like this, but he would take the heat. Not to be outdone, Obama agreed to cut entitlement spending on social security. He told Boehner that Reid and Pelosi would not like it, but he too would take the heat as well. (Note: During the primary debates, Hillary was asked if she would reduce social security and she responded that is not what Democrats do. But Mr. Obama is not a Democrat in the traditional sense of the word. He is a neo-lib Democrat.)
July 2011: however, when Obama went back to Reid and Pelosi with the proposal to cut Social Security, they rejected his proposal out of hand. He folded. Therefore, he went back to Boehner with his tail between his legs and demanded an additional $800 billion in taxes. This was bad faith regressive bargaining. Boehner properly rejected it. He called a press conference and announced that his negotiation with Obama had failed and was over. Desperate to save Obama, mainstream media blamed the Republican, Boehner. Obama called a press conference of his own to spin it. But it was obvious to the viewer that he was upset, depressed, and defensive.
July 2011: next day, Mr. Obama regained his composure and assumed a presidential bearing. He announced that he was calling the parties to the White House to workout a deal to save the country. Congressional leaders obliged. Shortly into the meeting Obama began to lecture the parties whereupon both sides thanked him for his interest, told him they would get more done without him there and asked Obama and his staff to leave the room. He did, and they did, and he signed what they agreed to. Whereupon Mr. Obama rushed to the cameras and told the country in substance that under his leadership, an agreement had been achieved, our financial status was safe, and everyone could stand down. Mainstream media hailed his extraordinary leadership.
August 2011: Unfortunately, not everyone agreed with Mr. Obama and mainstream media’s shallow assessment. The main audience was the market and they found it to be a disappointment. Standard and Poor’s had made it clear to the parties before the fact that the market was expecting a $4 Trillion reduction in the federal deficit over a 10 year period as a “good will down payment on fixing America’s finances’”. This mirrored the 4.4 Trillion figure that Paul Ryan had proposed. The deal Obama and Congress cut provided for a meager $2.1 Trillion. Therefore, Standard and Poor’s reduced the bond rating of the United States from AAA to AA, and said a further reduction was possible in the next twelve to eighteen months. This gave them time to see if there was a change in administrations in 2012.
August 2011: Standard and Poor’s put the blame where it belonged, i.e. on Mr. Obama and on Congress: The downgrade reflects our view that the effectiveness, stability and predictability of American policymaking and political institutions have weakened at a time of ongoing political fiscal and economic challenges to a degree more than what we envisioned (snip) in April. Since then, we have changed our view of the difficulties in bridging the gulf between the political parties over fiscal policy, which makes us pessimistic about the capacity of Congress and the Administration to be able to leverage their agreement this week into a broader fiscal consolidation plan that stabilizes the government’s debt dynamics any time soon. (Emphasis added) http://www.standardandpoors.com/ratings/articles/en/us/?assetID=1245316529563 January 2012:
Update: On January 12, Obama sent a one line letter to Congress announcing his intention to seek a $1.2 Trillion increase to the national debt ceiling, pursuant to the deal reached with Congress last August. This increase will put the nation’s debt over its economic input, is expected to last until the November elections.