Obama: Appearance and Reality – 1. His Conservative Economic Critics

Why is Obama portrayed as a failed president as he starts his second term in office? One explanation is the frequent, articulate and very numerous criticisms by conservative economic voices among the chattering classes. They paint a picture of Obama as converting America into a welfare regulatory state and inaugurating a social democratic program if not outright socialism. From the perspective of their economic ideology, they try to do anything to undermine his democratic legitimacy and weaken his political capital. The portrayal is unrelenting and unforgiving. Does it bear any resemblance to reality? 

 

Conrad Black in The National Post wept verbal tears after Barack Obama’s second historic victory as America’s first ever African-American president, even more than he wept over his own believed unjust incarceration under what he calls a terrorist regime of a fascistic prosecution. (Conrad Black: The Obama Disaster: Part II, 12 November 2012) Black wrote that, “Historically, when America has needed leadership, its greatest leaders have come forward. Not this year.”

 

Black implied that that Obama was elected with only a marginal mandate. As Black opined, Obama only managed to eke out a second victory because George Romney was such a weak and not very credible candidate for the Republicans. But the historical record suggests otherwise. Ignoring the electoral college, in which Obama won an overwhelming victory, and focusing only on the popular vote, Obama did not eke out a victory; he repeated the precedent of winning with 51.06% of the vote compared with the last democratic candidate who won a majority of voters, Jimmy Carter (50.08%). Bill Clinton won with only 43% of the popular vote in 1992. In 1996 when Bill Clinton won an overwhelming 379 Electoral College votes, he still only won 49.24% of the popular vote. Obama even beat George Bush’s 50.73% in 2004. In recent memory, until Reagan’s re-election, few presidential candidates won with over 50%. George Bush Sr. did with 53.37%, repeating what Franklin Roosevelt accomplished during WWII with 53.39%. In 1980, Ronald Reagan only won his first election with 50.75% of the vote, less than Obama’s share, but won the historic and unprecedented landslide in modern times in 1984 with 58.8%.

 

If we restrict Black’s interpretation of Obama’s victory as very marginal to only presidents running for re-election, the issue is not so much the margin of the popular vote but the discrepancy between that vote and his approval rate on inauguration day. The economic conservatives’ position on Obama’s approval rating is not so hyperbolic. Obama had an approval rating of 52% for the week of January 21-27 (http://www.gallup.com/poll/116479/barack-obama-presidential-job-approval.aspx) George F. Will declared that Barack Obama had the lowest approval rating of any re-elected president when inaugurated since WWII. (George F. Will “The President’s Contradictory Agenda,” The National Post, 28 January 2013, A12) Though Obama tied George W. Bush with the same approval rating at the beginning of his second term – just 52% – nevertheless both Bush Jr. and Obama really did enjoy the lowest approval rating of any re-elected president since WWII. In contrast, Bill Clinton’s was 59%, Ronald Reagan’s was 60%, Richard Nixon, who would not long after be forced to resign, had an approval rating of 65%. Dwight Eisenhower had an approval rating of 72%. 

 

Though the conservative right uses such statistics to weaken Obama’s legitimacy, I want to ask another question – why the discrepancy between Obama’s historic success at the ballot box but his historic failure to win the nation’s approval by a significant margin? If re-elected presidents generally have a significantly higher approval rate on their inauguration than their votes 2 1/2 months earlier on election day, why was Obama’s approval rate on the date of his inauguration virtually the same as his percentage of the popular vote?  

 

One reason offered is that right wing commentators keep harping on Obama as a failed president, particularly in economic matters. Economic growth continues to be sluggish. Although the unemployment rate is dropping, historically high percentages of Americans are out of work. As George F. Will put it, if the same percent of persons of working age were employed, there would be 14 more million people in the work force. Black lamented that, “The wealthiest country in history is bankrupt, with 50 million citizens in poverty and the entire middle class on an economic knife-edge.” Black bemoans that a $10-trillion of national debt, accumulated from 1776 to 2008, became a $16-trillion debt.

 

The assertions are correct but they ignore context and comparisons. The debt is less as a percentage of GDP than the debt incurred during WWII. They fail to acknowledge that the debt was an investment (admittedly a risky one) to save the nation from past follies to allow the country to grow in the future. The extra funds bailed out the financial sector, rescued the auto industry, invested in infrastructure (roads, bridges, etc.) in a way not seen since the Republic Eisenhower post WWII administration, and invested as well in education and in clean energy. Obama appears at least to have led America back from the brink of a great depression. Why is this not, at the very least, acknowledged even if one disagrees with the claim?

 

Peter Ferrara epitomized right wing critics of the Obama presidency with his article in Forbes on January 11, “President Obama Offers A Repeat Of His Same Failed Policies.” The refrain was similar to many others. Tax rate cuts are inherently pro-growth and expansionary. Government regulation depresses economic initiative. There is no distinction between taxes needed to build infrastructure and enhance education as crucial elements in economic growth and tax revenues spent on otherwise frivolous items. Nor is there any recognition of those regulations that enhance growth because they enlarge the field of economic opportunity. Instead we get a mantra of homogenization and lack of distinction, a mantra that refuses to take account of evidence that might falsify the claim that Obama is a failed president.

