Is Obama trying to accomplish too much?
If there were normal times, then you'd have to answer yes. However, these are not normal times: the nation and the world are grappling with a financial crisis and a severe recession. And all of the problems the Obama team is tackling are interrelated. The plan to cut the budget deficit and get the U.S. economy on a sustainable growth track requires progress on the issues his administration is working on simultaneously: health care reform, energy policy, and education enhancement, along with ending the financial crisis.
In other words, if the Obama administration does not succeed in creating a more efficient, universal health care system, it will be virtually impossible to cut the U.S. budget deficit in half at and after 2012. Medicare costs alone will continue to propel red ink for as far as the eye can see, due to the retiring Baby Boom generation.
Likewise with energy policy and education enhancement. It's hard to envision a U.S. economy growing adequately if it continues to transfer $300-$600 billion in wealth to foreign oil producers and allocate unreasonable amounts of national income, due to a lack of a sensible, self-sufficient energy policy and increased vehicle fuel efficiency. The Obama administration's support for renewable energy (wind, solar) and to create a smart electric grid also have the potential to add hundreds of thousands of new, good paying, domestic jobs.
Finally, increased support for both secondary and higher education will increase the workforce's value-added skills, increase incomes, better prepare the workforce for the industries and jobs of tomorrow, and help make up for a math and science skills deficit. All of the aforementioned will also set the stage for the new, transformative technologies and business processes that will surely increase productivity and wealth as the century progresses.
White House communication performance must improve
What accounts for the notion that the Obama administration is taking on too much economically, then? So far, the administration has done a sub-par job communicating the administration's budget priorities. The administration needs to succinctly state how health care reform, improvements in education and energy efficiency, both cuts the budget deficit in half by 2012 and helps get the nation on the sustainable growth path. They need to use short messages to convey their philosophically stronger and operationally superior public policies. One example: 'Lower-cost health care will help crush the budget deficit.' And: 'Education funding leads to good-paying jobs and prosperity.'
Fiscal Policy Analysis: With health care reform savings and investments in energy and education that will lead to real growth and real prosperity, the budget deficit will trend toward $600 billion by 2012, then drop even more. Absent health cost containment, the deficit remains above $800 billion, according to Congressional Budget Office research (pdf). Further, the education and energy policy improvements speak for themselves: they are investments that lead to better jobs, higher profits, and larger GDP growth.
Hence, while toxic asset removal and fixing the banking system is priority No. 1, the Obama administration is correct to simultaneously pursue its innovative federal budget: that budget will help correct problems caused by eight years of public policy mistakes that are in large part responsible for bulk of the nation's economic problems.
Financial Editor Joseph Lazzaro is writing a book on the U.S. Presidency and the U.S. economy.