Deficit myths: it's still all about healthcare, so Obama was right to work it. And yet, I want him gone in 2013 [WITH ADDENDUM]

Got asked in Belvoir this last week about the present situation in US and what must be done.  I answered by citing my own household economy as microcosm:

• Far more competitive world means earning potential is harder to achieve;
• That income "haircut" means past debt patterns unsustainable, thus the deleveraging that continues (done better by individuals, families, firms, everybody but the Fed Gov!);
• Housing is key (our move to short sale old house was big financial achievement of 2011), and curing that is key to allowing workers to move (that's why we did it this year, while the right constellation of circumstances presented themselves, in preparation for eventual 2014 move back East for job-related purposes);
• Education is key (I pay 7 tuitions: 2 preschool, 2 grade school, 1 HS, 1 undergrad and 1 grad) to maintaining future possibilites, so investment trumps damn near everything; and yet,
• Healthcare is huge drain (I pay my own now and the pre-tax cost, by my estimate, is between $30-40,000, meaning that's how I gotta earn to cover it all from stem to stern).

So larger reality for US not unlike my family: we had to scale back everything to preserve what matters, which is healthcare and education; we had to solve the housing situation to allow for renewed labor mobility; we haven't really seen our standard of living go down at all, and yet we've made wrenching changes to be able to live on a much smaller consumption footprint. All tough adjustments, but incredibly worthwhile.

But again, healthcare is huge and seemingly unassailable from my perspective. We are exceedingly careful about how we spend those dollars, even as that's the last thing - besides education - that we want to scrimp on.

Of course, if we don't have six kids, then my life is dramatically simpler on all scales, but there again, what keeps America strong?  Demographics, so that's worthwhile too.

Citation here is Alan Blinder op-ed in WSJ.  Great stuff.

"Four deficit myths":

1. Americans now demand deficit reduction like never before. Not true.  Jobs matter far more now, as does healthcare and housing. Just understand, polls on this subject are no more definitive than they were 20-30 years ago.  This is not our current obsession.
2. Our deficit is so bad right now that massive cuts are required immediately. Also not true. We have no trouble selling debt in this global economy. Yes, long-term deficit issue is acute, but key is setting in place conditions for long boom that takes care of that. See Europe for austerity approach.
3. The ten-year reduction focus makes sense. Bad thinking. Little can and will be accomplished in any 10-year plan. The problem if far longer in scope - see demographics, and thus the solutions must be similarly gauged.
4. America has a generalized problem of runaway spending. Very untrue. The only part of the Fed budget that's really exploding is Medicare and Medicaid, so it's still mostly about healthcare.

In short, "we have a humungous healthcare problem."

Anybody familiar with the US defense budget has long said the same thing: we don't have operations or acquisition or training or personnel crises. The "imperial overstretch" argument remains complete academic bullshit.  We primarily have a healthcare crisis that is extended into pension system. Everything else pales.

In my family right now, the biggest short-term threat, now that we're mortgage free and successfully deleveraging across the board, is healthcare. Huge drain.  Big uncertainty. Encourages self-defeating avoidance behavior on many levels (which we try desperately to be smart about). Leaks into everything.

When GOP says Obama went off deep end on healthcare because country didn't want that or didn't elect him for that, they miss the mark.  It is clearly the biggest internal challenge we face - short and long term. It is the hidden villain on everything. Saying it was a diversion is - itself - a diversionary election-centric tactic.  

But still, I would trust a Romney to finesse its implementation better than an Obama, whose political and negotiating skills I no longer respect, and whose stunning ignorance of, and antipathy toward, business has become an unacceptable leadership flaw - given the tough adjustments still to come.

And yes, I LOVE that Romney did it first in Massachusetts - and did it intelligently. That is a huge credentializer in my mind.

Americans' distrust and anger toward globalization and big business is stunningly misplaced. Globalization has made the world so much better, but it now challenges us in ways we've long gotten used to avoiding because of our long-term privileged position in the global economy, which itself reflected gross historical injustices stemming from colonialization, WWII, socialism in the East, etc. None of those things were our fault, and we took the lead in overcoming them all, but we did live in a pretend world of superiority on that basis across the second half of the 20th century.

That world is gone, and good riddance, say I, because it was supremely unfair to the majority of the planet, and I don't want to live in this world by exploiting others unnecessarily.

So our succees in spreading American-style globalization now comes back to haunt us, demanding we adjust. That's not about demonizing business, even as it is about cleaning up some incredibly bad form on Wall Street (a regular task, just bigger this cycle). It's also not about demonizing China, who is our biggest ally in the global economy going forward - like it or not.

