Obama Needs Luck

President Obama is a thoughtful, cool, reasonable person – the epitome of the Renaissance Man. His policies are well-researched and documented. His campaign was guided by a strong commitment to the logical analysis of all policy issues. His selection of Joe Biden as vice-president provides a good example of this ordered approach. Senator Biden emerged as the chosen one only after months of systematic assessment of various other possible candidates. By comparison, his opponent, John McCain chose Sarah Palin on a gut feeling, after two conversations.

Most people are impressed by this kind of deliberative approach to problem-solving, used by Obama and his advisors. However, history points to a major weakness in this approach: most historical events are driven, partly, at least, by emotion and tribal convictions, which are often not amenable to thoughtful analysis. Shakespeare was a devoted exponent of the rational approach to life, but, he fully realized its limitations. “There are more things in heaven and earth, Horatio, than are dreamt of in your philosophy.”

There are two major areas of concern for the new President, which, to a great extent, operate outside the ability of planners to control. If either one goes against him, then his whole presidency will be in serious trouble.

First, his economic stimulus plan is largely a shot in the dark. The new President was advocating last week for the additional 350 billion dollars, part of the Bush bailout plan, to stabilize the banking and insurance industries. Yet, there has been no accountability for the first half of the huge Bush payouts. The bankers took the money and continued on their merry way, following the same policies as before.

Homeowners struggling with mortgages continue to get foreclosure letters, despite billions of taxpayer dollars going to these financial institutions. Now, even if the Obama administration insists on changes in this regard before the second 350 billion is disbursed, there is still no great confidence among independent economists that this money will solve the credit crisis. What happens if they want a few more hundred billion in the fall?

The wider almost-trillion dollar stimulus package that the new President is himself proposing is also fraught with danger. They expect that this money will create about three million new jobs, and reduce the unemployment rate by about 2%, very worthy goals. Furthermore, the resulting improvement in the nation’s infrastructure will certainly have very positive long-term economic effects.

However, some democratic leaders, including the chairman of the Senate Banking Committee, Senator Conrad, consider that these employment predictions by the Obama team are very rosy. The powerful Senator expressed the view that maybe half the projected new jobs is a more realistic figure. What happens if the unemployment rate keeps rising, despite the stimulus package? Is the capitalist system so broken, after the collapse of banks, insurance companies and the auto industry – the commanding heights of the economy – that a whole new economic model will have to be developed?

The scale of the borrowing required is astronomical. Apart from the stimulus packages, we are told that for the next ten years the US Treasury will have to borrow one trillion dollars a year. Add in about one and a half trillion for stimulus packages, and we get some idea of the frightening extent of this problem. Will the Chinese bankers stop lending to us or demand repayment for the money already owed? Surely Socialists must be smiling at the United States depending on Chinese money to keep going!

I don’t know enough about how currencies operate, but I am reading that a lot of economists are very concerned about the impact that all the borrowing and printing of new money will have on the stability of the dollar. The unintended consequences of this kind of mega-borrowing on the strength and stability of the American currency are another major concern for the Obama team.

The new president is really in uncharted waters, and he is doing his utmost to find a scientific answer, a new formula that will, somehow, jumpstart the economy and halt the precipitous climb in unemployment numbers. Nobody seems to understand the dynamics of the present crisis, the worst since the hungry 30’s, but, if, despite his best efforts, the economic situation continues to worsen, the President will be gradually abandoned by his friends and allies in the Democratic Party, and his poll numbers will move in the direction of the last White House incumbent.

The second major concern is a new terrorist attack. President Bush and his supporters point to the fact that the homeland has not been hit since 9/11. They argue that it was his stern policies which kept the country safe.

Many on the other side see this safety issue very differently. They say that the Bush policies, especially the invasion of Iraq, have drawn the anger and heightened the resentment of Muslims everywhere. In this perspective, America is more likely to be hit again by extremists because of the Muslim perception that the United States is hostile to their culture and their interests.

The President-elect is committed to closing Guantanamo and outlawing torture. The American people support these moves right now. However, in the event of another serious attack, this would likely change as people would blame the “soft” policies of Obama for the new tragedy. The tough, militaristic, Bush approach would be lauded then as the only way to deal with terrorists.

Part of the reason that President Clinton had a successful presidency was that he had more than his share of luck, especially in the area of the economic growth of the nineties. President Obama will also need the gods to smile on him for his economic stimulus package to work, and so that there won’t be another serious attack on the homeland.