Defining Ideas

Barack Obama's Failed Presidency

Tuesday, July 5, 2016
Image credit: 
Alex Wong, Getty Images News

The week after the Fourth of July is a good time to take stock of the presidency of Barack Obama. It is highly unlikely that he will change course in his six remaining months in office, so he will be judged by history on his current record. That record reveals an enormous gap between his grandiose promises and his pitiful performance over the past eight years.

Ironically, one of Obama’s finest moments came before he was elected President. When he secured his nomination in June 2008, a younger Obama waxed eloquent about his future role as a world historical figure:

I am absolutely certain that generations from now, we will be able to look back and tell our children that this was the moment when we began to provide care for the sick and good jobs to the jobless; this was the moment when the rise of the oceans began to slow and our planet began to heal; this was the moment when we ended a war and secured our nation and restored our image as the last, best hope on Earth.

Obama constantly used the word “we” in that speech, but all too often that first person plural sounded more like the first person singular, as if his nomination heralded a sharp demarcation between the past and future. He spoke as if no one had ever addressed these issues before he “began” a transformation that was “absolutely certain” to reach full flower in his future administration. Obama here is a visionary captured by the nobility of his ends. But vision and skills are not always doled out in equal measure, and his lack of the latter made him unfit to choose the proper means for meeting the challenges he set out for himself.

It is sobering to examine how and why his presidential performance stacks up so poorly against his ideals. An important question for any president is what issues fall in the domain of government action, and which should be left to the private sector. Any sensible answer starts with two presumptions that are antithetical to Obama’s progressive frame of mind. First, the government should seek to avoid interfering in economic affairs to allow the forces of competition and innovation to increase the size of the social pie from which everyone can benefit. Second, the government should focus its exercise of national power on defending the nation and its allies from aggression. Obama inverts these key relationships—a fundamental mistake. He is all too willing to use coercion in domestic economic affairs against disfavored groups, and all too reluctant to use it against sworn enemies of the United States and its allies.

A mistake of this magnitude cannot be corrected by marginal adjustments in office. The sad truth is that the United States today is weaker economically, more divided socially, and more disrespected across the globe than it was before Obama took office. With few exceptions, he made the wrong choices in all the areas in which he declared the dawn of a new era. Consider:

Just how has Obama provided care for the sick? On this, as in so many other economic and social issues, he faced this critical choice: Either he could seek to remove barriers to entry in markets, or he could impose a regime of regulation, taxation, and exclusion. The former increases growth and reduces administrative and regulatory overhang. The latter blocks potential gains from trade while increasing administrative and compliance costs.

His vaunted health-care exchanges violated every sound principle of economic theory. The benefit packages that were mandated were far more exhaustive than those supplied under any private plan. The more exacting standards for existing private plans forced many of them to close down or curtail their operations. The insistence that administrative expenses be capped at a predetermined fraction of total expenditures micromanaged businesses by outsiders who were totally ignorant of the trade-offs among various firm functions. Large numbers of insured people were forced out of sensible private plans into a restricted diet of public plans, typically heavily subsidized. The standard insurance problem of adverse selection was overlooked, as the president and his supporters acted as if young and healthy people were anxious to stay in health-care plans that forced them to provide extensive subsidies to older recipients. Instead, these healthy people simply delayed joining any plan until they had an immediate need of expensive medical services. Longer waiting periods for coverage of pre-existing conditions or required minimum periods of membership were brushed aside in a fit of ideological purity. The exchanges have had a rocky reception at best, and they have an uncertain future.

The situation is no better when we talk about “good jobs” for the “jobless.” The president’s policies have wreaked havoc on labor markets. A correct analysis starts with the simple insight that any regulation or tax on employers necessarily limits what employees can receive. In competitive labor markets, therefore, the government should enforce contracts as written, rather than rewrite them from above. Our unfortunate New Deal legacy contains many laws disrupting labor markets that no president can repeal at will. But the president can use his enormous administrative discretion to ease their burden.

