Know Your Audience

Back in 2009, I finished my MBA work with a Strategic Management course, which ended the year with a Case Competition. The target company was PetSmart, and my team came up with some great recommendations, creative and effective ways to create competitive advantage and grow the company at little cost. My report earned 99% from the professor, and his critiques of our presentation rehearsals praised us and gave us high hopes to win. But when the actual competition happened, a couple members of my team froze and we failed to place in the top three slots. Besides some presentation anxiety by my team, we made the mistake of not carefully considering our audience. We had prepared for our professor and designed our presentation as if we were actually going before the board at PetSmart with our recommendations. What we had not considered was that some of the judges were students from prior years who had won the competition. These judges, to our surprise, did not stick to the criteria outlined in the competition profile, and none of the judges were previously briefed on PetSmart’s corporate strategy and goals published in their 2008 annual report. In the lunch following the competition, I discovered that the judges did not even realize that some of the recommendations from winning teams contradicted PetSmart’s actual stated objectives and priorities. Many of the judges made decisions based in large part on style rather than substance, and this cost us in the competition. The lesson I took from that experience reminded me that many decisions are based on emotion rather than reason, and anyone hoping to sell their position effectively must consider their audience and prepare their argument for the people they have the best chance to persuade. The current crisis with the debt ceiling, therefore, will have short-term and long-term winners and losers, in significant part due to how well each side understands its audience.

The decision basically comes down to four groups; unrealistic liberals who imagine they can continue to spend without consequences (a minority of the democrats but visceral in emotion and support), Tea Partiers who refuse to accept any increase in the debt limit or increase in government ‘revenues’ for any reason, democrats who want more tax increases than spending cuts, and republicans who demand spending cuts must be significantly greater than any increase in money the government collects. The people outside those four groups are neither large nor organized enough to play much role in the debate or decision. The decision therefore comes down to the following questions:

1. Is it necessary to raise the debt ceiling?
2. Is it realistic to address the debt with just spending cuts?
3. What solution do voters want?
4. What will the voters absolutely not accept?
5. What spending cuts are acceptable?
6. What ‘revenue’ increases will voters accept?

First, the ceiling. As much as I hate to say it, the debt ceiling in this case does need to be raised. The problem is that the Congress waited so long to address the problem that we don’t have the time or slack to figure out a solution before we blow through that limit. Refusing to raise the debt ceiling at this time is in the same class of decision as slamming on the brakes when the car starts to skid, a panic response which generally leads to bigger problems.

Next, the cut-only approach. In theory, we should be able to fix the problem by just cutting back on spending. The problem is that we have three classes of spending that can’t easily be reduced; essential needs, entitlements, and the interest on our existing debt. Cutting the first would be suicidal, cutting the second will be hard to get passed into law, and the third is simply not possible. We also have to face the fact that republicans control only the House of Representatives, while the democrats control the Senate and White House. Anything passed into law will have to get support from democrats, enough to compel the President to sign it. That does not mean we just accept whatever the democrats demand, but it does mean we have to accept the reality of our limits as well as our power.

Third and fourth are the questions of what voters want and won’t accept. As much as we like to imagine that America is full of people who think the same way we do, in truth that’s just not so. There are regional, cultural, and social considerations which have to be considered, including the way Congress’ actions will be received by the public. Obama is lying when he claims most of America wants tax hikes, but it is true that most voters believe that some kind of tax increase will be necessary, and many believe those increases can be implemented by making some other group of people pay the increase; on the Left there is the broad belief that a lot of “rich” people are not paying enough, while on the Right there is a broad belief that some people who don’t have to pay income tax should be forced to do so now. There has been no specific poll taken which shows popular support for a tax increase that would affect the specific people polled.

