Obama: Doctor to the World Economy

Postmortems of Obama's Friday press conference have been plentiful on the web and the previous descriptor is unusually appropriate. Aside from his disastrous gaff, the entire performance impressed no one positively. Ed Rogers at the WaPo is scathing.

If you are president of the United States and you don't have anything to say, don't have a press conference to say it. If you're the president of the United States and by Thursday it's widely believed you've had one of the worst weeks of your presidency, take Friday off, and specifically avoid having a press conference.

Anytime you are president and you're speaking in public at an ill-timed press conference after a bad week, try to have something to say, and do a good job in saying it. I watched the whole thing, but it's not easy to think of one useful thing that he had to say. And what he said, he said very poorly. Was it just me, or did the president seem a little dazed and confused? He should have had a cup of coffee before the press conference.

And one more thing that's a pet peeve. The president says "uhhh" too much

Wow. No content, poor delivery, and a bearing suggesting lack of sleep or maybe a few of Rick Perry's painkillers add up to a pretty dreadful review. Coming at a moment when the all the President's persons surely were aware of his need to firm up, this suggests a campaign in very bad shape.

It doesn't get much better when we look to a review that tries to rescue the President. William Saletan at Slate points out that Mr. Obama points out that the President didn't really focus on the US economy in his press conference on the US economy. Instead, he blamed America's problems on Europe and Asia and Congress (meaning: Republicans). So there was content in the speech. The content was that pretty much everyone on the planet except Obama is to blame. Did I mention that Saletan is defending the President?

Saletan points out that Obama presented himself as doctor to the world economy.

Obama didn't just play the victim. He played doctor. He counseled Greece, Germany, and Spain. He urged Europeans to stabilize their banks, focus on growth, and gradually balance their books. He argued that the capital requirements he imposed on U.S. banks after the 2008 economic crisis would allow our financial system to "absorb some of the shocks that might come from across the Atlantic." And he encouraged Europe to adopt similar policies. "What we've tried to do," he concluded, "is to be constructive, to not frame this as us scolding them or telling them what to do, but to give them advice in part based on our experiences here in having stabilized a financial situation effectively."

Leave aside the questions of how well the domestic patient is responding to Dr. Obama's prescriptions and whether he has any standing to lecture any foreign nation about fiscal management. The Doctor Obama meme, if it could somehow be retailed, might restore a little of that '08 magic. The best odds Saletan can come up with are 50/50.

Will it work? Maybe. I can think of two presidents who tried to answer a bad economy by running for re-election as leader of the free world. One was George W. Bush. The other was his dad.

In fact, the only problem with the Doctor Obama meme is that it is either two years too late or seven months too early. The argument that divides politicians and economists across the globe may be described simply as austerity vs. stimulus. Those favoring austerity argue that what got us into this fix was indulgent over spending and over borrowing, so the only solution is to tighten the fiscal belts. Those favoring stimulus argue that austerity is self-defeating in the short run, as it depresses economic growth and so prolongs the slump.

Put that way, stimulus looks to have the stronger case. There are, however, a couple of tragic flaws. Stimulus requires that you have resources to inject. That in turn requires either strong domestic reserves or someone else to borrow a lot of cash from. With China and India failing, the US is now benefitting from its status as the last non-German safe place to put your money.

That leads us to the second tragic flaw. The US is borrowing heavily and that means borrowing against its own future. The CBO recently warned us, once again, that the fiscal trajectory of the federal treasury is headed toward disaster. Borrowing heavily now to stimulate the economy means accelerating toward the precipice. It also increases the risk that global financial markets will lose confidence in their last, best hope. If that happens, the world financial system will collapse. What's a doctor to do?

An answer is offered by Keith Hennessey, author of the best economics blog in the business. Hennessey presents the austerity/stimulus debate in a dialogue between "Lefty" and "Righty". At the risk of a spoiler, Righty argues that the two positions are not mutually exclusive.

