President's perilous balancing act
Obama's speech to Congress shows a careful tone on the economy - dispelling gloom but maintaining an urgency about doing big things.
WASHINGTON (Fortune) -- It's true: He didn't break it. But now he owns it.
With President Obama's three major (and expensive) salvage plans in place, we can apply a version of the Pottery Barn rule that Colin Powell made famous in his warning about invading Iraq. Obama now has a controlling ownership stake in this economy and how it performs.
And so, last night, we heard more up-talk, less gloom.
"We will rebuild, we will recover, and the United States of America will emerge stronger than before," Obama declared just minutes into his joint address to Congress Tuesday. It was a talking point released early to the media and designed to shape headline coverage of Obama's historic first speech on the state of the union (though it wasn't technically a state of the union address).
Those remarks stand in sharp contrast to Obama's earlier stated argument that the economic spiral might not reverse itself without his administration's bold hand -- and who, at his inaugural, compared today's Americans to George Washington's tattered patriots staining the snow with blood along an icy river. "In this winter of our hardship ... let us brave once more the icy currents," he intoned.
Last night's address demonstrated an attempt to carefully modulate the nation's mood, based on a politician's deep-dig analysis of public opinion polls. Obama's popularity is sky-high, with a job approval rating hovering around 60%. But any veteran political strategist knows just how fragile presidential approval ratings can be. (Recall George H.W. Bush's tumble from 90% to electoral defeat.)
Obama's economic recovery plan, for example, enjoys majority public support. But helping the nation's banks -- central to an economic recovery -- is not popular. Neither is bailing out GM and Chrysler. So, just like his predecessor, George W. Bush, Obama was forced to tirelessly make the case that forking out taxpayer dollars to these companies will ultimately help taxpayers.
He felt compelled to address the same brewing resentment over his home foreclosure plan, insisting (dubiously) that it won't help "that neighbor down the street who bought a house he could never hope to afford."
And while Obama is wildly popular with the public, the markets have held back on a standing ovation. The White House insists the president's down-talk on the economy while selling his rescue packages has been an "urgent and realistic" assessment, and is not a factor behind the stock market's slide. While it's true that continued bad economic news has hurt stock prices, it's hard not to notice that the Dow slipped 1,000 points during Obama's first 30 days in office -- and that stocks slid more than 4% in a single day when his Treasury Secretary unveiled a bank rescue plan.
Stoking fears about the economy's future has been good politics for the Obama White House, prompting Congress to quickly fork out a trillion dollars to spend on economic recovery and giving Treasury Secretary Timothy Geithner his $350 billion check to prop up the banking and housing sectors. Last night, Obama signaled -- as his top officials already have -- that the price tag to rescue the nation's banks will climb.
Now, though, Obama must engage in a perilous balancing act. On one hand, he needs to reassure investors and make the case that his $787 billion spending bill is turning the economy around, a prospect that the nonpartisan Congressional Budget Office has concluded is "very uncertain" -- likely to add jobs in the short run but slightly depress GDP, and wages, in the longer run.
On the other hand, Obama has a breathlessly ambitious agenda, much of which he wants to enact this year -- sweeping health care reform, doubling the nation's use of renewable energy, creating a "retooled and reimagined" auto industry, raising everyone's education levels, halving of the nation's deficit, entitlement reform -- and, yes, finding a "cure for cancer in our time."
Even if we leave aside the last item for a moment, it's a full plate, requiring a level of government spending and activism not seen since LBJ's war on poverty. In order to accomplish that, Obama needs to keep up his insistence that the nation faces a crisis of historical proportion.
So even as we hear more up-talk about the economy -- "we are not quitters" -- we will hear, as we did last night, that this is a "moment of economic upheaval and transformation" akin to the Civil War, the Industrial Revolution, the nation's post-World War II revival on the GI bill, the interstate highway system and putting a man on the moon.
George Washington brought us out of that icy river. Lincoln united a house divided. FDR produced a New Deal and JFK a New Frontier.
For Obama, attuned to his place in history, it's not enough to revive the economy. He told Congress last night he intends to build a "new foundation for lasting prosperity." That will require, Obama insists, "bold action and big ideas."