Just about everyone not named ‘Obama’ understands that the main problem is spending, and that serious cuts need to be made. When two and a half trillion dollars a year is not enough to pay for what you are buying, you have a problem no matter who you are. The trick is to figure out what gets cut. Democrats demand defense cuts, and to be sure there may be programs to reduce or abolish there, but that’s hardly the first place to cut. Republicans want Obamacare repealed, which would certainly reduce a lot of costs, but would be impossible to get through the Senate or signed by President Obama. Ultimately, this is the main hurdle for negotiations; everyone knows cuts need to be made, but no one can agree on specifics. What will probably happen in the end, is a general reduction in department budgets, and everyone will have to make do with less. It’s not the wisest course, but given the time constraint, it may be the only one which can go into effect in time.

The next point brings us back to revenue. President Obama does not like to be clear about raising taxes, but let’s be very blunt – if you bring more money into government, you have to do it by raising taxes. Someone is paying more, no matter what you call the action. And since taxation is inherently parasitic in nature, any increase in taxes – no matter who pays – will damage the economy at a time when this would have serious repercussions. Voters have figured this out, which is one reason the 2010 election turned out as it did, and this recognition is why Senate Majority Leader Reid backed off tax hikes in his own plan presented this week. While we must be careful to watch what happens in the next several months, as the temptation to slip in taxes, fees and rate increases will be very strong, for the moment it appears that Congress at least understands that cuts must be the primary focus, and the secondary focus as well.

Let’s look at that debt, for an understanding of the situation. The debt, as of March 31, stood at $14.825 trillion, an obscenely large number no matter how it’s presented.

$3.7 trillion was held in General government long-term notes, with another $3.6 trillion in ‘Other sector’ long-term bonds and notes. This is actually good news, as it means just about half the debt is held in bonds and notes that will come due over a long period of time, with only about $365 billion coming due each year in principal.

Another $1.7 trillion dollars was held in currency and deposits in banks, with another $583 billion in currency and deposits in other sectors and monetary authorities. That’s money being used in circulation, and while it’s a good idea to reduce that amount a bit once the economy gets going again, for now we can take the news that this money is not ‘coming due’ in the sense that we normally apply to debt.

Money Market instruments account for another $884 billion, which means some liability, but like long-term bonds the payments due are not generally immediate. Even ‘short term’ debts won’t all come due in August. Another $2.5 trillion is held in loans, which also are repaid over time. All in all, the debt situation is difficult but manageable, provided the government simply gets spending under control.

Here’s a more detailed look at where the money has gone. In simple terms, the Federal Reserve is telling us that our debt is held by a lot of creditors, some overseas, but for the most part the money we owe is to ourselves. That does not mean it does not have to be paid, and paid on time, of course. We have obligations to fund essential services, and the whole concept of bonds and loans depends on confidence that the loans will be paid according to the contracted terms. And the weight of the debt total is simply too big, and cannot be sustained indefinitely. And as wiser observers have noted, if the U.S. gets into trouble, there is simply no one available to bail us out. The Congress has to find a practical solution, and set things in motion in the next five days.

Which brings us back to the audience. Whatever is finally done to address the debt problem, the public will make their opinion known rather quickly, and it is therefore essential for republicans and democrats, both, to understand the perspective of people to whom they are listening, and with whom they should be talking. Listening to radio and reading blogs, I have observed that the avowed Tea Party members have promised fierce primary opposition to “anyone” who supports the Boehner plan, simply because even if it passes it would not be a complete and total victory. Leaving aside the obvious fact that anything that would completely please the Tea Party Clique would have absolutely no chance of passing the democrat-controlled Senate, or getting the signature of President Obama, I would also note that Allen West and Paul Ryan support the Boehner plan. Not because it is perfect, but because it is the best plan available with a realistic chance of passing through the Congress. To put it plainly, anyone calling themselves conservative who would attack Allen West and Paul Ryan, is representative neither of conservative values or intellectual maturity, and should not be taken seriously by the people making important decisions. Similarly, the people still obsessed with class warfare and tax hikes to fix the government’s spending crisis should be ignored by anyone trying to find viable solutions or read the public will. What most people want and demand is simply a reasonable approach to the problem and a serious attempt to cut down on spending. Scare tactics have no place in the debate, nor do ultimatums by politicians or special interest groups. Three hundred million Americans are going to be affected by the decision and resolve of the Congress, so it’s high time the Congress address the broad majority who are simply demanding Congress and the President stop making threats and speeches, and put together a solution, starting by voting on the plans already available.

