Obama’s Big Plan Needs a Truly Loyal Opposition

WASHINGTON – Let’s give President’s Obama budget proposal and bold blueprint for addressing and hopefully fixing a number of serious problems the benefit of the doubt. Let’s assume that his approach is well crafted, thoughtful and that the goals are both noble and reasonable. Let’s also stipulate that his assessment about past irresponsibility by both the private sector and government is correct. Fine. So we all agree on this. But does it follow that his complex plan is the best course of action and, more importantly, that it is indeed going to work as intended?

This is the problem. And, unless we indulge in ideological posturing letting prejudice and bias prevail over reason, all of us should humbly admit that we do not know the answer.

Given the mess we are in, right now the general mood is to give this plan a shot. Of course, the mood is due to the depth of this crisis in which the previously exalted free market capitalism got us into. There is no doubt that the irresponsible lunacy and recklessness displayed by the leading lights of the private sector is largely accountable for this new swing favoring government solutions to the large issues.

When the face is capitalism is Bernard Madoff, (the swindler), or Rick Wagoner, the hapless head of General Motors, the chief executive who presided over the final sinking of the automotive version of the Titanic, it is easier to listen to a new political leader who tells us that ramped up government activism will provide both the answers and the proper modalities to implement policies aimed at both reviving America and propelling it to new heights.

And in truth, with the economy in deep trouble, a banking sector on respirator, the housing market in the abyss, where else can we turn? The government seems to be a plausible alternative; even though we are aware that this new massive effort is going to increase an already gigantic deficit, with consequent increases of the national debt and more money to pay more interest to all the bond holders for years to come.

So, can we say that the pendulum swung back to where it was in the 1960s and the 1970s? Are we back to the optimism surrounding “Great Society” like interventionism? And if, so, is such optimism not so much in the public sector’s leadership but in its competence to manage large public policy programs and huge budgets warranted? Again, right now, the issue can be framed as: “Yes, we may have some legitimate doubts about government efficiency. But compared to what”?

Indeed if the auto sector CEOs are the face of capitalism, one is tempted to believe that anybody, including petty dictator Hugo Chavez, may be better than this brotherhood of supreme incompetence. And if you add to the line up the leaders of Wall Street, with that unholy mix of greed, thievery and stupidity, this may invite favorable comparisons with Zimbabwe’s leaders.

Remember that this is America. We were supposed to be the ultra-sophisticated leaders of free market capitalism. We were teaching the world. We invented the “Washington Consensus”, that high minded prescription to be fed to sick third world countries, consisting of fiscal discipline, budget cuts, privatization and –last but not least— the best of the best: “Private Sector-Led Growth”. And countless governments were invited (forced?) to pray at the altar of the Free Market and to publicly renounce Satan (i.e. “State Owned Enterprises” and other such evils).

And now, how do we look? We, the Keepers of the Faith? The Guardians of the Temple? Oh well. Contemplating this ruin, Maestro Alan Greenspan, until recently the object of almost religious reverence, just like a child with a broken toy in his hands, is speechless. The only thing that he could meekly articulate in defense of his hands off approach during his tenure as Chairman of the Fed is that he really, really believed that the private sector was perfectly capable of assessing and pricing risk. Well, he (along with many others, of course) was incredibly wrong. The very notion of risk, let alone any realistic pricing thereof, had vanished. Hence the overleveraging orgy which destroyed the financial sector and anything it touched.

In the 1980s Ronald Reagan successfully argued that the dysfunctions affecting the US economy were mostly due to too much government, too much regulation and too many taxes. He argued that the legacy of the Great Society was a bloated and incompetent public sector, supremely unsuited to manage anything. Hence the need to starve it. And he won the argument. (Ironically, the one component of public spending, defense, that Reagan wanted to increase, owing to the imperatives of national security, lived up perfectly well to his caricature of “fraud waste and mismanagement”. The Defense Department embarked in a gigantic and thoughtless shopping expedition. No real plan, no priorities, no streamlining of the procurement system. So, we got a stronger military, no doubt; but at an immense cost). 

