US Elections: Grand Plans versus Reality

WASHINGTON – America is in a deep funk. We have this unprecedented financial crisis whose dimensions, potential reach and likely duration we are still not sure about. Hence fear, if not outright panic. But, whatever the many countermeasures already undertaken and the chances of avoiding the worst regarding this plague, we should also keep in mind that this upheaval hit an economy already in bad shape, weakened by low growth, unsustainable leveraging, excessive consumption and negative personal savings.

The painful reality is that, quite apart from surviving the financial crisis, in order to recreate some balance and chances for future growth, we have to accumulate fresh capital for new productive investments. And this will take time, given the need to pay off the mountain of debt. There has been too much borrowing for unproductive purposes. Highly indebted individual consumers will have to cut spending for a number of years. This means recession, given the oversized relevance of personal spending as an engine of growth in the US. Prolonged spending cuts will spell disaster all over and especially in the huge services sector that depends on consumers. And all those clerks and waiters and salesperson who lose their jobs will also stop consuming, causing more contractions and more misery.

In all this, we have a presidential election. But the curious thing is that, while the candidates talk about this crisis, they sort of skip and jump, without seriously pointing out that this is going to mean prolonged pain throughout. In a rather disingenuous way, while the candidates admit the problem, they peddle their “plans” as magic remedies that will fix everything in almost no time, omitting the simple fact that, as we are already deeply in debt, the Government’s options will be severely constrained. Given the huge financial commitments that we have just created through various emergency programs, piled on top of already unsustainable public spending, realistically we have no real money for anything new.

Yet, the glaring contradiction between the current fiscal predicament and the electoral promises which promise more spending, strident as it is, goes essentially unnoticed. If a candidate gives a coherent 5 point solution to take care of this or that, well, this is “His Plan”. It does not matter that the solution is premised on increased spending that is just not available. The armies of commentators simply omit to mention this. Or, if they do so, they say it timidly. “Oh well, will candidate X be able to implement the overhaul of health care under the present fiscal circumstances”? Well, reason tells us that, no, he will not be able to do this. But, since the media and the analysts love someone coming along with a comprehensive solution, forcefully presented, they do not seriously challenge the fact that this or that program is based on unlikely premises of fiscal solvency.

Overall, it seems clear that, starting with the elites who shape the national commentary, people do not demand the “truth”, whatever that may be. The educated elites like to listen to a good doctor who seems to have the good cure, what it takes to fix the problems quickly and (maybe with magic) with little or no pain. There is no deep analysis of the assumptions, as long as the cure is well presented in an earnest and convincing way. And the winner is the one who sounds more persuasive. And if the solution is well articulated in 4 or 5 steps that, at least in principle, seem to follow some logic, well this is a “Real Plan”.

Barak Obama has come up with many such Plans. He sounds in control and thus intellectually ahead of his more disorganized opponent who seems to be all over the place and who has failed to articulate an equally compelling “Grand Strategy”. Besides, the bedside manners of Dr. Obama are clearly superior to those of Dr. McCain. Barak Obama successfully morphed from Messianic, visionary new leader who would transform the entire substance of the political dynamics in Washington, to the steady, reliable hand who can talk ably about grand policy plans and be believed in so doing. Hence he wins points for being  calm, while McCain appears flustered and unduly aggressive. Not bad for a freshmen Senator who was derided by his Democratic opponents during the primaries as naïve and inexperienced, someone whose career could be condensed in a couple of paragraphs. While one might argue that Senator Obama has grown through the grueling campaign process, we should not make the mistake that equates personal charisma which worked as a magnet to attract unprecedented funding for a well managed campaign with good governing skills. Right now the name of the game is persuasion. While governing certainly includes the ability to persuade, it is about persuading about doing “the right things”. And that is another matter.

On the other side, the feisty McCain-Palin Maverick Team has sputtered. Its message appeals mostly to its traditional base, a disoriented Republican constintuency that has become narrower and smaller in recent years. The strategy of appealing to the millions of uncommitted through an unconventional message that would transcend tradional politics has essentially failed. Their basic theme of “going to Washington to clean up the mess”, (including the mess caused by fellow Republicans), may sound good to some; but it is not reassuring to the millions who want “things” to be done, now, “for me, the suffering citizen”. McCain has not created a message that truly broadens his party’s political appeal and he does not have the polished plans that would include “things” to be delivered; or if he does, he does not communicate them well. His plans do not resonate.