Why He Will, Why he Won’t

President Obama has made it quite clear that he has one goal, and only one goal, on his mind: Getting re-elected. It seems therefore appropriate to give a look at his chances, and his problems.

First, a look back at 2008. Barack Obama and Joe Biden teamed up to beat John McCain and Sarah Palin, 365 electoral votes to 173 and 66.86 million votes to 58.32 million. In other words, Obama claimed 95 electoral votes more than he needed to win, and enjoyed a popular margin of eight and a half million votes. Reasons for the win depend on who you ask, but common responses point out the novelty of Obama’s run as a black candidate, McCain’s lack of charisma and eloquence, the declining public image of the Bush Administration, worry over the economy, and conservatives abandoning the GOP. It produced a perfect storm for Obama, which raises the obvious question about whether he can work such magic again.

First, the factors which work for Obama. There has been some discussion about a possible fight for Obama to claim the Democrats’ nomination in 2012 if he gets into public trouble, but it’s not very likely to work out that way. The media, for example, has been very much a pal to President Obama; his ‘honeymoon’ has lasted throughout his first term with every indication that the major networks and press will continue to act as lackeys for him for the foreseeable future. To change support for a different candidate would require these networks to abandon Obama while he remains in office, an unlikely prospect. Further, there is the historical record. No president running for re-election has failed to claim his party nomination since LBJ in 1968 (and no incumbent party has nominated a candidate who was neither the sitting president nor vice-president since 1952). It’s reasonable to say on just these two points alone, that if Barack Obama is not nominated by the Democrats in 2012, then the winner of the 2012 Presidential Election will be the Republican.

The next point to consider is Obama’s Job Approval. Obama’s present approval according to Gallup has dropped to 42 percent, just one point above his worst ever from April this year and October 2010. The thing is, the worst Obama has received is 41 percent approval. Compare that to Bill Clinton, whose approval support in the first seven months of 1995 ranged from 42 percent to 51 percent. Pretty similar, it seems. In any case, the numbers show that despite his abysmal job performance, Obama continues to enjoy enough support that he is very well-positioned to win another term.

The third factor to consider in Obama’s favor is the Republican field. Obama won in 2008 with unintentional help from the Republicans, who spent the bulk of the campaign feuding with each other, which led to a nomination which pleased few and angered many on the Right. One might think the bitter lesson would have been learned, but so far the field for the coming election is behaving much like the 2008 field did, with serious reason to fear a similar outcome.

Put these three factors together, and you have a problem for Republicans, and given how he has performed, for the nation. Fortunately, there are also a number of strong reasons why Barack Obama will have a hard time winning re-election.

First and foremost is Obama’s record. Since 1916, seven of the last ten presidents to seek re-election won their contest, but the three who lost (Hoover in 1932, Carter in 1980, and GHW Bush in 1992) all lost because of the economy. In a word, Jobs. If unemployment is high, the incumbent is in trouble. And that problem is especially bad for Mr. Obama, whose policies have pretty much done nothing but make things worse for the economy. Obama inherited an unemployment rate of 7.8% but has averaged 9.4% since taking office; the rate has not been below nine percent since May of 2009. Despite his attempts to blame Bush for the problem, Obama owns this record. What’s worse for Obama, his pet programs target employment at most public corporations, so Obama can effectively reduce unemployment only by abandoning his signature policies.

The second problem for Obama is the polling. Frank Newport of Gallup observed Presidents who have a 48 percent or better approval tend to win re-election, while those below do not. In that context, his present 42-43 percent approval levels are a warning to Obama that he is in trouble. Worse for Obama, he’s been able to get bumps only for short periods of time no matter what he says or does; not very much like Clinton after all, perhaps. Especially since Bill Clinton understood that his political survival depended on the economy improving, something Obama shows no sign of grasping. While it’s certainly believable that Obama could find a way to bring his approval up a few points to reach that tipping point, the clear momentum is working against him, and if he drops below 40 percent as he seems to be headed now, then time will become an implacable enemy.

