Obama: knowing when to be an asshole

Barack Obama’s health insurance reform initiative is clearly foundering. So, his administration has pulled out the big guns. Health and Human Services Secretary Sebelius on the Sunday morning talk shows. Obama himself had a prime time press conference on the issue. He has hosted a number of town hall meetings. The President has even written an opinion piece in the New York Times.

Yet, most pundits are still acting as if his healthcare efforts are on life support. I have read any number of posts from pundits of all political stripes asking why Obama is not having success on healthcare.  The answer is simple: Barack Obama needs to learn when to be the conciliator-in-chief and when to be an asshole.

Wasting political capital on banks

Let’s rewind a bit to explain. Back in July, I wrote that Obama had wasted a lot of political capital by caving in to the financial services lobby. In my view, this goes to the core of the issue. The US and global economy were poised on the precipice.  Obama rightly put economic issues first as he entered office in January, dealing with economic stimulus and financial sector reform. However, his crisis solution has been a massive giveaway to big banks, effectively transferring money from taxpayers to the banks in order to shore up their bottom lines and keep them solvent.

Team Obama thinks this was a necessary evil to prevent economic collapse.  But the average guy on the street of any political stripe sees this as galling.  You have a trader at Citigroup, a ward of the state for all intents and purposes, poised to make $100 million. JPMorgan recorded record revenue and $2.7 billion in profit last quarter. And Goldman is poised to pay record bonuses this year.  For Wall Street, the crisis seems to be over and it is business as usual. The response for many is rage – anger at the way banks have been gifted a new lease on life while ordinary Americans are displaced.  Much of this bile is directed at Wall Street, but the true anger should be reserved for Washington.

Populism is rising

And now we are getting that anger on health care. People are angry that the economy has suffered for so long and they are angry that the economic elite are prospering again but they are not. The realization that this did not have to be is sinking in.

Barack Obama campaigned for President as a change agent.  In effect, he was promising to change Washington, so that ordinary citizens benefitted as much as, if not more than, special interests. However, it seems that Washington has changed him. You have the banks getting bailed out, GM and Chrysler, a stimulus bill which many see as laden with pork-barrel spending, the secret deal with the drug lobby, and on and on.

These are not ordinary times, folks. This is a depression.  People are afraid – afraid of losing their jobs and their homes, afraid their standard of living will fall, afraid they will be the first American generation ever to be permanently, worse off than their parents. Most of all, Americans are afraid of America’s standing in the world. This economic period is shattering a world view that the American dream is attainable for everyone.

Enter the demagogues. In times of acute economic stress, demagogues, political bullies, fear merchants, and war mongers of all stripes come out of the woodwork.  These individuals are willing to point the finger and assign blame. They are willing to tell people what they want to hear. And their message is just fact-based enough to pass muster for anyone looking to channel their anger and disappointment about the sorry state of the economy.

Why do you think the birthers movement, challenging the American bona fides of Obama, is popular despite the evidence? Why do you think the idea of government ‘death panels’ is gaining currency in the healthcare debate?  It’s not because these ideas are accurate and I don’t think it’s because people are dumb. It’s because the people making these claims are pointing fingers and naming names.  They give us a target at which to vent our anger.

This is a major reason why the Austrian economics solution to depression is ill-conceived.

It is the same wrong-headed prescription given to the Asians in 1998 and to Argentina in 2001.  We squandered an opportunity for fiscal prudence when the economy was on more solid footing.  With depression on our doorstep, is now the right time to start cutting back?

This would mean liquidating General Motors, bankrupting Royal Bank of Scotland and Citigroup or allowing Iceland, Hungary and Pakistan to fend for themselves.  In theory, each of these measures seem prudent.  But, in practice, these measures would result in huge job loses, would induce further deleveraging and asset price declines, would deplete capital from an already fragile global baking system, and would lead to a probable depression of unimaginable severity.  It is in such a bleak environment that dangerous despots and dictators like Hitler and Mussolini rose to power, taking advantage of the natural human need for ’strong’ leader in a time of chaos and uncertainty.  Could we expect any different today?

The answer to that question is no. And we should remember this as we debate policy responses. The rise of extreme populist fervour on all sides is troubling and could lead to much worse if the economy does not show a robust recovery.

