Niall Ferguson: Obama’s
Gotta Go
‘Why
does Paul Ryan scare the president so much? Because Obama has broken his
promises, and it’s clear that the GOP ticket’s path to prosperity is our only
hope.
I was a good loser four years ago. “In the grand
scheme of history,” I wrote the day after Barack Obama’s election as president,
“four decades is not an especially long time. Yet in that brief period
Yet the question confronting the country
nearly four years later is not who was the better candidate four years ago. It
is whether the winner has delivered on his promises. And the sad truth is that
he has not.
In his inaugural address, Obama
promised “not only to create new jobs, but to lay a new foundation for growth.”
He promised to “build the roads and bridges, the electric grids, and digital
lines that feed our commerce and bind us together.” He promised to “restore
science to its rightful place and wield technology’s wonders to raise health
care’s quality and lower its cost.” And he promised to “transform our schools
and colleges and universities to meet the demands of a new age.” Unfortunately
the president’s scorecard on every single one of those bold pledges is pitiful.
COVER STORY: Obama has broken
his promises, and it's clear that the GOP ticket's path to prosperity is our
only hope bit.ly/QQLouG
In an unguarded moment earlier this
year, the president commented that the private sector of the economy was “doing
fine.” Certainly, the stock market is well up (by 74 percent) relative to the
close on Inauguration Day 2009. But the total number of private-sector jobs is
still 4.3 million below the January 2008 peak. Meanwhile, since 2008, a
staggering 3.6 million Americans have been added to Social Security’s
disability insurance program. This is one of many ways unemployment is being
concealed.
In his fiscal year 2010 budget—the
first he presented—the president envisaged growth of 3.2 percent in 2010, 4.0
percent in 2011, 4.6 percent in 2012. The actual numbers were 2.4 percent in
2010 and 1.8 percent in 2011; few forecasters now expect it to be much above
2.3 percent this year.
Niall
Ferguson discusses Obama's broken promises on ‘Face the Nation.’
Unemployment was supposed to be 6
percent by now. It has averaged 8.2 percent this year so far. Meanwhile real
median annual household income has dropped more than 5 percent since June 2009.
Nearly 110 million individuals received a welfare benefit in 2011, mostly
Medicaid or food stamps.
Welcome to Obama’s
Not only did the initial fiscal
stimulus fade after the sugar rush of 2009, but the president has done
absolutely nothing to close the long-term gap between spending and revenue.
His much-vaunted health-care reform
will not prevent spending on health programs growing from more than 5 percent
of GDP today to almost 10 percent in 2037. Add the projected increase in the
costs of Social Security and you are looking at a total bill of 16 percent of
GDP 25 years from now. That is only slightly less than the average cost of all
federal programs and activities, apart from net interest payments, over the
past 40 years. Under this president’s policies, the debt is on course to
approach 200 percent of GDP in 2037—a mountain of debt that is bound to reduce
growth even further.
And even that figure understates the
real debt burden. The most recent estimate for the difference between the net
present value of federal government liabilities and the net present value of
future federal revenues—what economist Larry Kotlikoff
calls the true “fiscal gap”—is $222 trillion.
The president’s supporters will, of
course, say that the poor performance of the economy can’t be blamed on him.
They would rather finger his predecessor, or the economists he picked to advise
him, or Wall Street, or
There’s some truth in this. It was
pretty hard to foresee what was going to happen to the economy in the years
after 2008. Yet surely we can legitimately blame the president for the
political mistakes of the past four years. After all, it’s the president’s job
to run the executive branch effectively—to lead the nation. And here is where
his failure has been greatest.
Photos:
Obama Faces a Tough Crowd in Iowa
On paper it looked like an economics
dream team: Larry Summers, Christina Romer, and Austan Goolsbee, not to mention
Peter Orszag, Tim Geithner,
and Paul Volcker. The inside story, however, is that the president was wholly
unable to manage the mighty brains—and egos—he had assembled to advise him.
According to Ron Suskind’s
book Confidence Men, Summers told Orszag over dinner in May 2009: “You know, Peter, we’re
really home alone ... I mean it. We’re home alone. There’s no adult in charge.
This problem extended beyond the White
House. After the imperial presidency of the Bush era, there was something more
like parliamentary government in the first two years of Obama’s administration.
The president proposed; Congress disposed. It was Nancy Pelosi and her cohorts
who wrote the stimulus bill and made sure it was stuffed full of political
pork. And it was the Democrats in Congress—led by Christopher Dodd and Barney
Frank—who devised the 2,319-page Wall Street Reform and Consumer Protection Act
(Dodd-Frank, for short), a near-perfect example of excessive complexity in
regulation. The act requires that regulators create 243 rules, conduct 67
studies, and issue 22 periodic reports. It eliminates one regulator and creates
two new ones.
It is five years since the financial
crisis began, but the central problems—excessive financial concentration and
excessive financial leverage—have not been addressed.
Today a mere 10 too-big-to-fail
financial institutions are responsible for three quarters of total financial
assets under management in the
Ironically, the core Obamacare concept of the “individual mandate” (requiring
all Americans to buy insurance or face a fine) was something the president
himself had opposed when vying with Hillary Clinton for the Democratic
nomination. A much more accurate term would be “Pelosicare,”
since it was she who really forced the bill through Congress.
Pelosicare was not
only a political disaster. Polls consistently showed that only a minority of
the public liked the ACA, and it was the main reason why Republicans regained
control of the House in 2010. It was also another fiscal snafu. The president
pledged that health-care reform would not add a cent to the deficit. But the
CBO and the Joint Committee on Taxation now estimate that the
insurance-coverage provisions of the ACA will have a net cost of close to $1.2
trillion over the 2012–22 period.
