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Sunday, March 15, 2009

President Obama's Self Imposed Credibility Gap

Those that paid attention to the president's remarks on the economy this week must have been confused and surprised. This week, speaking at a forum of business leaders, President Obama said this.

A smidgen of good news and suddenly everything is doing great. A little bit of bad news and ooohh , we're down on the dumps," Obama said. "And I am obviously an object of this constantly varying assessment. I am the object in chief of this varying assessment."

"I don't think things are ever as good as they say, or ever as bad as they say," Obama added. "Things two years ago were not as good as we thought because there were a lot of underlying weaknesses in the economy. They're not as bad as we think they are now."

"And my long-term projections are highly optimistic, if we take care of some of these long-term structural problems."

This words are nothing short of a 180 degree turn around from the non stop reference by President Obama to the economy as being in "crisis". Ironically enough, President Obama sounded as though he was describing himself when he uttered this part of his statement.

or ever as bad as they say

Now, a few things must be stipulated. First, the president is in a very difficult position. He has to be in many ways positive about the economy no matter what. Much of the economy is built on intangibles like mood, and if the president is gloomy then that naturally trickles down. On the other hand, the president can't be so positive that he is out of touch. He can't simply pretend that things are great when clearly they are not. To say he needs to thread a sharp needle is of course an understatement. That is as they so though why he gets paid the big bucks. No one said the job of president is easy and if he didn't want it he didn't need to run. Both FDR and Reagan did a great job of walking this tight rope whereas Jimmy Carter failed miserably. Both George Bush and his father also struggled with this tightrope. So far, President Obama is a lot more like Carter than he is like FDR.

Second, much of this is self inflicted. While the task is enormous, there is a right way to do this and a wrong way. President Obama practiced naked politics in selling his stimulus plan. He attempted to put the fear of God into the world and scare everyone into falling in line behind it. That may or may not have been an effective short term strategy however it had all sorts of unintended consequences long term. Once he took that end of the world tone, he wasn't going to be able to simply pivot without losing serious credibility. That's exactly what is happening now.

Dick Morris pointed out the tightrope he has to walk.

Pessimism comes naturally to the party in opposition, and it takes a while for its members to get the message that they need to embrace optimism once they take power. The Clinton administration did not move toward an upbeat assessment of the economy until its third year in office. Even then, after the president had shifted his rhetoric, the Cabinet was slow to come around.

For Obama, shifting to optimism runs the risk that he loses his credibility if his predictions do not bear fruit. Mounting unemployment numbers could make a mockery of his optimism.

What Obama has done is made it nearly impossible to have any credibility. Once he took out to turn the economy into a disaster, there was no pivoting. Now, he sounds silly and absurd just two months later saying things aren't really that bad. Furthermore, the president is in even more precarious position going forward. He will still need to get more money to fix the banks, health care, energy, and education. What language will he use and how will it differ from what he has already used. In order to get many of these things, he will need to once again paint things as dire. How many times can he pivot between dire and positive before no one believes anything he says anymore. He has already lost a lot of credibility from this one change in tone.

The bank bailout will likely go into the trillions, and the president will likely paint a dire picture in order to make the case that a massive injection is necessary. Now imagine if the president in April or May is again saying that we would be facing doom without another injection of bailout into the banks. If he once again pivots to doom and gloom after pivoting to a positive outlook, his credibility will be nearly gone. If that happens, he will have no one to blame but himself. He walks a tightrope however it is a tightrope that previous presidents have walked successfully and others have not. He has taken to walking it in the wrong way and now he is stuck.


Wolf said...

He's consistent here and "walking the tight rope" fine, despite what your idol/teen-crush Dick Morris says (of course that little weasel is going to say Obama's messing up no matter what he does). Obama's been saying all along that circumstances require bold action, but that not all is doom and gloom since if we work hard we can make it out of the crisis. But not if we sit by and let everything collapse. Anyhow, the president's rhetoric is just icing on the cake; the cake is the policy and tools used to address the crisis, which is why I hope we'll be taking banks into receivership soon.

mike volpe said...

Yeah, going from using the word "crisis" more than 20 times in one speech, to saying things aren't that bad in about six week, is not walking the tightrope fine. This is a naked reversal and he's done it in about seven weeks.