An Agenda Disrupted: Obama After Year One

Originally posted in the Bloomberg BusinessWeek on January 26, 2010.

“The best laid plans of mice and men go oft astray”—John Steinbeck, Of Mice and Men

The election of Massachusetts Republican Scott Brown to the late Ted Kennedy’s seat caps a difficult first year for President Barack Obama. This unexpected outcome has almost certainly doomed the President’s long-desired health-insurance bill.

Now the Obama Administration must regroup to determine whether any part of his domestic agenda—energy cap and trade, financial system reform, jobs stimulus, or health-care reform—is still viable.

As he triumphantly took office a year ago, the 44th President had little reason to think that his best-laid plans might go astray. He was of course aware that he faced unprecedented challenges: the aftermath of the financial meltdown, wars in Iraq and Afghanistan, and mounting job losses. But the new President was buoyed by soaring expectations from voters who selected him as a leader who would solve enormous problems, in part by eschewing “the old politics” of government influenced by lobbyists.

His political and legislative agenda was the most ambitious in decades. He focused on stabilizing the financial system, pushing through an $800 billion stimulus bill, and targeted early passage of health-care reform. Then he planned to tackle climate change and banking reform—all in 2009.

a defining moment

One year into his term, not only has Obama’s agenda stalled, but he faces a crisis of confidence that will define his leadership. The real issue is not health care, but whether Obama the Leader or Obama the Politician will dominate. Like the Roman god Janus, whose two heads faced in opposite directions, Obama the Leader pulls against Obama the Politician. This dichotomy is eroding the President’s political capital and alienating him from voters.

We have always known there were two Obamas: the idealistic and compassionate community organizer whose service changed lives and the skilled politician that emerged from political wars on Chicago’s South Side. During the Presidential campaign, Obama brilliantly integrated these two facets of his persona. Most of us who voted for him believed that, once in office, Obama the Leader would dominate.

On the international front Obama has led with poise and wisdom. Bipartisan appointments of Hillary Clinton and Robert Gates as Secretaries of State and Defense give him a highly experienced leadership team. His new style of respectful leadership and an “open hand” to the world are restoring trust in the U.S., resulting in the Nobel Peace Prize. His decisive response to the Haitian tragedy displayed competence and empathy.

Yet on the domestic front Obama has floundered. There he chose to play the Washington insider’s political game, giving broad access and influence to lobbyists. Many Cabinet and White House staff appointees are former politicians, some of whom have steeper learning curves than others, but there is not a single business person in the entire Administration. Chief of Staff Rahm Emanuel has led countless rounds of dealmaking with Congress and lobbyists representing virtually every special interest group from insurance companies to labor unions.

unintended consequences

Instead of proposing a comprehensive health-care policy, Obama effectively abdicated his power by turning health care over to Congress. With nearly one-fifth of the nation’s GDP resting on the outcome, politicians and lobbyists produced a mish-mash of regulations no one understands. Democratic leaders made hundreds of side deals within their own ranks that would produce myriad unintended consequences.

Beyond health care, Obama’s populist criticism of the banks reflects a disconnect between sound policy and reality. The banks—essential actors in any functional financial system—must play a significant role in any recovery. Instead of tackling meaningful regulatory reform that protects the nation from excessive leverage among interdependent financial intermediaries, he opted for politically popular moves such as a banking tax. (Disclosure: I sit on the board of Goldman Sachs (GS).)

Meanwhile, 16 months after Wall Street’s collapse, no financial reform legislation is close to passing. Contrast that with the fact that the Sarbanes-Oxley legislation was passed in 31 days following Enron’s demise.

Most pressing of all for Obama’s second-year agenda is the deepening jobs crisis. Twenty-five million Americans—17.3% of the workforce—lack full-time jobs. While the massive stimulus bill saved some jobs, it did virtually nothing to create new ones. This November, absent a major jobs revival, voters’ frustrations are likely to be directed at the party in power, further weakening the President’s ability to lead an increasingly dysfunctional Congress.

At the outset of his second year, Obama faces a choice. Obama the Politician would fan the flames of populist anger to solidify his base. Obama the Leader would follow in the footsteps of President Clinton—who also faced failed health-care reform—and pivot to the political center to address the nation’s most pressing problems, starting with job creation.

For the sake of our nation’s health, let’s hope that Obama the Leader will prevail in the year ahead.