Robert McNamara died this week, but his life holds lessons for Barack Obamaâ€™s presidency. Arguably the leading light of JFKâ€™s stable of the best and the brightest, McNamaraâ€™s work as an architect and prime executor of LBJâ€™s Vietnam debacle is well remembered by tens of millions of boomers who came of age during Vietnam, as well as the President. The caution for Mr. Obama and his advisors lies in the conundrum of how McNamaraâ€™s brilliance expedited the implosion of the most progressive presidency since FDR â€” and how the spectacular failure of the Vietnam policy and the deep domestic divisions it produced helped deliver a generation-long majority to Republican conservatives.
Mr. Obama came to his presidency at a moment of the greatest opportunity to reshape the nation since, well, LBJ and FDR. Fittingly, his agenda â€” economic revival, universal health care access, abating climate change, and restoring effective American power and influence in the world â€” is the most sweeping since LBJ and FDR. The core challenge he and his advisors face, however, involves their character more than their intellects, because the potential for greatness imminent in such moments can distort the decisions of the most brilliant leaders and advisors. The prospect of grabbing historyâ€™s golden ring seems to breed a powerful disposition for best-case scenarios, which brought down McNamara and LBJ and now could threaten their successors.
Vice President Biden confessed to it this weekend, acknowledging the now risibly-obvious optimism of the administrationâ€™s economic forecast. They are smart enough to recognize that after a year of real-life, worst-case scenarios which ultimately brought on the first systemic, cascading economic meltdown in three generations, it would be foolhardy to base the Presidentâ€™s program on a supposition of a quick, sharp recovery. It may be merely human to want to believe in such a miracle, because it might make everything else possible. And without that particular miracle, there will be little money for health care reform, at least without risking the nationâ€™s credit-worthiness, and little public willingness to accept the costs of a genuine climate change program. Most important, without the real prospect of peopleâ€™s incomes growing again, the American people could withhold the political support the President will need, again and again, to successfully deal with untold foreign crises and new domestic problems.
The issue here is not pragmatism, but realism. Hereâ€™s a dose to consider. The yet-unreported chatter among New York financial people is that commercial real estate loans with their securities and derivatives could be on the edge of the kind of crash we suffered last year from home mortgage-backed securities and derivatives. To make matters more dismal, the volume of commercial real estate securities and derivatives dwarfs last yearâ€™s home mortgage market. Moreover, commercial real estate lending and securitization are the business of not only Wall Street, but thousands of regional and local banks. So, if that market goes south, the economic carnage will begin on Main Street. The New York analysts who talk among themselves about thousands of banks going under in the next year may be suffering from their own kind of post traumatic stress. But if theyâ€™re right and the President and his brilliant advisors havenâ€™t planned for it, the blame for the resulting national pain will fall on them; and the most progressive presidency since LBJ could be left in the sort of ruins that can drive a political party and its agenda from power for a long time.
Even if commercial real estate doesnâ€™t melt down â€” and sovereign debt defaults donâ€™t start springing up in Asia and Europe â€” a rosy forecast isnâ€™t the only economic trap waiting for the president and his indisputably brainy advisors. During the last expansion, job creation fell by half even as GDP generally grew at healthy rates, and the strongest productivity gains since the 1960s didnâ€™t stop average real wages from falling. President Bush and his less than brilliant economic advisors certainly mismanaged the run-up and onset of last yearâ€™s crisis, but we cannot pin these new structural problems on their mistakes.
Yet, the administration agenda seems to depend on some faith that decent growth and productivity gains in the near future â€” which both remain problematic â€” will drive healthy job creation and income gains again as they did in the 1990s. Itâ€™s time to put aside that best-case scenario, too, and focus on reforms that might make a difference for these dynamics. The President could get behind a proposal he supported as a senator, to make free computer and Internet training available to all American adults through community colleges. He also could redirect the early stages of his energy and health care programs to restraining those costs for businesses. For the last decade, the intense competitive pressures of globalization have prevented businesses from passing along those higher costs in higher prices â€” secret of our long, low inflation â€” forcing them to cut jobs and wages.
If the President and his advisors can live with less than best-case scenarios, they can still achieve their agenda over time, as the economy and peopleâ€™s incomes come back. In that way, they can escape the trap that snared LBJ and Robert McNamara.