Obama: Six Month Performance Review

In my May 2 post appraising the President's first 100 days, I gave Obama a D+ on domestic policy, an F on defense policy, and a C+ on foreign relations. I think the discussions and critical remarks made then are still relevant, so I want to focus on a few salient points.

• Obama is Reaping the Rewards of Over-Promise and Under-Delivery. The President boxed himself in by unconditionally expanding government services without addressing revenues in sufficient detail. In the process, he put constraints on revenues by exempting most Americans from federal tax increases and maintaining a disparate taxation scheme for health care insurance and related expenses, i.e., maintaining a tax-favored basis for business-sponsored health insurance. Possible long-term consequences of scaled-up federal spending without commensurate revenue increases include inflation (a de facto tax cutting across all income classes) and bond interest expenses crowding out key domestic and defense spending initiatives. In addition, the nearly trillion dollar stimulus package was sold with oversold benefits and payback in terms of employment statistics.
• Obama Must Establish Credibility and Accept Responsibility. Obama recently was quoted crediting his  administration's economic policies for the government not falling into depression. This is patently preposterous.  What could have resulted in a global collapse was last September's economic tsunami. The bipartisan TARP legislation and various bailouts probably staved off a credit freeze and more severe economic collapse. The idea that the single-percentage spending of the massive so-called stimulus bill and Obama's union-biased version of a belated bankruptcy proceeding of GM and Chrysler prevented an economic collapse simply lacks credibility. Scapegoating the Bush Administration for the economic tsunami is, at best, debatable; first, the Obama Administration has been in power long enough for policy decisions to influence macroeconomic variables; second, political pressure on the mortgage market to expand home ownership among riskier lower-income Americans and/or regulatory reform issues (especially of the secondary market) also reflect Clinton Administration and/or Congressional Democratic policy goals.
• Obama and the Congressional Democrats Have Transparency Problems. Convoluted bills, like the grab-bag stimulus and omnibus budget bill and prospective health care legislation, not to mention Obama's unprecedented utilization of so-called czars, limited bipartisan participation, and short-shrifted review periods make it difficult to evaluate legislation and assess outcomes and responsibility.
• Obama's True Test of Leadership is To Confront his Base. We have yet to see Obama jawboning trial lawyers on the need for medical malpractice reform, a key issue in discussing physician availability and medical costs. Obama's short-sighted capitulation to union demands to bypass bondholders in the GM and Chrysler bailouts will no doubt have a negative impact on the automakers' post-bankruptcy attempts to borrow. Obama has also refused to address public school union monopolies standing in the way of educational diversity and competition.
• Obama is too Detached from Legislative Processes. We have seen a lack of sufficient direction by the White House in Congressional Democratic sausage-making on the stimulus bill, the omnibus budget bill (i.e., earmarks), cap-and-trade, and the health care legislation. This puts him on the defensive as Congressional Democrats pursue their own priorities (e.g., earmarks) or refuse to compromise with Republican leadership.
• Obama is Too Abstract, Makes Dubious Assumptions, Uses Questionable Statistics, and Sets Unrealistic Expectations. Obama during the early Democratic nomination had a reputation for being long-winded and professorial.  Obama makes a dubious case for  a significant expansion of federal involvement in the health care industry, particularly given chronic budget deficits and double-digit percentage tax revenue shortfalls from individuals and businesses; he needs to be more focused, e.g., addressing specific issues like the effects of malpractice insurance on availability of doctors willing to practice, the difficulty of high-risk individuals in finding affordable coverages, and increasing household bankruptcies due to catastrophic medical costs. It is doubtful that green energy can scale to the degree Obama hypes, not to mention his promise of a material generator of new jobs, and that a public sector option will compete fairly against private health insurers. He promises to maintain campaign promises not to touch tax-advantaged basis of company health insurance and not to increase taxes on all but the highest tax brackets and still pay for sharply higher federal spending. The idea that the Administration can find enough money to displace hundreds of billions on health care, when a deficit budget savings effort yielded just $17B, doesn't seem credible. Obama tries to use gimmick unconventional indicators such as "jobs saved". Obama has to make the case how the government presiding over Katrina, the economic tsunami, and massive federal deficits cam credibly argue that it (versus the private sector) can provide leadership on diagnosing and controlling health care costs. He also needs to address the problems his friend, Massachusetts Governor Deval Patrick, has faced given his state's huge funding shortfalls for its own initiative, well beyond projections. We need to seriously address whether Obama is deliberately understating costs in a disingenuous bait-and-switch operation, which is really  a Trojan horse strategy to nationalize health care.
• Obama Must Scale Back His Agenda and Set Different Priorities. The budget deficit is huge; there is a risk that a growing federal interest tab will come at the expense of other domestic and defense priorities; initiatives like the health care and cap-and-trade initiatives which involve an expansion of government and new passed-along costs to consumers or taxes are not well-suited for an economy struggling to find its footing. Obama's attempts to tie in Medicare for his separate health care initiative for are not credible, The reserve issues for Medicare and social security have become even more critical given recessionary effects of payroll contributions; yet Obama has placed dubious higher priorities on carbon emissions and a small percentage of uninsured Americans. Moreover, the effectiveness of Obama's proposals would require certain preconditions which are unfulfilled. For example, unilateral cutbacks in American generation of carbon emissions would be overwhelmed by escalating carbon emissions by developing economies (e.g., China and India), which are reluctant to saddle their corporations with additional costs in an increasingly competitive global economy. With respect to Obama's health care initiative, it seems that the President is putting the cart before the horse; given existing medical staffing shortfalls, increasingly difficult problems in new patients finding available physicians,  and unevenly distributed medical facilities and personnel, where are tens of millions of new patients in the system going to find doctors?