Obama needs to be an asshole

I have said before that Barack Obama is in a political and economic position more akin to Herbert Hoover than Franklin Roosevelt. Hoover dealt with a sick economy that was still falling.  Roosevelt entered the White House after a large percentage of the economic damage had been done. I believe the economic situation for Obama is certainly less severe than it was for Hoover, but still precarious.  I do not mean to say that Obama is the ‘black Herbert Hoover’ as my friend Yves keeps pointing out. I do mean to say that he needs to be thinking of himself as Hoover and not Roosevelt to have the right mental predisposition of what’s at stake.

So, from a purely Machiavellian perspective, Obama needs to jettison the professorial above-the-fray coolness and get down in the trenches and fight for what he believes in.  And that means he is going to have to run roughshod over his enemies.  Mark Thoma pointed me to a quote that gets the essence of this argument:

A lot of what our job is about is understanding the point of view of others, even when we disagree with them. A lot of our job is explaining to students a wide variety of viewpoints, and allowing them to choose from among them.

I don’t think FDR worried so much about the point of view of others–Doris Kearns Goodwin said he "gloried in his enemies."

FDR also largely got what he wanted.

So, when pundits debate where Obama is losing hearts and minds, it has as much to do with style as substance.  For instance, Patrick Buchanan says Obama is losing the center because he’s running left. He would say that. Robert Kuttner says Obama is losing the left because he is running center. He would say that too.

But Nate Silver’s critique in his Grand Unified Obama Critique is more on the mark.

If liberals are convinced that the President is too conservative and conservatives are convinced that he’s too liberal then either the President must be doing everything right or everything wrong. Lately, granted, it has seemed more like the latter…

What I think people were hoping for is that Obama would, somehow or another, be able to overcome the institutional barriers to change, probably through a hands-on approach involving a lot of public persuasion.

Put bluntly, Obama needs to be an asshole. Right now it looks like he is willing to compromise on any and every issue. Yes, compromise is an integral part of leadership and governance. But, there is a time for compromise and a time to fight.

For which specific issues is Obama really willing to fight and lose? He is not saying, “Give me Liberty, or give me Death!” Americans still have no clue what his core beliefs are. And, they are losing respect. That gives demagogues an opening and is the main reason Obama’s grass roots support has evaporated when he needs it most.

Look, if the economy regains solid footing by mid-2010, these issues will go away and Obama’s political party will benefit in the mid-term elections. He might even get the Roosevelt treatment for bringing us out of a deep economic contraction. However, if the economy remains fragile, as I believe it will, this lack of fight will become a true liability for the President.

Unquoted related articles

Where’s Mr. Transformer? – Eugene Robinson

Palin’s Red Menace – Richard Cohen

  1. doctorx says

    Obama needs to be Reagan or either Roosevelt. Unfortunately, he’s more like LBJ: domestic spending plus a land war in Asia, though w/o any of LBJ’s legislative skills and a depression rather than a boom underway.

    IMHO it is a negative commentary on our times that such a brilliant thinker and writer as Ed Harrison uses the “A” word to describe that Mr. Obama needs to take a stand and fight for it.

    Why has the White House not submitted its own healthcare plan?

    Five competing plans in Congress provide 5 targets for critics.

    And why is PhRMA spending $150 MM in advertising if the President is really for the people and not the powerful? That’s why Yves called healthcare reform DOA.

    My answer is that Barack Obama is a front man for the Establishment that wanted a fresh face to carry on its looting.

    But he’s a rookie and is making rookie mistakes.

    1. Edward Harrison says

      I know the ‘A’ word is a bit shocking, but I did use it in that way on purpose. Perhaps the only time you’ll see that from me.

  2. @jporter says

    Spot on Edward. It’s time for Obama to step up and lead. And that’s going to require knocking some heads together.

  3. Anonymous says

    I found your analysis, as with all of them, very interesting. Especially your point about whether a blind implementation of Austrian policies can give birth to another Hitler. I am a devout Austrian economist myself, and definitely believe that the only way to rectify an inflated bubble is to deflate (deleverage) it. The question is whether this deflation is going to be allowed to run its course naturally (chaotically), or if we are going to intervene and cushion it (less chaotic, but probably more prolonged). Either way, the deflating of the bubble has to happen, and trying to outright prop up these institutions is not the right way to go.

    1. Edward Harrison says

      Kbob, you and I are 100% on the same page here. My biggest problem with the
      policy response to date is that it is an attempt to short circuit the
      natural deleveraging process and an attempt to maintain excess capacity.

      You hit the nail on the head in regards to uncontrolled deleveraging versus
      controlled. The deleveraging must happen, but to let it occur in an
      uncontrolled way invites chaos and the political opportunists, demagogues,
      strongmen, totalitarians and so on, who wish to fill the political vacuum.

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