Can Obama Meet His Great Economic Expectations?

Barack Obama better be the unstoppable force. Because his economic plan targets some immovable objects.

I know, I know: Yes we can. Dare to Hope. Don’t succumb to business as usual. Etc. Okay, maybe Obama really will change things that haven’t changed in decades.

But for now, all he’s offering are verbal assurances that this time, things will be different. Many of his predecessors promised the same thing. They were wrong. I’m glad Obama is aiming high, but by doing so, he’s also setting extraordinary expectations – and raising the odds he’ll disappoint. Here are some of the goals, as Obama stated them in his recent speech on economic priorities, that will be hardest to reach:

“We will double the production of alternative energy in the next three years.” Sounds great - unless this means that the government will subsidize dubious forms of energy that don’t have a natural place in our economy, which is what it’s been doing for years. Federal subsidies for ethanol have led to a substantial boost in production of this fuel made from corn and other plant matter – even though it’s less efficient than gasoline, costs more in real terms, and tends to raise the price of foodstuffs derived from corn. Many scientists consider ethanol subsidies to be a boondoggle driven by farm-state legislators bringing home the bacon for their constituents. Obama advocates other kinds of alternative fuels, in addition to ethanol, but one lesson of ethanol is that just because it’s “alternative,” that doesn’t mean it’s useful.

[See the pros and cons of 8 green fuels.]

“We will make the immediate investments necessary to ensure that within five years, all of America’s medical records are computerized.” This is a worthwhile goal, but computerizing medical records is a marginal step compared to what’s needed to really fix our healthcare system. The reason this has emerged as a priority is it’s one of the few things that all the powerful interest groups with a stake in healthcare reform – insurers, corporations that pay the insurance premiums, doctors, hospitals, the pharmaceutical industry – generally agree on. None of them are really threatened by digital record-keeping, so it’s safe as a political goal.

But the issues that matter most – like slashing costs, expanding coverage, and getting more bang for the healthcare buck – do threaten many of the powerful interest groups in Washington. That’s why real healthcare reform will be a political bloodbath that will last years. And why Obama may not take it up till his second term.

[See 5 risky assumptions for 2009.]

We’ll put people to work repairing crumbling roads, bridges, and schools by eliminating the backlog of well-planned, worthy and needed infrastructure projects.

But there will be no pork in the stimulus package, right? Obama has made a determined point about how his stimulus plan will be the first spending bill in modern history that’s not festooned with home-district projects for lawmakers. Yet infrastructure projects, almost by definition, are pork. There’s nothing wrong with including them in a stimulus plan. But it’s disingenuous to insist that billions for road and bridge projects doesn’t constitute pork.

[See why Obama should end the bailouts.]

We’ll also do more to retrofit America for a global economy. That means updating the way we get our electricity by starting to build a new smart grid that will save us money [and] protect our power sources from blackout or attack.

Very necessary. And one of the most expensive and disruptive projects imaginable. Modernizing America’s power grid could easily cost upwards of $1 trillion. It’s a laudable goal – but so expensive that it would require huge cuts elsewhere, or strenuous tax increases on virtually everybody – which don’t seem to be in the plan.

[See why failure is sometimes a good thing.]

“…It means expanding broadband lines across America.” Another smart priority. Even though America incubates some of the world’s best technology, we rank only 15th in broadband penetration rates, which measure how many homes have high-speed Internet connections. South Korea, Luxembourg, and most Scandinavian countries rank higher, which means more citizens have access to a key tool for future innovation. Part of the reason is that in the most-wired countries, the government subsidizes and sometimes even bears full responsibility for running cable to homes or building wireless portals. Here, it’s up to consumers to order high-speed Internet from Verizon (VZ) or Comcast (CMCSA) or some other provider. After all the bailouts, is Obama really going to offer a subsidy to telecom companies doing just fine on their own?

[See 9 upsides of recession.]

“We will launch an unprecedented effort to eliminate unwise and unnecessary spending.” Please do! For reference, see the National Partnership for Reinventing Government (1993), the Packard Commission (1986), the Grace Commission (1982), the Hoover Commission (1947), and the Brownlow Commission (1937). Maybe this time, it will be different.

Disclosure: no positions

Comments

[Tradememe:]

Promises... Promises...

Let's wait one year for results...

Perhaps, someone ought to tell President-elect Obama that he has already won the election. From Jan 20th on, it will be results results...

Jan 09 03:55 AM

[Steven Hansen:]

Obama is faced with an economic crisis unparalleled since hoover. the swamp is filled with alligators - and he will soon learn there is no consensus on the way forward.

what may be worse is when it is realized that the current game plan does not work,

Jan 09 04:18 AM

[bosun.j:]

Indeed. On both counts.

I've been very disappointed by most of Obama's choices for cabinet and staff positions. His stimulus plan and concurrent tax cuts reek of his predecessors mistakes.

Combine the above with the realization there is very little anyone can do to stop the inevitable total collapse and it looks to get very ugly.



On Jan 09 04:18 AM The hand wrote:

> Obama is faced with an economic crisis unparalleled since hoover.
> the swamp is filled with alligators - and he will soon learn there
> is no consensus on the way forward.
>
> what may be worse is when it is realized that the current game plan
> does not work,
>

Jan 09 04:38 AM

[henarl:]

Well, no President since at least Eisenhower has accomplished what he has promised and Obama has promised way more than any of his predecessors so his odds of success are much longer. Howver, results are what count, not perceptions, so it's too early to assess him. Maybe he is smarter than all of the others. I doubt it but we'll see.

Jan 09 03:28 PM

[M-P:]

There is a well-known saying that can often be heard from sales reps - "Don't confuse selling with delivery." Sales reps often promise things that they can't deliver on and set expectations that can't possibly be achieved (note: I've done this myself and paid for it in the end).

Managing expectations is one of the most critical skills in politics, business, and relationships. My fear with lofty rhetoric and over-reaching promises is that they set people up for a fall ... I hope Obama is successful - it's partly my money after all - but I do think he needs to be careful with over-stating his case, which is one of the quickest ways to lose credibility and status.

Jan 09 09:13 PM