Obama Must Beware the Gap Between His Rhetoric and His Politics

The stimulus program was introduced without delay, but it also demonstrated a troubling lack of political experience and toughness. It was fiercely partisan, attracting only three Republican votes in the Senate and none in the House. It gave the vastly weakened Republican Party the leverage to launch an aggressive attack, magnified by a 24-hour news cycle that focuses on sharpening differences. And yet the stimulus itself was substantially weaker than what is likely to be necessary. Too much of it applies to extended programs that will take effect too late, indeed after 2010. Just last week the Government Accountability Office reported that only a small proportion of the funds, $49 billion, would go out to the states and communities by September 30, and two thirds of that is for state Medicaid programs to maintain coverage and for preventing layoffs. The rest is for slow-starting state budgets and transportation infrastructure programs, with $108 billion to be disbursed in fiscal 2010 and $123 billion more to trickle out in the years to follow. A similar delay in delivery of dollars impeded the efforts of both Herbert Hoover and FDR.

So Obama's program is simply inadequate to address the trillion-dollar-plus hole in national demand (in 2009 alone) that comes from declines in consumer spending, investment spending, and exports. This is the Achilles' heel of his presidency, threatening disillusion. He will be blamed for overreaching, spending political and monetary capital on issues like healthcare and energy rather than concentrating on three clear priorities: recovery, recovery, recovery. It will not easily be forgotten that the stimulus package and the budget package both contained thousands of earmarks and pork to placate members of Congress—something that he had promised he would no longer tolerate. But Obama let them get away with it. Moreover, his budget (and the stress tests for the banks) have lost credibility because of their wildly optimistic assumptions about long-term economic growth and the cost of the programs, raising fears that the fiscal deficits necessary for recovery will be bloated by dubious and even partisan policies. The partisan gap is manifest in the difference between the high approval by the president's political base (over 90 percent) and the low approval from the opposition party—the biggest gap for any president since the end of World War II.

Obama's rationale for dealing now with long-term problems such as healthcare and energy is that this is the moment to do it or, as some of his advisers have put it, let's not waste a good crisis. But programs of this scale have in the past defeated much less overburdened administrations. Given that the programs have little to do with the short-term financial and economic crisis, they risk overloading the system and the ability of the public to cope.

Many administrations are lucky to do one thing at a time, never mind two. But winning the economic war will be tougher when you are trying to jam a whole bunch of bills through Congress, particularly when they involve a huge expansion of federal spending. Roosevelt's big mistake early on was to create the National Recovery Administration. It was meant to stimulate business and labor in new endeavors, but he had too much on his plate. The act was not thought through and flopped in a torrent of bureaucratic regulations discouraging to enterprise and threatening to individual liberties.

So far, concerns over Obama's policies have not translated into a loss of public support despite the rise in the numbers out of work. But how long will the public be patient? The danger sign is that 53 percent of Americans believe his policies have not yet improved the economy; 26 percent say they have made conditions better; 16 percent say they have made things worse. Without real results (in bank lending, in reduced foreclosures), the public may well conclude that he was trying to do too much too quickly while trying to deal with a financial crisis that could overwhelm any administration, let alone one that is trying to learn on the job.