Romeny will say stupid things on China to win the GOP nomination. Obama is already doing stupid things. On the business, it's clear who's hostile and who's not.

Looking ahead, I want a dealmaker, a difference-splitter, a realist on business who acts based on experience and not sterile theory. I also want somebody who can rationalize our military budget and global presence without resorting to idiotic, default targeting of the Chinese.

Romney is far from ideal on all those scores, but he does beat Obama, in my mind, on every one of them.

I stil maintain Obama was the best choice of the two in 2008. I would still vote for him all over again, given the repeated chance. I do think America, however, would have been much better served by a Hillary presidency (I voted for her in the primary), and since I can't get that this time around, I'll make do with the alternative, who I think will have a far better chance of working with a Republican House and Senate than Obama will - given overall Boomer political proclivities (most Boomer politicians are just above cartoon-grade in their motivations, skills and intelligence).

No, I would take Obama over the two jokers (Santorum and Paul) and the complete wild card (Gingrich). And yes, this would be my first vote for a GOP presidential candidate in my entire life.

And my logic on all this if decidedly unemotional (can I toss in that I'm the father of two African-come-to-America daughters, just to be safe?).

This isn't personal in the least; this is strictly business.

LATER ADDENDUM DUE TO MIKE RUSSELL'S COMMENT ABOUT GOP'S CHARGE THAT OBAMA IS "ANTI-BUSINESS":

I don't use that political term of art (anti-business), because I don't think it's true. I don't think his policies have been particularly anti-business.

I think he doesn't understand business (ignorance) and on that basis tends to vilify and scapegoat business (antipathy) for our continuing poor recovery. The silliness over "taxing millionaires and billionaires" is, to me, just rhetorical nonsense. Those people pay plenty, but no matter how much more we tax them (I am indifferent on the subject), it won't change our fundamental issues. So, to me, rolling with political gamesmanship like that says serious change isn't what he's looking for, otherwise he would have gone with Bowles-Simpson and not ignored what everyone said were sound recommendations.

I also cite the ignorance issue for what I consider to be generally bad-for-business-but-bad-for-everybody-else-too policies in combating the crisis. The administration just hasn't done enough to encourage deleveraging throughout the economy, instead preferring stimulus spending to cure a financially-driven overhang crisis, which, per Rogoff, is the wrong medicine chasing the wrong disease.

I won't claim to have tracked the US economy enough to have said, I told you so way back when, because I most certainly did not. But it's hard for me to accept that a guy as smart as Obama couldn't find enough people around him who were smart enough to realize that stimulus splurging after a financial crisis only gets you a follow-on fiscal crisis without actually improving the financial hang-over/debt overhang. They still don't seem to get that, and as long as they don't, I think business will hold off on investment and hiring because consumers are forced to keep their spending low (I certainly am).

So all I am left assuming is that he doesn't know business (ignorance) and made patently bad choices out of some antipathy to business (it is hard to advise the guy who's certain he's always the smartest guy in the room). I say that because business has largely argued for a far stronger deleveraging focus versus the path Obama has taken. That path did include bailouts for Wall Street firms (not sure history will be kind there) and Detroit (am certain history will be kind there and have said that throughout in posts and speeches - but there I cite the global car industry, which is something I have tracked).

Finally, if Obama were both smart on business and less into his business-can't-be-trusted mode, I think he would have pursued opening up the US economy to Chinese investment instead of staying stuck on the RMB's value and this bizarre strategic "pivot" to East Asia, where apparently our weaponry and national "will" is going to keep us economically engaged in the region despite openly targeting the biggest economy there, a country, by the way, that we expect to finance this military buildup in the Pacific. But that's just me saying I don't trust how he views or understands global business.

In general, I do think Obama is a smart guy, but he's displayed enough dumb/antipathy WRT business for me to want him swapped out versus keeping him another four years. The global economy right now is in fairly precarious shape, and I don't see his administration being able to work with a GOP congress over the next four years any better than he has the past 3. We can say it's all GOP hostility but Bill Clinton managed that, and Reagan did with the Dems. Obama is just not that guy. He matches the GOP's Manichean view with too much of his own, along with a pride and self-confidence in his supreme intelligence that I think is his biggest weakness.