The president just kept ducking the
fiscal issue. Having set up a bipartisan National Commission on Fiscal
Responsibility and Reform, headed by retired Wyoming Republican senator Alan
Simpson and former Clinton chief of staff Erskine Bowles, Obama effectively
sidelined its recommendations of approximately $3 trillion in cuts and $1
trillion in added revenues over the coming decade. As a result there was no
“grand bargain” with the House Republicans—which means that, barring some
miracle, the country will hit a fiscal cliff on Jan. 1 as the Bush tax cuts
expire and the first of $1.2 trillion of automatic, across-the-board spending
cuts are imposed. The CBO estimates the net effect could be a 4 percent
reduction in output.
The failures of leadership on economic
and fiscal policy over the past four years have had geopolitical consequences.
The World Bank expects the
Fact
Check: Has Obama Kept His Promises?
Meanwhile, the fiscal train wreck has
already initiated a process of steep cuts in the defense budget, at a time when
it is very far from clear that the world has become a safer place—least of all
in the Middle East.
For me the president’s greatest failure
has been not to think through the implications of these challenges to American
power. Far from developing a coherent strategy, he believed—perhaps encouraged
by the premature award of the Nobel Peace Prize—that all he needed to do was to
make touchy-feely speeches around the world explaining to foreigners that he
was not George W. Bush.
In Tokyo in November 2009, the
president gave his boilerplate hug-a-foreigner speech: “In an interconnected
world, power does not need to be a zero-sum game, and nations need not fear the
success of another ... The United States does not seek to contain China ... On
the contrary, the rise of a strong, prosperous China can be a source of strength
for the community of nations.” Yet by fall 2011, this approach had been
jettisoned in favor of a “pivot” back to the Pacific, including risible
deployments of troops to
His
In the case of
“This is what happens when you get
caught by surprise,” an anonymous American official told The New York Times
in February 2011. “We’ve had endless strategy sessions for the past two years
on Mideast peace, on containing
Remarkably the president polls
relatively strongly on national security. Yet the public mistakes his administration’s
astonishingly uninhibited use of political assassination for a coherent
strategy. According to the Bureau of Investigative Journalism in
The real crime is that the
assassination program destroys potentially crucial intelligence (as well as
antagonizing locals) every time a drone strikes. It symbolizes the
administration’s decision to abandon counterinsurgency in favor of a narrow
counterterrorism. What that means in practice is the abandonment not only of
It is a sign of just how completely
Barack Obama has “lost his narrative” since getting elected that the best case
he has yet made for reelection is that Mitt Romney should not be president. In his
notorious “you didn’t build that” speech, Obama listed what he considers the
greatest achievements of big government: the Internet, the GI Bill, the Golden
Gate Bridge, the Hoover Dam, the Apollo moon landing, and even
(bizarrely) the creation of the middle class. Sadly, he couldn’t mention
anything comparable that his administration has achieved.
Now Obama is going head-to-head with
his nemesis: a politician who believes more in content than in form, more in
reform than in rhetoric. In the past days much has been written about Wisconsin
Congressman Paul Ryan, Mitt Romney’s choice of running mate. I know, like, and
admire Paul Ryan. For me, the point about him is simple. He is one of only a
handful of politicians in Washington who is truly sincere about addressing
this country’s fiscal crisis.
Want to discuss this week's cover
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Over the past few years Ryan’s “Path to Prosperity”
has evolved, but the essential points are clear: replace Medicare with a
voucher program for those now under 55 (not current or imminent
recipients), turn Medicaid and food stamps into block grants for the states,
and—crucially—simplify the tax code and lower tax rates to try to inject some
supply-side life back into the U.S. private sector. Ryan is not preaching
austerity. He is preaching growth. And though Reagan-era veterans like David
Stockman may have their doubts, they underestimate Ryan’s mastery of this
subject. There is literally no one in Washington who understands the challenges
of fiscal reform better.
Just as importantly, Ryan has learned
that politics is the art of the possible. There are parts of his plan that he
is understandably soft-pedaling right now—notably the new source of federal
revenue referred to in his 2010 “Roadmap for America’s Future” as a “business
consumption tax.” Stockman needs to remind himself that the real “fairy-tale
budget plans” have been the ones produced by the White House since 2009.
Photos:
Obama Faces a Tough Crowd in Iowa
I first met Paul Ryan in April 2010. I
had been invited to a dinner in
It remains to be seen if the American
public is ready to embrace the radical overhaul of the nation’s finances that
Ryan proposes. The public mood is deeply ambivalent. The president’s approval
rating is down to 49 percent. The
But one thing is clear. Ryan psychs Obama out. This
has been apparent ever since the White House went on the offensive against Ryan
in the spring of last year. And the reason he psychs
him out is that, unlike Obama, Ryan has a plan—as opposed to a narrative—for
this country.
Mitt Romney is not the best candidate
for the presidency I can imagine. But he was clearly the best of the Republican
contenders for the nomination. He brings to the presidency precisely the kind
of experience—both in the business world and in executive office—that Barack
Obama manifestly lacked four years ago. (If only Obama had worked at Bain
Capital for a few years, instead of as a community organizer in
The voters now face a stark choice.
They can let Barack Obama’s rambling, solipsistic narrative continue until they
find themselves living in some American version of Europe, with low growth,
high unemployment, even higher debt—and real geopolitical decline.
Or they can opt
for real change: the kind of change that will end four years of economic
underperformance, stop the terrifying accumulation of debt, and reestablish a
secure fiscal foundation for American national security.
I’ve said it before: it’s a choice
between les États Unis and the Republic of the
I was a good loser four years ago. But
this year, fired up by the rise of Ryan, I want badly to win.’