Whereas Dr. Obama has a solid list of therapies and remedies, (remedies that include tangible benefits), targeted to the middle and lower middle class. And he explains them in a calm and steady way. He sounds “in control” and thus believable. And he is believed. He will tax some people; but, hey, not you and me. He will find money to reform health care, and, by modernizing antiquated administrative systems, he will manage to realize substantila savings, thus diminishing medical cost for all. He will get those millions of outsourced jobs back. He will give you what you need for work, child care, access to university, retirement. On top of that, he will retool the economy, revamp Detroit and create millions of new jobs by turning America into an efficient energy producer and consumer through massive investments in renewable energy. And he will end all the wars. He will finally catch Osama bin Laden and he will talk to foreign leaders, so that we can finally regain respect and good will in the international arena. Yes, he will do all that, deficits and economic meltdown notwithstanding.

Dr. McCain may have a few interesting points here and there; but his presentations are not compelling and they are not smooth. It all looks a bit confused. His good intentions are not necessarily in question; but his ability to keep it all together is in doubt. He has not convincingly articulated a “Grand Policy Plan” that will help Middle America. Besides, he is getting old. When he talks, his delivery is not secure and his voice not as silky as the other physician’s. His number two, Sarah Palin may be interesting. But she is too right wing for most independents and very green in terms of experience. Besides, McCain is too closely associated with the Republican Team in charge as the economic disease developed. Thus, one more reason to ditch the Republicans and try a fresh approach.

Of course, nothing, absolutely nothing in the record of either candidate indicates probability of success by choosing one or the other. While McCain has been around longer, showing some propensity to be a pragmatist, neither of the two Senators has had significant executive experience of any kind. They are politicians. They have not “run” anything. True, Obama’s smooth performance, his well oiled campaign, his long list of distiguished advisors would indicate an ability to manage and to plan. Yet again, quality of execution when governing is another matter.

But the national elites seem to have made up their mind based on appearance, debating skills and cleverness of delivery. But, most of all, the intellectual elites are instinctively in favor of social engineering. The consensus now being that the machinery of free enterprise is broken, they believe that now is the time to implement complex regulations that will bring about discipline and accountability. They are instinctively convinced that society needs to be fixed and that it is up to the technocratic elites (as they know better) to come up with the good solutions which they (the enlightened ones) will implement for the benefit of us all. And, as the intellectual consensus now is that the current crisis shows the perils of deregulation, the elites love the idea of being in charge of the plans to fix everything, while correcting injustices and finally creating a more equitable society.

So, the elites have already decided for Obama. Once the country digested the notion that a racially mixed candidate is quite alright, Obama’s talent as an articulate, thoughtful public speaker, seems to have done the trick. And the citizens are comfortable. Obama’s cure, at least on the surface, appears more detailed, better researched and more ably presented. Hence his lead in the opinion polls.

But does “The Plan” match reality? As I said, the question is not asked. For some reason a Big Plan is better than a Small Plan; even if it is based on questionable fiscal assumptions. This is the triumph of good presentation and clever delivery of a well scripted policy book; even if completely divorced from the unpleasant reality of fiscal emergency in which we are, due to the current crisis. Obama wins because of well articulated presentations and because of the appeal that programs laced with goodies have with the suffering middle and lower middle class. But the truth is that most of what either candidate recite, however smart and intriguing, is largely a rhetorical campaign exercise.

Most of it will not be done, as there is no money.

Let’s clarify this. Well before the financial emergency, the federal government was already on an unsustainable pattern of rapidly increasing debt that goes back to the very beginning of the Bush presidency, almost 8 years ago. Lower taxes, runaway spending and two prolonged wars have massively increased public debt. Fiscal year 2007-2008 that just ended on September 30 got us the highest federal deficit in the history of the United States: 455 billion dollars. While this is bad enough, the raft of emergency measures just undertaken to contain and hopefully stop the bleeding caused by the consequences of the financial insanity of the last decade amount to an additional trillion, (and we are still counting) of new spending. This means that the projected deficit for Fiscal Year 2008-2009 (which just started on October 1) is about a trillion. These are fantastic inbalances, even for the world’s largest economy.