I want to fix our government's unsustainable borrowing path by making big changes to medium and long-term government spending, especially in the big 3 entitlements. In any conceivable reform those changes don't even begin for a few years, and once they do, the spending "cuts," as you call them, phase in gradually over time. I propose policy changes that have no effect for the next few years, then a small effect for a few years. It then grows gradually over time to have huge long-term effects.

Our long term fiscal problem is due to programs that a structured so they tend automatically toward national insolvency. A President and a Congress could restructure them. That would not require any austerity right now nor would it threaten people on the verge of retirement. Let the changes begin five years down the road, or as long as you think it will take for the economy to recover. If you wonder whether anyone will trust future promises from Congress, I reply that the only solution to structural insolvency is structural solvency.

If we did this, it would reassure world capital markets and give the President and Congress more flexibility in dealing with the current dilemma. If you really believe that fiscal responsibility is in order, just not right now, you would be proposing something like this right now. If you aren't for the latter then you are lying about the former.

Dr. Obama might have proposed something like this two years ago, or better yet four years ago. He did not. He certainly won't do so now, and that probably means that the surgical gown is destined for the duster. Mitt Romney can't propose it. The airwaves would be flush with clips of him pushing Grandma off the edge. Only the next President can hope to do so. That might be the good news and it might be the bad news.

Comments

[A.I.]

One little problem with this post KB is like so many marriages, it ended in divorce...from reality. This from some factual Republicans:

"75% of the federal budget is Defense, Medicare and Social Security. Obama offered John Boehner a $4 trillion debt-reduction deal that would have raised the Medicare retirement age to 67-- an unprecidented proposal by any President, much less a supposedly "liberal" one.

The only reason why John Boehner wouldn't accept it is because Obama also proposed raising revenues. He proposed moderate tax increases for the richest people ever to walk the earth, who have benefitted most from living in our country. We're not talking the 90%, 70%, or even 50% marginal tax rates of previous decades. We're talking tax rates similar to what people paid during the Clinton years."

The rest is here: http://www.republicansforobama.org/node/9570

Of course that was not the only entry that came up when I Googled 'Obama on entitlement reform'. It's pretty well documented that he is willing to work with congress to reduce the deficit in the long term including by goring Democratic sacred cows.

Republican leadership in congress, meanwhile, says taxes and spending must be cut both in the long and short run and will not or can not compromise.

You missed this opportunity to accuse Obama of ignoring the advice of his own National Commission on Fiscal Responsibility and Reform but you know what, his proposals are one heck of a lot closer to theirs than anything Republicans are offering. And when Obama blames congress for not addressing our economic woes he is blaming exactly those at fault: Republicans.

[Bill Fleming]

I agree, A.I. It's time the GOP owned their part of this. Past time.

[Donald Pay]

The problem with Obama is he is too nice, too timid, too defensive, too technocratic and too bipartisan in his approach. It took him 2 years to figure out what the rest of us had realized by July 2009--the Republicans want middle class failure.

Obama needed to go Harry Truman on the Republicans early and often, go big with jobs programs and go big on health care. He needed to end the Bush tax insanity. What we got was someone who pushed and passed conservative Republican programs, rather than programs that would actually work.

The Republicans' whine about deficits is totally bogus, and not ever worth discussing. They caused them with their policies, the same policies they want to foist on the economy now. Even Romney, he of minimal understanding of the middle class, realizes how cuckoo these austerity people are. He admits austerity won't work in this economy, unless you want to drive the economy into a depression.

[Stan Gibilisco]

"The US is borrowing heavily and that means borrowing against its own future. The CBO recently warned us, once again, that the fiscal trajectory of the federal treasury is headed toward disaster. Borrowing heavily now to stimulate the economy means accelerating toward the precipice. It also increases the risk that global financial markets will lose confidence in their last, best hope. If that happens, the world financial system will collapse. What's a doctor to do?"

