Obama, the Sequel: What is the standard of success for his second term?

By Robert Presser on March 11, 2013

No one does an inauguration like the Americans, and it is a marvelous spectacle to watch.  What made it even more memorable was the progressive, liberal bent to his inaugural address that included a broad range of initiatives from gun control to gay marriage to the preservation of Medicare and Medicaid.  Whether you agree with that agenda or not, the fight with the Republican-controlled House of Representatives on all of these issues, perhaps concurrently, will make for a hyperactive 2013 agenda and keep the political class fully engaged.  What is not so clear is how Obama intends to deal with legacy issues from his first term on which he was barely engaged at worst (like the budget debate) or leading from behind (Libya, Syria, Iran, North Korea, Pakistan, you get the picture).

The pundits often say that a president’s second term is about defining a lasting legacy.  Based on the first term, there is little that merits lasting memory.  Also, there has been little effort to qualify or quantify what would be required in order to evaluate whether the Obama presidency has been a success or a failure.  The objective of this article is to sketch some objectives for Mr. Obama and his administration to meet, and based on the results we can then determine if his time in office merits granting him a positive legacy or not.  After all, if corporate governance dictates that the evaluation of management is tied to clear objectives in a performance review, why can’t the same be done for a presidency?

obama_talk.jpgThe CEO is ultimately responsible for the bottom line, so let’s set some financial objectives regarding the economy.  In order to sustain employment growth and begin to reduce the federal government deficit, the US economy should grow at an average real rate of 2.5% over the 2013-2016 period while maintaining inflation at 2.5% or below.  This would result in a nominal growth rate (adding the growth and inflation rates) of approximately 5%, which would likely increase federal revenues by $150 billion per year.  These objectives fit within the Federal Reserve’s dual mandate to stimulate growth while controlling inflation, so these figures are reasonable.  Even with a 2.5% annual growth rate, the US economy is still operating enough below its capacity that inflation should not be an issue.  For unemployment, let’s set an objective of a 6% unemployment rate at the end of his term.  While this is far higher than the 4.5% rate that existed before the financial crisis, we must recognize that discouraged workers will re-join the ranks of job seekers as the economy improves, so the unemployment figures could bump up even though the total number of employed US workers will continue to increase.

The increase in government revenue generated by a recovering economy should not be wasted by pork-barrel politics and business as usual in Washington; the budget deficit must be reduced and tax reform must be implemented.  The US tax code has not been overhauled since 1986 under Reagan and the time has come once again for streamlining and simplification, including the removal of loopholes for special interests that distort the distribution of capital and reduce revenues.  President Obama should fully engage with Congress to reduce the annual budget deficit to $400 billion per year by the end of his term.  This would bring the deficit in below 3% of GDP and would be sustainable against a real growth rate in federal revenues of 5%, as discussed earlier.  No budget deal will be possible without dealing with the complex and controversial issues of Social Security, Medicare and Medicaid, as outlined by the Simpson-Bowles deficit reduction review panel two years ago.  The growth rates in these programs must be moderated in order to assure their long-term viability.  Obama must negotiate a deal with Congress and then sell it to the people, no more hiding in the Rose Garden.

The recent impasse over “the sequester”, a series of automatic budget cuts totaling $85 billion per year illustrates the enormity of the challenge Obama faces.  The cuts were constructed to be so politically unpalatable to both Republicans and Democrats that a more reasonable deal would have to be adopted to replace it.  The failure of the political system to engage prior to March 1st, 2013 allowed the cuts to go through and now the Congress and Obama will have to backtrack to contain the damage.  Obama reached out via a private dinner for key Senate Republicans and is now talking privately about tackling major entitlement programs like Medicare – too bad we can’t roll back the clock and imagine that this initiative was actually taking place in 2011.