We've have world-class brain presidents (Hoover, Carter, Obama) and they manage to have attract hard economic times. I have come to greatly prefer emotionally intelligent presidents (FDR, Reagan, Clinton) or incredible dealmakers (Johnson, Nixon). That's why I will take Romney and his blandness and his difference splitting and flip-flopping and non-agenda. I want a manager who moves the process along for the next four years, rather than the perceived/actual ideologue who attracts more fight than he's worth and isn't clever enough to realize when he needs to bend instead of stand proud.

Comments

[Mike Russell]

Obama bailed out the banks, over Conservative/Republican opposition, then bailed out the auto companies, also over Conservative/Republican opposition. It's certainly a Conservative/Republican talking point that he is "anti-business," but what has he actually done that supports that contention?

[VanFromGreensboro]

What about Romney's foreign policy?

[Thomas P.M. Barnett]

Mike,

I don't use that political term of art (anti-business), because I don't think it's true. I don't think his policies have been particularly anti-business.

I think he doesn't understand business (ignorance) and on that basis tends to vilify and scapegoat business (antipathy) for our continuing poor recovery. The silliness over "taxing millionaires and billionaires" is, to me, just rhetorical nonsense. Those people pay plenty, but no matter how much more we tax them (I am indifferent on the subject), it won't change our fundamental issues. So, to me, rolling with political gamesmanship like that says serious change isn't what he's looking for, otherwise he would have gone with Bowles-Simpson and not ignored what everyone said were sound recommendations.

I also cite the ignorance issue for what I consider to be generally bad-for-business-but-bad-for-everybody-else-too policies in combating the crisis. The administration just hasn't done enough to encourage deleveraging throughout the economy, instead preferring stimulus spending to cure a financially-driven overhang crisis, which, per Rogoff, is the wrong medicine chasing the wrong disease.

I won't claim to have tracked the US economy enough to have said, I told you so way back when, because I most certainly did not. But it's hard for me to accept that a guy as smart as Obama couldn't find enough people around him who were smart enough to realize that stimulus splurging after a financial crisis only gets you a follow-on fiscal crisis without actually improving the financial hang-over/debt overhang. They still don't seem to get that, and as long as they don't, I think business will hold off on investment and hiring because consumers are forced to keep their spending low (I certainly am).

So all I am left assuming is that he doesn't know business (ignorance) and made patently bad choices out of some antipathy to business (it is hard to advise the guy who's certain he's always the smartest guy in the room). I say that because business has largely argued for a far stronger deleveraging focus versus the path Obama has taken. That path did include bailouts for Wall Street firms (not sure history will be kind there) and Detroit (am certain history will be kind there and have said that throughout in posts and speeches - but there I cite the global car industry, which is something I have tracked).

Finally, if Obama were both smart on business and less into his business-can't-be-trusted mode, I think he would have pursued opening up the US economy to Chinese investment instead of staying stuck on the RMB's value and this bizarre strategic "pivot" to East Asia, where apparently our weaponry and national "will" is going to keep us economically engaged in the region despite openly targeting the biggest economy there, a country, by the way, that we expect to finance this military buildup in the Pacific. But that's just me saying I don't trust how he views or understands global business.

In general, I do think Obama is a smart guy, but he's displayed enough dumb/antipathy WRT business for me to want him swapped out versus keeping him another four years. The global economy right now is in fairly precarious shape, and I don't see his administration being able to work with a GOP congress over the next four years any better than he has the past 3. We can say it's all GOP hostility but Bill Clinton managed that, and Reagan did with the Dems. Obama is just not that guy. He matches the GOP's Manichean view with too much of his own, along with a pride and self-confidence in his supreme intelligence that I think is his biggest weakness.

We've have world-class brain presidents (Hoover, Carter, Obama) and they manage to have attract hard economic times. I have come to greatly prefer emotionally intelligent presidents (FDR, Reagan, Clinton) or incredible dealmakers (Johnson, Nixon). That's why I will take Romney and his blandness and his difference splitting and flip-flopping and non-agenda. I want a manager who moves the process along for the next four years, rather than the perceived/actual ideologue who attracts more fight than he's worth and isn't clever enough to realize when he needs to bend instead of stand proud.

[David Emery]

Where's the 'like' button? What I'd add to the analysis is the need for a President who will not just announce broad goals, but who will get involved with the sausage making. More than anything else, I blame Obama's unwillingness to engage Congress with the full power of the administration to make things happen. It's not enough to set a policy goal, you have to work with Congress and within the administration to negotiate its implementation. The fact that we have not had any success in getting and passing budgets through either a Democratically controlled Congress or the current divided Congress is my #1 item on this indictment.

"Do, or not Do. There is no try."

