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<\/a><\/p>\nBy\u00a0 NIALL FERGUSON
\nNEWSWEEK<\/p>\n
I was a good loser four years ago. \u201cIn the grand scheme of history,\u201d I wrote the day after Barack Obama\u2019s election as president, \u201cfour decades is not an especially long time. Yet in that brief period America has gone from the assassination of Martin Luther King Jr. to the apotheosis of Barack Obama. You would not be human if you failed to acknowledge this as a cause for great rejoicing.\u201d<\/p>\n
Despite having been\u2014full disclosure\u2014an adviser to John McCain, I acknowledged his opponent\u2019s remarkable qualities: his soaring oratory, his cool, hard-to-ruffle temperament, and his near faultless campaign organization.<\/p>\n
Yet the question confronting the country nearly four years later is not who was the better candidate four years ago. It is whether the winner has delivered on his promises. And the sad truth is that he has not.<\/p>\n
In his inaugural address, Obama promised \u201cnot only to create new jobs, but to lay a new foundation for growth.\u201d He promised to \u201cbuild the roads and bridges, the electric grids, and digital lines that feed our commerce and bind us together.\u201d He promised to \u201crestore science to its rightful place and wield technology\u2019s wonders to raise health care\u2019s quality and lower its cost.\u201d And he promised to \u201ctransform our schools and colleges and universities to meet the demands of a new age.\u201d Unfortunately the president\u2019s scorecard on every single one of those bold pledges is pitiful.<\/p>\n
In an unguarded moment earlier this year, the president commented that the private sector of the economy was \u201cdoing fine.\u201d Certainly, the stock market is well up (by 74 percent) relative to the close on Inauguration Day 2009. But the total number of private-sector jobs is still 4.3 million below the January 2008 peak. Meanwhile, since 2008, a staggering 3.6 million Americans have been added to Social Security\u2019s disability insurance program. This is one of many ways unemployment is being concealed.<\/p>\n
In his fiscal year 2010 budget\u2014the first he presented\u2014the president envisaged growth of 3.2 percent in 2010, 4.0 percent in 2011, 4.6 percent in 2012. The actual numbers were 2.4 percent in 2010 and 1.8 percent in 2011; few forecasters now expect it to be much above 2.3 percent this year.<\/p>\n
Unemployment was supposed to be 6 percent by now. It has averaged 8.2 percent this year so far. Meanwhile real median annual household income has dropped more than 5 percent since June 2009. Nearly 110 million individuals received a welfare benefit in 2011, mostly Medicaid or food stamps.<\/p>\n
Welcome to Obama\u2019s America: nearly half the population is not represented on a taxable return\u2014almost exactly the same proportion that lives in a household where at least one member receives some type of government benefit. We are becoming the 50\u201350 nation\u2014half of us paying the taxes, the other half receiving the benefits.<\/p>\n
And all this despite a far bigger hike in the federal debt than we were promised. According to the 2010 budget, the debt in public hands was supposed to fall in relation to GDP from 67 percent in 2010 to less than 66 percent this year. If only. By the end of this year, according to the Congressional Budget Office (CBO), it will reach 70 percent of GDP. These figures significantly understate the debt problem, however. The ratio that matters is debt to revenue. That number has leapt upward from 165 percent in 2008 to 262 percent this year, according to figures from the International Monetary Fund. Among developed economies, only Ireland and Spain have seen a bigger deterioration.<\/p>\n
Not only did the initial fiscal stimulus fade after the sugar rush of 2009, but the president has done absolutely nothing to close the long-term gap between spending and revenue.<\/p>\n
His much-vaunted health-care reform will not prevent spending on health programs growing from more than 5 percent of GDP today to almost 10 percent in 2037. Add the projected increase in the costs of Social Security and you are looking at a total bill of 16 percent of GDP 25 years from now. That is only slightly less than the average cost of all federal programs and activities, apart from net interest payments, over the past 40 years. Under this president\u2019s policies, the debt is on course to approach 200 percent of GDP in 2037\u2014a mountain of debt that is bound to reduce growth even further.<\/p>\n
And even that figure understates the real debt burden. The most recent estimate for the difference between the net present value of federal government liabilities and the net present value of future federal revenues\u2014what economist Larry Kotlikoff calls the true \u201cfiscal gap\u201d\u2014is $222 trillion<\/i>.<\/p>\n
The president\u2019s supporters will, of course, say that the poor performance of the economy can\u2019t be blamed on him. They would rather finger his predecessor, or the economists he picked to advise him, or Wall Street, or Europe\u2014anyone but the man in the White House.<\/p>\n
There\u2019s some truth in this. It was pretty hard to foresee what was going to happen to the economy in the years after 2008. Yet surely we can legitimately blame the president for the political mistakes of the past four years. After all, it\u2019s the president\u2019s job to run the executive branch effectively\u2014to lead the nation. And here is where his failure has been greatest.<\/p>\n