On domestic policy, let’s review Obama’s own short term objectives of dignity and equality for the LGBT (Lesbian, Gay, Bisexual and Transvestite) community and the creation of new, effective gun control legislation.  The elimination of “don’t ask, don’t tell” from the military is one move towards equality, and now we will have to see if the federal government can move forward with the states that do not currently allow same-sex marriage.  Liberals and reformers will be judging Obama on this item above all else since it merited a direct reference in his inaugural address.  On gun control, the president should be able to negotiate a renewed “temporary” ban on assault weapons and large ammunition clips to replace the one that expired in 2004.  One has to assume that the NRA will still have enough influence to impose an expiry to this legislation which will allow some moderates to vote in favor of it, it is unlikely that an outright ban will get the votes to pass.  There should be a significant mental health component attached to any gun control legislation that imposes checks on the request for any new firearm licenses.  The window of opportunity to advance gun control legislation will probably be over by the fall of 2013, since many in Congress will begin ramping up for mid-term election campaigns in 2014 and the NRA will begin funding opponents to sitting members who advocate for significant gun control reform.   Ironically, Obama will have to deal quickly with the budget issue if he is to create room on the political agenda to advocate effectively for his non-financial domestic agenda.

In international affairs, the world cannot afford another four years of delay, indecision and leading from behind.  In Libya, the world was fortunate that joint, limited international military intervention assisted the rebels in achieving regime change, but many months went by and thousands more lives were lost until the US committed its air support to bring the effort to a successful conclusion.  The US is pulling out of Afghanistan on an accelerated timetable that is politically motivated rather than based on prudent military policy.  The Afghan military is not ready to assume control of the country’s territory, most certainly in eastern Pashtun regions bordering Pakistan.  Obama war legacy will be determined by the continuity of the secular regime in Afghanistan and the current policy is setting the administration up to be a loser.

In Iran, the push towards a nuclear weapon continues unabated while the US and its allies are being stalled by the Ahmadinejad regime as it drags on negotiations.  The greatest folly would be concluding negotiations allowing the Iranians to have a “peaceful” nuclear program since the end result would be continued weapons development in secret.  The Obama success checklist on this issue must be the effective dismantling of the Iranian nuclear program in exchange for the removal of economic sanctions and an offer of integration into the international community.  The Iranians must agree to offer full inspection of all known and currently undisclosed nuclear sites.  Failure on this issue would eventually result in a surprise Iranian nuclear test, likely unleashing a nuclear arms race in the Middle East at best, or a unilateral military response by the Israelis at the worst.  Twenty years from now historians will look at Obama’s international leadership on the Iranian nuclear program with the same significance as Neville Chamberlain’s failed effort to contain German fascism and expansionism in the 1930s.  We can only hope for a different outcome.

Syria remains a fluid issue where the Assad regime is committed to a scorched earth policy to remain in power.  The international community is likely to engineer regime change as it moves to arm the rebels, the danger being that those arms make their way into the hands of Islamic militias who impose the creation of a fundamentalist state once Assad falls.  The success test will be the emergence of another Iraqi-style democracy in Syria, volatile as that may be, rather than the emergence of an Iranian-style theocracy.  

Finally, to the Israeli-Palestinian peace process, which often attracts the attention of presidents in their last two years in office as their influence in Congress wanes and they spend more time on foreign affairs.  Every president since Jimmy Carter has made attempts at an end-game on this issue; some made progress while most failed.  Obama’s advantage is that the situation on the ground has moved from a hot war to a cold peace, but there is certainly no evidence of détente, a critical step on the way to a peace treaty.  Previous presidents created artificial deadlines that attempted to push the parties together and force a resolution where no goodwill existed between them to negotiate in earnest.  The bar is going to be set very low on this one; Obama will probably be considered successful if there is no additional military conflict between the two sides and economic cooperation improves, perhaps coupled with a multinational effort to improve Palestinian infrastructure.  Since Hamas and Fatah are still locked in their own struggle for political supremacy it is unlikely that a Palestinian leader will emerge with the authority to negotiate with Israel before the end of Obama’s term in any case.

Obama came to the presidency with the worst in-box of economic issues since FDR.  His ability to muddle through his first term will not be forgiven if he replicates that experience in his second.  Obama must embrace the notion that it is better to have engaged and lost than not to have engaged at all.  Great leaders do not pass into history with spotless records of success, but they are recognized and evaluated based on their willingness to commit the political and personal capital to the greatest problems of the day.  Will Obama end up being remembered as a Calvin Coolidge or a Harry Truman?  So far, the Coolidge label has the lead.

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