Newsweek Cover Story: "Hit the Road Barack - Why we need a new president."
Niall Ferguson: Obama’s Gotta Go
Aug 19, 2012 1:00 AM EDT
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.
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 America has
gone from the assassination of Martin Luther King Jr. to the apotheosis
of Barack Obama. You would not be human if you failed to acknowledge
this as a cause for great rejoicing.”
having been—full disclosure—an adviser to John McCain, I acknowledged
his opponent’s remarkable qualities: his soaring oratory, his cool,
hard-to-ruffle temperament, and his near faultless campaign
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.
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.
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
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.
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.
to Obama’s America: nearly half the population is not represented on a
taxable return—almost exactly the same proportion that lives in a
household where at least one member receives some type of government
benefit. We are becoming the 50–50 nation—half of us paying the taxes,
the other half receiving the benefits.
all this despite a far bigger hike in the federal debt than we were
promised. According to the 2010 budget, the debt in public hands was
supposed to fall in relation to GDP from 67 percent in 2010 to less than
66 percent this year. If only. By the end of this year, according to
the Congressional Budget Office (CBO), it will reach 70 percent of GDP.
These figures significantly understate the debt problem, however. The
ratio that matters is debt to revenue. That number has leapt upward from
165 percent in 2008 to 262 percent this year, according to figures from
the International Monetary Fund. Among developed economies, only
Ireland and Spain have seen a bigger deterioration.
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.
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.
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
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 Europe—anyone but the man in the White House.
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
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
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. Clinton would never have made these mistakes [of indecisiveness
on key economic issues].” On issue after issue, according to Suskind,
Summers overruled the president. “You can’t just march in and make that
argument and then have him make a decision,” Summers told Orszag,
“because he doesn’t know what he’s deciding.” (I have heard similar
things said off the record by key participants in the president’s
interminable “seminar” on Afghanistan policy.)
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.
is five years since the financial crisis began, but the central
problems—excessive financial concentration and excessive financial
leverage—have not been addressed.
a mere 10 too-big-to-fail financial institutions are responsible for
three quarters of total financial assets under management in the United
States. Yet the country’s largest banks are at least $50 billion short
of meeting new capital requirements under the new “Basel III” accords
governing bank capital adequacy.
then there was health care. No one seriously doubts that the U.S.
system needed to be reformed. But the Patient Protection and Affordable
Care Act (ACA) of 2010 did nothing to address the core defects of the
system: the long-run explosion of Medicare costs as the baby boomers
retire, the “fee for service” model that drives health-care inflation,
the link from employment to insurance that explains why so many
Americans lack coverage, and the excessive costs of the liability
insurance that our doctors need to protect them from our lawyers.
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.
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.
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.
failures of leadership on economic and fiscal policy over the past four
years have had geopolitical consequences. The World Bank expects the
U.S. to grow by just 2 percent in 2012. China will grow four times
faster than that; India three times faster. By 2017, the International
Monetary Fund predicts, the GDP of China will overtake that of the
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.
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.
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 Australia and Singapore. From the
vantage point of Beijing, neither approach had credibility.
Cairo speech of June 4, 2009, was an especially clumsy bid to
ingratiate himself on what proved to be the eve of a regional
revolution. “I’m also proud to carry with me,” he told Egyptians, “a
greeting of peace from Muslim communities in my country: Assalamu alaikum
... I’ve come here ... to seek a new beginning between the United
States and Muslims around the world, one based ... upon the truth that
America and Islam are not exclusive and need not be in competition.”
it was his role to repudiate neoconservatism, Obama completely missed
the revolutionary wave of Middle Eastern democracy—precisely the wave
the neocons had hoped to trigger with the overthrow of Saddam Hussein in
Iraq. When revolution broke out—first in Iran, then in Tunisia, Egypt,
Libya, and Syria—the president faced stark alternatives. He could try to
catch the wave by lending his support to the youthful revolutionaries
and trying to ride it in a direction advantageous to American interests.
Or he could do nothing and let the forces of reaction prevail.
the case of Iran he did nothing, and the thugs of the Islamic Republic
ruthlessly crushed the demonstrations. Ditto Syria. In Libya he was
cajoled into intervening. In Egypt he tried to have it both ways,
exhorting Egyptian President Hosni Mubarak to leave, then drawing back
and recommending an “orderly transition.” The result was a
foreign-policy debacle. Not only were Egypt’s elites appalled by what
seemed to them a betrayal, but the victors—the Muslim Brotherhood—had
nothing to be grateful for. America’s closest Middle Eastern
allies—Israel and the Saudis—looked on in amazement.
“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 Iran. And how many of them
factored in the possibility that Egypt moves from stability to turmoil?
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 London, the civilian proportion of drone
casualties was 16 percent last year. Ask yourself how the liberal media
would have behaved if George W. Bush had used drones this way. Yet
somehow it is only ever Republican secretaries of state who are accused
of committing “war crimes.”
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 Iraq but soon of Afghanistan
too. Understandably, the men and women who have served there wonder
what exactly their sacrifice was for, if any notion that we are nation
building has been quietly dumped. Only when both countries sink back
into civil war will we realize the real price of Obama’s foreign policy.
under this president is a superpower in retreat, if not retirement.
Small wonder 46 percent of Americans—and 63 percent of Chinese—believe
that China already has replaced the U.S. as the world’s leading
superpower or eventually will.
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.
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.
. . .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.
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 Gallup Economic Confidence Index is at minus 28 (down
from minus 13 in May). But Obama is still narrowly ahead of Romney in
the polls as far as the popular vote is concerned (50.8 to 48.2) and
comfortably ahead in the Electoral College. The pollsters say that Paul
Ryan’s nomination is not a game changer; indeed, he is a high-risk
choice for Romney because so many people feel nervous about the reforms
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
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 Chicago, he might
understand exactly why the private sector is not “doing fine” right
now.) And by picking Ryan as his running mate, Romney has given the
first real sign that—unlike Obama—he is a courageous leader who will not
duck the challenges America faces.
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.
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
I’ve said it before: it’s a choice between les États Unis and the Republic of the Battle Hymn.
I was a good loser four years ago. But this year, fired up by the rise of Ryan, I want badly to win.
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