On paper it looked like an economics dream team: Larry Summers, Christina Romer, and Austan Goolsbee, not to mention Peter Orszag, Tim Geithner, and Paul Volcker. The inside story, however, is that the president was wholly unable to manage the mighty brains\u2014and egos\u2014he had assembled to advise him.<\/p>\n According to Ron Suskind\u2019s book Confidence Men<\/i>, Summers told Orszag over dinner in May 2009: \u201cYou know, Peter, we\u2019re really home alone … I mean it. We\u2019re home alone. There\u2019s no adult in charge. Clinton would never have made these mistakes [of indecisiveness on key economic issues].\u201d On issue after issue, according to Suskind, Summers overruled the president. \u201cYou can\u2019t just march in and make that argument and then have him make a decision,\u201d Summers told Orszag, \u201cbecause he doesn\u2019t know what he\u2019s deciding.\u201d (I have heard similar things said off the record by key participants in the president\u2019s interminable \u201cseminar\u201d on Afghanistan policy.)<\/p>\n This problem extended beyond the White House. After the imperial presidency of the Bush era, there was something more like parliamentary government in the first two years of Obama\u2019s administration. The president proposed; Congress disposed. It was Nancy Pelosi and her cohorts who wrote the stimulus bill and made sure it was stuffed full of political pork. And it was the Democrats in Congress\u2014led by Christopher Dodd and Barney Frank\u2014who devised the 2,319-page Wall Street Reform and Consumer Protection Act (Dodd-Frank, for short), a near-perfect example of excessive complexity in regulation. The act requires that regulators create 243 rules, conduct 67 studies, and issue 22 periodic reports. It eliminates one regulator and creates two new ones.<\/p>\n It is five years since the financial crisis began, but the central problems\u2014excessive financial concentration and excessive financial leverage\u2014have not been addressed.<\/p>\n Today a mere 10 too-big-to-fail financial institutions are responsible for three quarters of total financial assets under management in the United States. Yet the country\u2019s largest banks are at least $50 billion short of meeting new capital requirements under the new \u201cBasel III\u201d accords governing bank capital adequacy.<\/p>\n And then there was health care. No one seriously doubts that the U.S. system needed to be reformed. But the Patient Protection and Affordable Care Act (ACA) of 2010 did nothing to address the core defects of the system: the long-run explosion of Medicare costs as the baby boomers retire, the \u201cfee for service\u201d model that drives health-care inflation, the link from employment to insurance that explains why so many Americans lack coverage, and the excessive costs of the liability insurance that our doctors need to protect them from our lawyers.<\/p>\n Ironically, the core Obamacare concept of the \u201cindividual mandate\u201d (requiring all Americans to buy insurance or face a fine) was something the president himself had opposed when vying with Hillary Clinton for the Democratic nomination. A much more accurate term would be \u201cPelosicare,\u201d since it was she who really forced the bill through Congress.<\/p>\n Pelosicare was not only a political disaster. Polls consistently showed that only a minority of the public liked the ACA, and it was the main reason why Republicans regained control of the House in 2010. It was also another fiscal snafu. The president pledged that health-care reform would not add a cent to the deficit. But the CBO and the Joint Committee on Taxation now estimate that the insurance-coverage provisions of the ACA will have a net cost of close to $1.2 trillion over the 2012\u201322 period.<\/p>\n The president just kept ducking the fiscal issue. Having set up a bipartisan National Commission on Fiscal Responsibility and Reform, headed by retired Wyoming Republican senator Alan Simpson and former Clinton chief of staff Erskine Bowles, Obama effectively sidelined its recommendations of approximately $3 trillion in cuts and $1 trillion in added revenues over the coming decade. As a result there was no \u201cgrand bargain\u201d with the House Republicans\u2014which means that, barring some miracle, the country will hit a fiscal cliff on Jan. 1 as the Bush tax cuts expire and the first of $1.2 trillion of automatic, across-the-board spending cuts are imposed. The CBO estimates the net effect could be a 4 percent reduction in output.<\/p>\n The failures of leadership on economic and fiscal policy over the past four years have had geopolitical consequences. The World Bank expects the U.S. to grow by just 2 percent in 2012. China will grow four times faster than that; India three times faster. By 2017, the International Monetary Fund predicts, the GDP of China will overtake that of the United States.<\/p>\n Meanwhile, the fiscal train wreck has already initiated a process of steep cuts in the defense budget, at a time when it is very far from clear that the world has become a safer place\u2014least of all in the Middle East.<\/p>\n For me the president\u2019s greatest failure has been not to think through the implications of these challenges to American power. Far from developing a coherent strategy, he believed\u2014perhaps encouraged by the premature award of the Nobel Peace Prize\u2014that all he needed to do was to make touchy-feely speeches around the world explaining to foreigners that he was not George W. Bush.<\/p>\n In Tokyo in November 2009, the president gave his boilerplate hug-a-foreigner speech: \u201cIn an interconnected world, power does not need to be a zero-sum game, and nations need not fear the success of another … The United States does not seek to contain China … On the contrary, the rise of a strong, prosperous China can be a source of strength for the community of nations.\u201d Yet by fall 2011, this approach had been jettisoned in favor of a \u201cpivot\u201d back to the Pacific, including risible deployments of troops to Australia and Singapore. From the vantage point of Beijing, neither approach had credibility.<\/p>\n His Cairo speech of June 4, 2009, was an especially clumsy bid to ingratiate himself on what proved to be the eve of a regional revolution. \u201cI\u2019m also proud to carry with me,\u201d he told Egyptians, \u201ca greeting of peace from Muslim communities in my country: Assalamu alaikum<\/i> … I\u2019ve come here … to seek a new beginning between the United States and Muslims around the world, one based … upon the truth that America and Islam are not exclusive and need not be in competition.\u201d<\/p>\n<\/picture><\/span><\/a><\/p>\n<\/picture>CHARLES OMMANNEY FOR NEWSWEEK<\/span><\/span><\/span><\/a><\/p>\n<\/picture><\/span><\/p>\n