Not this president. Just recently, the Department of Labor announced new overtime regulations under the 1938 Fair Labor Standards Act that now cover workers who earn less than $47,476 annually, double the previous figure of $23,660. The FLSA was an unwarranted interference at the time of passage, but the distortions it creates are greater in today’s fluid economy. At a minimum, the new regulations impose heavy compliance costs on both private and public employers, forcing them to rethink virtually every job classification. It makes the “hour” the official unit of compensation even where it is entirely inappropriate in practice. Here are three examples. First, tech start-ups provide much compensation in stock and stock options, whose accounting value for regulatory purposes the FLSA caps at 10 percent of wages, forcing cash-poor firms to redo their entire business plans. Second, university graduate students and post-docs work long hours to secure an education and job. Yet no one knows where to find the extra cash once they become hourly workers subject to overtime protection. Finally, the entire “gig” economy works on a piecemeal basis because neither Uber nor Task Rabbit can monitor workers’ hours at a distance.

Elsewhere, the Obama administration has sought to prop up union membership by ordering quickie elections, limiting employer speech, and treating franchisors like McDonald’s as though they were the employers of their franchisees. These clumsy forms of labor market intervention have led his administration to take protectionist positions on free trade in order to safeguard faltering labor monopolies. President Obama has given some support to the Transpacific Partnership, but often under a mercantilist  “fair trade” banner. It is all self-defeating. To be sure, unemployment rates have gone down, but so too have labor market participation and median family income.

The president’s policies also falter when it comes to the hugely complex issues of global warming and the environment. Most people think, all else being equal, that an increase in carbon dioxide will increase overall global temperatures. But how? Are the relatively flat temperature readings of the past 15 years a blip or a trend?  Even though the president puts global warming at the top of his agenda, he ignores these questions, only to preside over an Environmental Protection Agency that refuses to rework its permitting rules to allow low-carbon emission plants to displace the antiquated coal facilities still in operation. Obama also champions massive overregulation under the Clean Water Act and the Clean Air Act. And his international protocols could easily create domestic dislocation without securing any tangible environmental benefits.

Foreign affairs, for their part, have been an unmitigated disaster. Everywhere one looks—Russia, China, the Middle East—the situation is more dangerous than it was before President Obama took office. That is the inescapable consequence of a presidential reluctance to trust military affairs to generals, and to rule out of bounds, virtually categorically, the use of American ground troops to stem the violence in the Middle East. The relative stability that George W. Bush bequeathed to Obama in 2009 has been shattered in Afghanistan, Iraq, and Syria, and by the rising power of Iran. ISIS commits atrocities nearly daily, most recently in Baghdad and Bangladesh. And the turmoil has created a migration crisis in Europe and throughout the Middle East. Red lines in Syria count for nothing, and ISIS has set up multiple permanent bases throughout the Middle East, which serve as springboards for terrorist activities that have reached the United States, most recently in Orlando. The breakdown has only heightened global intrigue, transient alliances and political instability. Yet Obama’s only firm commitments are to cut down our military capability and not to use ground forces in the Middle East, leaving a huge power void that the Russians are all too eager to fill. Pax Americana is indeed dead.

Nor has Obama done better on an issue close to his heart: race relations. Instead of firm moral leadership, the president has raised tensions. He announced, for example, that “if I had a son, he’d look like Trayvon.” And even after his Department of Justice exonerated Darren Wilson in the killing of Michael Brown, it buried that story behind a searing denunciation of Ferguson, Missouri for the alleged racism of its ticketing practices. The “Ferguson effect” has made policing ever more difficult in African-American communities. No wonder crime rates are rising across the country, even in cities like Chicago that have strict, but largely ineffective, gun control laws, which the president relentlessly champions without any explanation of how they are likely to do any good.

Behind all of these social ills lies a president who lacks the skills of a leader. Sadly, his frayed political legacy has left us with a choice between two undesirable candidates, Hillary Clinton and Donald Trump, neither of whom has the capacity and temperament to correct the many ills that President Obama has created at home and abroad over the past eight years.