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President Obama's Legacy
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How will the president handle the federal debt?
President Obama has been in crisis mode ever since he entered office about three years ago. The financial system imploded shortly before the 2008 election, triggering the deepest recession in decades. Inflated home prices began to plummet, triggering a massive foreclosure crisis that would cause prices to drop even further, the construction industry to crash, more people to walk away from their homes, and the nasty feedback loop to spiral. Two wars inherited from the previous administration still lingered, with the looming threat of another September 11th style attack looming on Americans’ minds. And in addition to these ongoing difficulties, the President has also been confronted with periodic disasters, revolutions, and crises: the BP oil spill, earthquake/ tsunami in Japan, Arab Spring, and European Debt Crisis.
All things considered, I am surprised that the American economy is not in worse shape. And in recent months, there have been signs that we may be finally turning the corner. Many companies have been reporting strong profits, the DOW recently hit 13,000, unemployment has been gradually dropping, and even the still struggling housing sector has been showing some signs of life. Still, most economists would argue that the recovery is slow and fragile, with potential trends and events, both domestic and international, threatening to drag us back into the abyss: high gas prices; the Greek bailout falling through; a deteriorating situation in Iraq, Afghanistan, or Syria; or a military confrontation in Iran. But assuming that nothing catastrophic occurs and that recent trends continue, President Obama’s bid for reelection seems secure. Neither Mitt Romney nor Rick Santorum has demonstrated much of anything in terms of innovative ideas or personal charisma, so only a reversal or significant slowdown of the economic recovery between now and November seems likely to carry one or the other to the White House. Whether fair or not, this election will ultimately be a mandate on President Obama’s handling of the economy.
Just as with Franklin Roosevelt’s handling of the Great Depression, people have passionately debated about President Obama’s role in the economic recession and recovery. Some have argued that his policies only made things worse, while others give him credit for stopping the bleeding and putting the nation back on the right path. Personally, I think that we tend to give presidents too much credit for the performance of the economy, and many people tend to look for evidence to back their ideology. If you want to believe badly enough that Obama has been either a success or failure, there is plenty of “evidence” to back either premise.
I suspect, however, that my ultimate judgment of Obama’s performance will not be based on what he has done so far. Instead, assuming that he wins in November, it will be based on his leadership in his second term. For while the economy has stabilized and improved under his watch, his personal role in this improvement, whatever that may be, has come at a high cost. The President has supported expensive bailouts for the financial and auto industries, the extension of tax cuts for the overwhelming majority of Americans, hundreds of billions of dollars of infrastructure and social services spending under the stimulus package, and the extension of unemployment benefits. Partly as a result of these policies, the federal government has run annual deficits well in excess of one trillion dollars for each of his three years. And in the end, his handling of our nation’s long-term debt problem, rather than his response to the short-term financial crisis and recession, may be his ultimate legacy.
So far, I have been willing to cut the president some slack when it comes to his federal debt record. It is ridiculous, after all, to blame it all on him. Much of the increase in debt resulted from a financial crisis that was years in the making and was well under way before his inauguration. The deep recession resulted in a significant drop in tax revenue, revenues that had been inflated for years due to the financial bubble. Most of the rest of the debt can be attributed to the increasing costs of Medicare and Social Security as our population continues to grow older (on average) and as the first wave of baby boomers hits retirement age. The unfunded tax cuts of the early 2000’s and expansion of Medicare benefits to include prescription drugs have also piled on debt, but many Americans, who have grown used to these policies, do not want to give them up. So even if the President supported a federal government running on auto pilot – which he has done in many ways – an explosion of federal deficits was inevitable.
An economic crisis is not the best time to get the financial house in order. During bad times, major spending cuts and/or tax increases will, in the short-term, only make matters worse. And without economic growth, tax revenues will only decrease, leading potentially to more deficits. This is why I would argue that Obama has been wise to focus more attention on economic recovery than debt reduction. But like all economic downturns, this one will eventually come to an end, and as I stated earlier, there are signs that it is already ending. The big question, then, is what the president will support once the crisis appears to be over.
Since this is an election year and the economy is still fragile, I do not expect the president or anyone in Congress to push for any radical deficit reduction plans (or much of anything else). Tax increases and major spending cuts do not tend to win politicians a whole lot of votes, especially when times are tough. But if the president wins reelection –as I suspect he will – and if the economy is on a firmer footing in 2013 – as I suspect it will – we will find out what kind of a leader Obama really is. Will he call for the sacrifices, in terms of both federal spending and tax increases, which are necessary to get the federal deficit under control? Or will he play it safe, calling only for tax increases on the wealthy and for minor decreases in spending? For anyone who thinks that we can come close to closing the budget hole purely through tax hikes or spending decreases is delusional. Cuts must be made where most of the money is spent: Medicare, Social Security, and defense. The eligibility age for receiving benefits must quickly go up, people with high incomes should probably be declared ineligible for Social Security, and we must rethink our role as the world’s policeman. And we must also face the reality that tax increases on only the wealthiest Americans will not be enough to make a significant dent in the budget deficit.
Come 2013, the old excuses, many of which have been legitimate, will start to wear thin. The president will no longer have the financial crisis, the policies of his predecessor, or his need to get reelected to explain the circumstances that he faces or the actions that he takes. In a sense, it can be easier to govern during a crisis and clean up someone else’s mess than it is to provide real leadership when times seem to be good. And since he cannot run for a third term, he can theoretically push for what he believes and for what is best for our country over the long-term rather than worrying about opinion polls fixated on the here and now. But if he fails to seize this opportunity, this voter will be less inclined to cut him some slack, and I will be looking carefully in 2016 for a leader (of whatever political party) who shows even a hint of the willingness to tell the American people some hard truths.
In the end, however, even if the president were to stand up and lead, his powers are rather limited. Congress controls the purse strings, and the people who serve there do not face term limits. And these Congressional representatives know that in a democracy, thinking about the long-term and calling for shared sacrifice is not a great electoral strategy. In my view, and apparently in the opinion of many Americans, Congress is the most dysfunctional of the three branches. This is why we face the same systemic problems, decade by decade, that have brought us to this situation in the first place. So if the president wins reelection and shows some real leadership in facing our fiscal situation head-on, I hope that Americans of all political persuasions will face up to reality and pressure their partisan, self-interested, bickering, rhetoric-spewing Congressmen and Congresswomen to look beyond their personal political careers and the electoral success of their particular party. Sure, the president needs to lead. But if he has the balls to go out on a limb and be more than just another self-interested, partisan, “realistic” politician, then the public has two choices: either follow this real leader or accept (and stop bitching about) politics as usual. Ultimately, all of us are passing on a legacy to the next generation. The president can only make the choice of either pointing us in a better direction or telling his particular faction what it wants to hear. And if a president chooses the latter, then it’s time to go searching once again for a politician that wants more than a legacy of successful elections.