 

Do lower capital gains taxes produce greater revenues for the state? Then why did 2012 yield $38 billion less in capital gains taxes than in 2007? Did cutting the tax rate increase employment? If so, why is Obama blamed for the huge increase in unemployed Americans during his first term even though he agreed to continue the Bush capital gains tax cuts?  Len Burman of Syracuse University studied of the relationship between capital gains tax rates and economic growth between 1950 and 2011. His study showed no correlation between the two. Nor is the correlation negative. The rate cuts also did not affect the downturn in the economy. There is just no 1:1 correlation between capital gain tax cuts and economic growth in either direcion. (See Burman’s opening chart in his article in Forbes on 15 March 2012: “Capital Gains Tax Rates and Economic Growth (or not).”) The correlation was not even statistically significant. So capital gains cuts likely played no significant part in either economic growth or the series of economic downturns, including the overwhelming one that came after the end of the Bush presidency. This finding was confirmed by the independent Congressional Research Service (CRS) in its report, subsequently withdrawn under pressure of the Senate Republicans, Taxes and the Economy: An Economic Analysis of the Top Tax Rates Since 1945 and another report, Small Business and the Expiration of the 2001 Tax Rate Reductions: Economic Issues.

 

Jennifer Rubin, another right wing economic pundit in her op-ed, “Obama’s challenge: Why give a failed president another chance?” (The Washington Post, 3 September 2012) repeated the effort to blacken Obama’s economic record and challenged Obama for falling back on failed policies of raising taxes on the upper income group, expanding investments in teachers and education and enhancing infrastructure investments. Ashe Schow in The Foundry on 18 October 2012 in his article, “President Obama’s Taxpayer-Backed Green Energy Failures,” zeroed in on all the eco-companies that failed in their initiatives even though they received large federal government grants – Geothermal ($98.55m), Babcock and Brown ($178m), Ener1 ($118.5m) (Ner1 was sold to a Russian businessman). Johnson Controls ($299m). Others actually filed for bankruptcy – Abound Solar ($400m) (the company actually only received $68m when the government cut its loan off) and A123 Systems ($279m) (the Chinese conglomerate, Wanxiang Group, bought A123 for 1% of its share value at its peak evaluation), Solyndra ($535m).

 

The message is simple. Venture capitalists, not governments, should be the only ones entrusted to pick winners and losers. As Charles Krauthammer summed it up, Obama, who began his program of enlarging the state with medicare in his first term, reaffirmed his commitment to healing the planet in his second inaugural address by promising “a state-created green energy sector, massively subsidized (even as the state’s regulatory apparatus systematically squeezes fossil fuels, killing coal today, shale gas tomorrow).” (Charles Krauthammer: Obama Unbound – Our President Wants to Undo Everything Reagan Ever Did,” FoxNews, 24 January 2013.)

 

The charge that Obama invested in eco-company losers, let alone his cronies, is also distorted. One only has to choose enough winners to outpace losses from losers over the long term. For venture capitalist investments in green energy, it is too early to tell, though Jesse Jenkins, Devon Swezey, and Alex Trembath in their article, “Solyndra’s Failure Is No Reason To Abandon Federal Energy Innovation Policy” in Forbes on 2 September 2011 concluded that “when judged by its entire diverse portfolio of investments, the LGP has performed remarkably well.” They argue that, “with a capitalization of just $4 billion, DOE has committed or closed $37.8 billion in loan guarantees for 36 innovative clean energy projects. The Solyndra case represents less than 2% of total loan commitments made by DOE, and will be easily covered by a capitalization of eight to ten times larger than any ultimate losses expected following the bankruptcy proceedings.” Even if one does not accept those positive assessments, the reality is that when private government investments in green energy are compared to government investments, government investments were slightly more successful even though the private sector chose less risky and more senior tranches. (World Economic Forum http://www.weforum.org/content/closing-green-investment-gap) I myself was very surprised by this result.

 

If Americans went through the greatest downturn since the Great Depression, Obama did not put them there. Bush did under a program of tax cuts, expensive and apparently never-ending foreign wars, and transferring the costs to future generations. Instead of lauding the legislation that saved the auto industry and that launched the largest ever infrastructure program since the post WWII period under the Republican Eisenhower administration, the economic conservatives harp repeatedly on Obama’s alleged poor economic record and other sins such as the fact that the number of people with criminal records in the USA is heading towards 50 million. The economic conservatives do not go on to add that this is the case largely because of obsolete marihuana laws that are beginning to be dismantled under democratic state legislatures; finally, we are witnessing the reversal of the trend and continuing demands for incarceration as a primary policy for dealing with crime even by Republicans.

 

Black, although he granted that Obama has at least “avoided the open-ended adventurism of his predecessor,” did not credit him with much more. The right wing economic critics of Obama’s various economic strategies work by repetition of stock phrases, are selective in their citations, and ignore analyses that might falsify their beliefs. It is possible that their position could be right to some degree. However, they create a caricature. The evidence when weighed does not demonstrate that the economic conservatives are right. Instead the evidence suggests that ideological conviction rather than comparative detailed analyses yield their conclusions.

 

However, I am not so interested in determining whether the criticisms are correct or not. I am more interested in their methods of homogenizing and repeating negative colourings and conclusions based on selected writings, pithy refrains and repetition to blacken Obama’s image. Why are they so outrageously unfair? Are they responsible for Obama’s stalled approval rate staying at the same level as his popular vote on election day? Surely community conservatives must share at least part of the blame (tomorrow’s Blog), if the blame is to be placed on the repeated deformations of the right. 

[tags economics, neo-cons, USA, President]

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