• Obama's Deployment of Czars Raises Constitutional Issues. I believe that Obama is deliberately empowering individuals with material impact over national policies as a workaround to traditional Congressional approval and oversight
• Obama's Record is Contradicting His Post-Partisan Rhetoric. One of the things that appealed to voters about Obama last November was a change in tone and more constructive attitude towards seriously addressing the nation's problems. But in fact, Obama has routinely blamed the Bush Administration for economic issues, has hinted that he could pursue prosecution of Bush Administration members involved with enhanced interrogation techniques, contradicted his campaign promise not to sign "business-as-usual" Congressional pork earmarks sweetening the omnibus budget bill, and has signaled that he would go along with unconventional Senate voting procedures enabling bypass of GOP compromise on health care reform legislation. In addition, the Obama Administration gave equity stakes to lower-ranking union interests above those for higher-ranking creditors for bankruptcy proceedings, a counterproductive appeasement of their own special interest groups, undermining Obama's frequent allegations of improper lobbyist influence during the Bush Administration.
• Obama and the Congressional Dems Have Undermined Their Credibility With a False Sense of Urgency and Ineffective Results. For partisans who alleged that Republicans were running a politics of fear, Obama and the Congressional Democrats have deliberately promoted the so-called stimulus bill and the bailout/bankruptcy of GM and Chrysler in apocalyptic terms. The stimulus package actually spent only a tiny percentage in the first 6 months, which undermined Obama's sense of urgency in selling the bill, without sufficient time for public review. Past Democratic criticisms of budget deficits under the Bush Administration have been silenced by a recently reported record $1.27T budget deficit, largely reflecting the result of bills passed without appreciable GOP support, not to mention trivial budget cuts (by percentage). Credibility on effective use of tax money to achieve objectives (e.g., getting less fuel-efficient, higher-polluting vehicles off the road) has also been undermined by a badly designed "cash for clunkers" program, which unnecessarily expands the deficit for trivial environmental impact.
• Obama Needs to Assert a More Positive Style of Leadership. Obama seems obsessed with criticizing/acknowledging past administration actions or troubling moments in America's past (e.g., slavery, nuclear weapon deployment, the Bay of Pigs, and, of course, George W. Bush), even on foreign soil, speaking to foreign leaders. Obama has constantly scapegoated the Bush Administration for the hand he's been dealt, and he routinely ran down the economy, particularly over the first 4 months of his term. This is not the "yes, we can" inspirational leadership which resonated so well particularly among younger voters; it comes across as defensive and seems to reflect a lack of confidence in his own ability to deal with today's problems. Whatever events occurred in the past are irrelevant; Obama did not control the Executive Branch prior to his inauguration. It is particularly important to project an upbeat confidence in the resilience of the US economy and its recovery.
• Obama's Legislative Agenda Too Diffuse, Risky Politically. The Democrats seem to be trying to make up for lost time with a blizzard of initiatives (including immigration reform), seeking to take advantage of legislative majorities unlikely to improve over coming elections; Obama has set aggressive deadlines, most recently the missed August target vote on his health care initiative. Among other things, Obama has discovered that Congressional Democrats are a coalition which can vary by issue (with many Democrats representing districts or states which McCain carried strongly), with many Democrats worried about supporting initiatives that lack significant public support (e.g., deficit spending, the energy-tax cap-and-trade proposal, and health care reform). Democrats are discovering even though ad spending for Obama health care reform enjoys something like a 5-1 advantage over  opponents, the reform measure is opposed in many polls. Obama is now in a place where he needs to compromise, strongly opposed by progressives. With falling approval rantings, Obama may have put other goals in his political agenda in danger. 
• Obama Has Overstepped His Change Mandate. Obama seems to have forgotten that nearly half of American voters rejected his candidacy, despite factors strongly in his favor, including economic uncertainty, a highly unpopular GOP incumbent President to whom Obama tied to McCain, a normal change election year, a hopelessly inept GOP campaign against him (including baffling miscues by McCain in suspending his campaign over TARP and the selection of an incompetent running mate) and a massive campaign funding advantage. At least half of the votes Obama got were not progressive or liberal, but from moderates, independents and conservatives. These voters were responding more to Obama's smoother personal style and less strident rhetoric on issues. While almost everyone is concerned about a struggling economy, it's difficult to argue these voters share Obama's priorities on progressive priorities of cap-and-trade and transformative change in the health care sector
• Obama Has Failed to Support a Pro-Growth Economic Agenda. We had a stimulus bill which all but ignored the business spending side of the economy; Obama has continued to intervene in the private sector (e.g., the auto sector) or threatened to intervene (e.g., possible tax penalties for small companies not offering health care and/or deep pockets behind the "public option" health care proposal)  in ways counter to business interests, Obama signed into law certain buy-American provisions which were counterproductive for American exporters, and Obama continues to stress tax hikes on the investor class and increasing the number of rules and regulations on business, an indirect form of taxation.