Implement a value-added tax (VAT), of course. Just like they have in Europe.

Politicians in both parties have been planning that for years. Once the public gets scared enough, they'll accept the VAT as the "least bad alternative" (which, in a perverse sense, it will in fact become).

For years, our doctors (I mean quacks) have been turning us all into addicts, delusional addicts who think they can get more for less.

The drug of last resort is a VAT, on top of (not instead of) all of the other taxes that the ordinary citizen pays.

It won't work. Stronger and stronger drugs don't cure addicts. Trust me on this one. When the VAT fails, we'll be like the patient stricken with flesh-eating bacteria and for whom the last antibiotic on the doctor's shelf has kicked the can of death right off the final cliff.

I have no clue what will happen then.

[A.I.]

It's hard to digest such cheeriness so early in the day Stan.

[A.I.]

I agree Donald, Obama has been too nice/timid. It's almost as though he is afraid of appearing "uppity" and if he did stand up to Republican BS, that's exactly what some of them would be calling him. I, for one, would enjoy watching that meme blow up in their faces.

[Stan Gibilisco]

A.I.:

Digestion and cheeriness ... that's what Diet Mountain Dew is for. My drug of choice. Guess I didn't have enough before I wrote that blant.

[Ken Blanchard]

Listen to you guys! It's all the Republicans fault. Well, I guess so. Not one of them voted for the President's last two budgets. Of course, not a single Democrat in either house voted for them.

Here I suggest a policy that addresses both sides of the stimulus/fiscal discipline debate and not one of you is the least bit interested. I have said before that Republicans are partly at fault. Sooner or later we are going to have to raise taxes. It is at least as clear that we are going to have to reduce spending. You guys will never consent to that, will you? So we know who is half the problem.

[Stan Gibilisco]

Ken:

My mind has a major bug in its software. It practically requires bulleted lists of items stated in concise terms. In addition, the underlying hardware (brain) contains outdated, exceedingly small-capacity memory chips (but they always work, given enough caffeine). My simplistic, hardened cranial platform has come up with the following proposal for dealing with our budget woes:

+ Adopt the original Simpson-Bowles plan.
+ Get rid of the Social Security tax cap.
+ Adjust the Social Security tax rate downward enough to scale back the additional revenue produced by the cap elimination by 50%.
+ Gradually raise the retirement age to 70, except for certain physically demanding jobs.
+ Institute some form of Social Security means testing for eligibility.
+ Roll back the Bush tax cuts over a five-year period.
+ Raise the marginal income-tax rate by 3 percentage points for people making over a million dollars a year.
+ Raise the marginal income-tax rate by an additional 2 percentage points for people making over ten million dollars a year.
+ Avoid a value-added tax or national sales tax in any form. In fact, enact an Amendment to the U.S. Constitution specifically outlawing such a tax.
+ Please forgive any overlap or redundancy in this list.

If you'll come at me with a list in a format like that, my brain, with its archaic memory chips, might be able to wrap itself around your plan ...

... if the visit of my 88-year-old parents (finally, after eight years here in Lead) doesn't cause a denial-of-attention attack.

[A.I.]

One problem with your bullet points Stan is they make S.S. much more of a welfare program. In a perfect world, that may make sense. In the real world, conservatives kill welfare programs.

You are confusing what you think I want with reality KB. Whether or not I favor reducing S.S. and Medicare benefits is moot, Obama made the offer in return for tax increase to ultimately reduce the deficit. You often accuse him of being spineless. Consider for a moment what that offer means to his standing among the Democratic base and you may want to reconsider that assessment.

Contrast that with the Grover-Norquist-pledged Republicans. Meet Obama half way?, 10% of the way?; hell no. Cut taxes, that is the sum total or their approach to government no matter what. And there is absolutely not one shred of past evidence that reducing tax revenue will lead them to reduce spending so just forget about all their disingenuous talk about deficits.