Posted by: dstieglitz | December 8, 2008

HIGH EXPECTATIONS

           The day after the election I was at a client’s office and saw that the Director of Administration was dog tired. Seems she spent Monday and Tuesday campaigning for Barack Obama, and then joined the euphoric early-morning celebration outside the White House when he was declared the winner. She gleefully said: “Obama will fix everything!” In a similar vein, the Outlook section of the Sunday Washington Post showed a foot-tall, color picture of Obama in a Superman costume. Great victories spawn high expectations, but in this case the optimism may be unrealistic. After winning a hotly contested election, Obama must re-unite the country, cure its economic ills, and avoid the temptations of one-party rule.

 

Obama’s transition is more like Bush-to-Clinton in 1992 than Clinton-to-Bush in 2000. In 1992 we also had a recession, but when George-W took over in 2000 the dot-com bubble was bursting but the Federal government had a budget surplus. Obama also enjoys the same congressional majority as Clinton. So Obama’s presidency begins like Clinton’s (it’s about the economy stupid!) including: unemployment at a 25-year high, the financial sector on government life-support, consumer confidence at record lows, and an out-of-control Federal deficit. Obama was lucky to have the financial crisis happen close to Election Day, but his luck will evaporate if the economy continues its downward spiral. His inspirational speaking ability will be an asset, but he must produce results quickly to retain the confidence of the American people.

 

If Obama delivers recovery in his first term, he will be hailed as a great president and rewarded with a second term. But if he fails, he’s likely to be a one-term president like Carter. If the Obama administration pushes a partisan agenda in Congress, the country could easily fall into a morass of protectionism, choking regulations, and taxes that squash recovery. “Spreading the wealth” could cause investment capital to move off-shore, and increasing the capital gains tax will choke private investments just when the country needs them to rebuild. After Clinton’s election, it took just two years for Republicans to regain power in the 1994 mid-term election. To his credit, Obama seems to understand the need to manage expectations as well as to implement changes that produce recovery.

 

At the end of the campaign, Obama scored an 80 on the 1-to-100 Change Quotient (CQ) scale relative to his ability to change Washington. That score was seven points ahead of McCain, but substantially behind President Reagan’s 91 and President Johnson’s 90. Obama rated highly in the relationship and communications factors of the CQ, but had weaknesses in clarity, consistency, and proven ability to execute. So what can President-elect Obama do?

 

In my view, he must provide a national growth strategy – a vision that focuses our creative power and restores our national pride. We need something akin to President Kennedy’s post-Sputnik initiative to land an American on the moon. For example, the vision might be to make us the world’s #1 supplier of alternative energy and green technologies – not solely to preserve the planet, but to regain our leadership in the world economy. The U.S. must produce something the world will buy in huge quantities, like we did with manufacturing after World War-II and computers in the information age. The strategy must stimulate both the supply side (industry incentives) and the demand side (consumer incentives).

 

Our economy obviously needs stimulation, but the vision should be the basis for recovery actions. The vision must replace the current wack-a-mole recovery plan being pursued in Congress with a coherent strategy of bi-partisan decisions that:

  (1) unleash industry’s creativity while bailing out the auto industry and Wall Street

  (2) rebuild the housing industry while helping homeowners deal with foreclosure

  (3) deliver cheap energy today while developing new technologies for tomorrow

  (4) create millions of jobs while extending unemployment and repairing infrastructure

  (5) encourage personal and corporate investments while fixing the broken tax system.

These five fixes (and others) must be done as part of a grand strategy to revitalize America’s position in the world economy. In my view, the two measures of Obama’s success will be unemployment under 4% and a positive balance of trade – we can’t afford to consume roughly $60 billion more each month than we produce as a nation. His vision must stimulate the economy and awaken America’s innovative genius. If Obama provides such a vision, he can change Washington and change America like he promised. To register your view on these matters, log onto the change blog at www.dickstieglitz.com

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