[Tom Wade]

Tom,

Your addendum filled in the blanks that moves this post from one that mirrors what many middleclass Americans struggling to meet their family obligations of protecting, (health) and future security, (education of young) are faced with; to one with substantial supporting evidence using history as a guide to illustrate previous President's utility or lack there-of, in a crisis.

[Terry Collier]

Good article in NYT , giving a glaring example, using Apple, of the deficiencies that Tom points out in our skill sets and the consequences of Globalization making our recovery in Manufacturing problematic..
http://www.nytimes.com/2012/01/22/business/apple-america-and-a-squeezed-middle-class.html?pagewanted=all

[Mike Russell]

Tom,
You made my day with your addendum -- once I got my jaw off the floor, where it had dropped when I saw it, I ran and got my wife to show her -- my 15 minutes of fame! Read all your books (well, not Romanian and East German Policies in the Third World, but all the others) and follow your blog along (with Paul Krugman's, so as you can imagine, we may have to agree to disagree on our economic analysis). Didn't mean to put words in your mouth, re: anti-business vs. antipathy. Probably the point we can agree on is your comparison of Obama to Jimmy Carter; he's proved frustratingly ineffectual, thus as many enraged Progressives as Conservatives over the last few years. Like yourself, I wish we could go back in time and choose Hillary, but I'm still not ready to throw him over for Romney. Thanks again for your time and attention.

[Terence Smith]

"But it's hard for me to accept that a guy as smart as Obama couldn't find enough people around him who were smart enough to realize that stimulus splurging after a financial crisis only gets you a follow-on fiscal crisis without actually improving the financial hang-over/debt overhang"

This assertion isn't supported by how we've seen the crisis played out, and is contradicted by the very comments on the debt situation you quoted earlier in the piece. The US government has not had any problem servicing it's debt, and that will continue at least into the medium term.

In fact, the stimulus and the general expansion of the deficit has been critical in allowing the private sector to de-leverage without an even more devastating recession. Krugman recently wrote about this, and as you can see total US debt has actually stabilised during the crisis.

[Thomas P.M. Barnett]

Yes Terence, Krugman is the alternate take from Rogoff. Per Krugman, even greater fiscal spending would have been worthwhile.

I just don't see the evidence supporting that assertion.

The fact that we're still getting away with floating monstrous levels of debt only proves that the world has no legit choice on reserve currency - and that Europe proved just how dangerous such a follow-on fiscal crisis can be.

[Kanani]

Healthcare. I know it all too well. Unfortunately, few understand how it's contracted. The chain is such: big government (Medicare/Medicaid) -> the healthcare insurance companies-> and then subcontracted to the IPAs (large, medium and small medical groups) ->and then contracted out again to the specialists. The bulk of what you are paying is not going to direct care. Just a glance at an EOB will show that. The majority is going to middle men, and also --to paying hefty compensation in all 50 states to CEOs CFOS by the healthcare insurance carriers.

One bonus alone is usually enough to sustain two hospices, an operating room theater, a community hospital, outreach programs and several clinics. The five year compensation for the national CEO of Aetna alone added up to 77 million. Imagine that. Is that for real? Well, given you're paying 30k, it must be. It certainly isn't going to doctors. I've written extensively about it , coming from the field (the trenches as I call it) of specialist practice before chucking it all to go into that bottomless pit, The US Army Medical Corps. Anyway, there's lots more to say, but truthfully, I don't see Obama's single payer system being a remedy either. In fact, it just further puts the "gold standard" of lean, precise, small practices on a shelf of nostalgic memories. Click on my name above to take you to one article on my old blog, and then over on The Kitchen Dispatch, I've added my rebuttal to an insult given to me by a military hospital administrator over here. http://kitchendispatch.blogspot.com/2012/01/medical-practice-and-why-money.html

[Dean]

The secret fact about healthcare costs that no one dares to say is that America's healthcare system is in addition to being the most expensive, is the most profitable. Any improvement in healthcare costs comes at the price of healthcare profits and healthcare jobs. If you eliminate all the middlemen with single payer plans, and you transform the fee for service model with its incentives for ineffective and unnecessary treatments, you destroy all the jobs that are supported by that inefficient but voluminous activity. That's right, healthcare reform is anti-business. Government initiatives that improve the health of citizens destroy demand for healthcare services. Michelle Obama's "Let's Move" project is just another aspect of her husband's socialist plan to destroy America's economic leadership.

If you can't tell whether I'm being sarcastic or not, you've taken a step towards understanding why fixing healthcare is so difficult.