But the winning deregulation philosophy of the Reagan years and the aftermath got us into the Wild West of no rules and no boundaries. And the hands off approach was justified by the notion that the private sector and the infallible market would wisely allocate capital to the benefit of us all.

Well, the developments of the New Millennium proved that this was not so. Everybody was wrong. And all the guardians of the system, the Securities and Exchange Commission and all the other regulators, were more than wrong, they were negligent and inept.

So, here comes Barak Obama telling us that we need to fix things. Everything else being broken or almost bust, government will have to step in. Of course, Obama’s plan is not confined to fixing capitalism, but to use some of its resources to make our society more just. And this is not just a detail.

And here we set the stage for old and new ideological battles. Should government be in the redistribution business? What is fair? To what extent those at the bottom are victims of injustice and lack of opportunity or victims of their lack of abilities?

Well, the large debate between government role and individual responsibility will never end; and rightly so, as circumstances change and roles should adjust accordingly. If such debate were conducted in a responsible fashion, it would be healthy. But if it all degenerates into an ideological food fight, a useless cacophony conducted only to score points before the next election, the real issues do not become any clearer and nobody wins.

Having said that, let’s focus on the fact that the most immediate dilemma confronting us today is not about philosophy. It is really about implementation tools and capabilities. The anti-government Republicans (and not just the Republicans) of the 1980s argued two things. Number one, the government has no business in meddling in the economy. Number two –and this is really the point— government, even with the best of intentions, is inherently incapable of delivering a good product in a cost effective manner. Bureaucrats are just incapable of understanding large issue and thus they cannot manage them.

Plenty of evidence to support this point, at the time.

Again, today the context is different, as we have massive evidence of private sector failures. In Ronald Reagan’s times it could be said: “Give the private sector a chance”. Today the simple rebuttal is: “We gave the private sector a chance. And look at what they gave us: the worst crisis since the Depression”.

While this is true, the failures of Wall Street do not automatically authorize us to be reassured that, in the meantime, government reformed itself and that it is today up to the task of administering gigantic new programs and new spending. While government can and should be more efficient, where is the evidence that it has become so?

Or was it just the fault of the Republicans who governed until yesterday? Can we say that the Republicans poisoned the well and made it impossible for the federal bureaucracy to do its job? Sure, to some extent atmosphere counts, as it affects morale and thus performance. But can we safely say that a major change at the top, with a brand new Democratic leadership in charge, is enough to change not just the mood but the degree of competence and thus the ability to execute?

In the intelligence realm, can we say that the massive failures that led to the inability to detect the 9/11 plot, and later on to the gigantic blunder regarding the weapons of mass destruction in Iraq, was all George Bush’s fault? Likewise, the inept response to Hurricane Katrina, was it all due to the wrong leaders giving the wrong commands? Sure enough, sub par leadership made things worse, but it can not explain everything.

So, in the end, this is the issue. President Barak Obama wants to do a great deal. Looking at his plan for action, as outlined in the Budget blueprint just made public, there are two sets of possible critiques regarding this renewed faith in Government’s activism. The first one is that, no matter how bad the private sector has been in protecting the general welfare, government is still worse.

The second one, (and in view the most troubling) is that even assuming that the policies are correct and just, government is just not capable of executing because it lacks the intellectual and the institutional tools to act swiftly, intelligently and to produce the intended results. Needless to say, those who oppose interventionism as a matter of principle, are already salivating and ready to pounce on each and every blunder, big or small, that will prove that government (…I told you so, didn’t I?…) is inept.

But, if this becomes a gigantic ideological brawl, nobody wins. We got ourselves in a deep mess. President Barak Obama is the new steward of the common welfare. He has a recipe. Maybe flawed and imperfect; but it is a plan. And he will use the public policy tools that he has inherited, imperfect as they are, to implement it. The question before us all is: do his opponents really want him to fail to prove that he was philosophically wrong, or do they want to engage in a dialogue aimed at improving both the plan and the tools to the extent that it may be possible as we move along? Things being as bad as they are, Obama’s presidency can be a historic turning point for America. It would be wise –and, yes, patriotic– for the opponents to criticize and to present their ideas, as they see fit; but to do so constructively, with the sincere intent to lend a hand.

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