And if we look further down the line at the aggregate fiscal implications of larger numbers of older people who will be collecting pensions, while requiring medical care, we are told that America has already accumulated unfunded liabilities in excess of 50 trillion dollars. And this was before the extraordinary new expenses forced by the need to contain the consequences of the financial tsunami! In other words, unless the national priorities are drastically changed, quite apart from the present contingency, we are headed towards financial catastrophe. Given all this, with this gigantic and growing fiscal shortfall, the new President will see that the already constrained policy options will be severely limited.

The truth is that we have almost no discretionary spending left, as the revenue is both insufficient (hence the need to borrow heavily) and already committed. From the general revenue that Washington gets, first we must take out money to be paid as interest on the debt (which must be handed over to all those Treasury bonds holders). Interest is going to increase as a percentage of total outlays in light of the additional borrowing. Then take out from the pool of available funds all the large and growing (due to an increasingly older population) entitlement programs: Social Security, Medicare, Medicaid, veteran benefits. All these programs run on autopilot. These obligations must be paid, along with built in cost of living adjustments. And with this, we have already eaten up more than two thirds of the total revenue. Then we have Homeland Security spending. It will be difficult to cut from Immigration, Border Patrol, Airport Security and the like. If anything, the experts tell us that we should be spending more to make the country more secure. And finally we have defense spending. Of course, we can play a little with it. But not too much, with two wars underway. You may cancel, delay and stretch some of the weapons programs and other procurement. Maybe you could save a few billions. But, contrary to popular opinion, most of the defense money goes to salaries and funding for current operations. It will be difficult to maintain a fighting force and save significant money at the same time, even assuming a successful fast track out of Iraq.

Simply stated, what is left for “non defense discretionary spending” which includes most of what government does, beyond the entitlement programs and national security, is very little, very little indeed. It is roughly 15 per cent of the total kitty. That’s right, when you take out interest on the debt, entitlements, homeland security and defense, the rest is about 15 per cent of all the dollars that Washington can allocate. And even this relatively small slice of the total is pretty much spoken for. Unless we want to eliminate or downsize entire departments or agencies, (how about cutting down 50 per cent from Commerce, NASA, NIH, or Agriculture?), unless we want to significantly cut foreign aid or close down embassies, most of the discretionary money goes to run operations for the entire federal government at current levels. The wiggle room is minimal. Senator McCain talks  forcefully about the exponential growth of earmarks, that is money allocated for projects that do not really serve the public good. Still, we could eliminate all earmarks today and the basic fiscal picture would not change that much.

And so, this dire financial scenario means that the convincing delivery of detailed cures and remedies that supposedly will take out of this mess under the reliable care of Dr. Obama is mostly that: good delivery of good intentions. The hospital has run out of almost everything. The fancy new therapies require new money. The electoral programs are about reintroducing fairness, about giving more to those who do not have a seat at the table. But the ability to engineer these complex reforms assumes extra funds; and we do not have any.

The fact is that both Dr. Obama and Dr. McCain know this. All of Washington knows this. The media pundits know this. And yet, somehow, the game of make believe, whereby the candidates engage in debates about things that in reality cannot be done, continues. And the complicit pundits give high marks to whomever sounds better; the one who can deliver the clever line with a secure tone of voice, showing to have better command of the issues and better stage presence, along with the necessary gravitas or humor, depending on the need of the moment. Whoever “seems” to have the policy that “seems” to meet the needs, well presented and artfully delivered, will win. Obama is better at this. No question. And he will probably win because he appears more in command, while his promises have broader appeal.

But Obama is not auditioning for the part of President in a new movie. This is the real thing. Taking for granted that both candidates have a modicum of intelligence and perspicacity, to be more personable, as Obama is, is a good trait for any human being and in politics it certainly is a plus. To be inspiring and reassuring, as he is, is even better. But, while these qualities can engender trust, neither of them are substitutes for real governing skills. Simply stated, complex governing programs that promise fixes, assuming financial resources that will not be found, is either a dream or a hoax, depending on your preferences.

As I said, this is not a movie about Washington, this is the real thing. No money will make it impossible to implement these complex ideas, at least not as stated. What will actually be possible, given the uncertainties of the cost of the current crisis and the paucity of fiscal resources, has not been seriously discussed. But, for the moment, the national elites have decided that they like the sophisticated policy plans, as many of them dream to be in charge of implementation, showing thus their superior talent. In step with the national intelligentsia, the frustrated people seem to have decided that the one who has the best of list of promises and who unquestionably looks better on stage is the one to be trusted.

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