The third problem for Obama is, well, Obama. He ran on a lot of promises in 2008, casting himself essentially as a non-partisan visionary and peacemaker. It’s more than plain by now that the real Barack Obama is a thin-skinned paranoid narcissist with delusions of competency; he wavers between indecision and bad judgment, all the while complaining that he doesn’t get enough credit and admiration. On the one hand, it may be observed that Obama has fired up conservatives to get back into the national debate again, although some may argue that Obama should not waste time thinking about people he cannot win over anyway; but on the other, Obama has also outraged many on the Left with his broken promises regarding Guantanamo, Iraq, and other liberal demands. While as President of the United States Barack Obama holds tremendous power and influence, his habit of making enemies so readily means that if pressed into desperation, he has few allies who will come to his aid unless they gain from the action themselves; no one supports a tyrant out of agreement with his character.

Obama’s next problem is the Tea Party. Political movements spring up all the time, but officials would do well to note those which genuinely start at the grassroots, and which focus on only one or a few key issues, because those don’t go away without making changes in the landscape … and in politicians who refuse to notice the change in reality. The Tea Party was a significant force in the 2010 midterm elections, and ignoring them is just plain foolish. Dismissing the Tea Party’s significance can be a bad idea, in battleground states where concerns about federal spending and accountability influence not only votes but the debates of the election. This does not mean that Obama will lose because the Tea Party does not like him, but his ignorance of the movement’s identity and influence could damage his campaign in several states.

The next problem, and the big one, is the Republican nominee. Obama had an easy time beating John McCain in 2008, but it’s very unlikely the GOP will nominate someone that weak this time. In 2008 conservatives were disillusioned and bitter, producing no significant candidates and contributing little to the campaign. The main body of republican voters this time is more conservative and active, and they are also better-focused. Guys who talk but can’t deliver (like Thompson), or ‘centrist’ republicans eager to give in to democrats in order to ‘get along’ (like McCain) will find the going harder than last time. This does not give the inside track to image-first candidates with weak resumes (Bachman or Palin), but builds a stage for experienced leaders who understand what will really work. While this will mean the republican nominee won’t emerge for a while yet, when he does it will be someone the voters can identify by values and commitment, and he will be a sharp contrast with President Superficial.

How it shakes out, is in the math. There’s no doubt that Obama has lost a lot of support, and in all likelihood will be less compelling in 2012 than he was in 2008. But having 95 more electoral votes than he needed in 2008 means that even a weakened Obama could still win. The question is just how many of the states will swing away from Obama to the republican. In 2008, Obama won DC and 29 states, but if his support falls by just three points he loses five states, and if he drops by five points he loses eleven states.You may choose to disagree, but unless the republicans thoroughly destroy their chances, they’re looking at their best opportunity to rout the democrats in a presidential election by the largest margin since Reagan’s win in 1984.

Thin Skin, Thick Head

My wife thinks President Obama is working for Al-Qaida. I kid you not. She brought up this contention while we were watching the news Saturday night. To Mikki, the combined effect of President Obama’s policies, being clearly anti-business (on any business level) anti-entrepreneur, and anti-consumer mean that he is working to destroy the infrastructure of the United States. Bear in mind that my wife is from Hong Kong, and tends to see things from a different perspective than most people. The thing is, Mikki is no Republican, in fact she does not vote much except when she really likes someone, like Mayor Bill White of Houston, or is furious with someone, like Barack Obama. And Obama has really set her off. So far as she is concerned, Obama is directly responsible for just about every problem in America right now, if for no reason beyond the fact that as President, Obama should be setting the example and building optimism and confidence. I do not agree that Obama is trying to undermine America, though. I think the man just has the interests of the United States of America far lower on his list of priorities than his own personal agenda.

The reason I mention that point of view, is that I am hearing it more and more, and from black Americans as often as from white Americans. Obama seems to have exhausted his mojo, and the canned promises sound, well, like canned promises that aren’t worth spit. This happens a lot with politicians, though, so the real question is the way an individual politicossack handles the turbulence. Some, like Harry Truman, tough out the flack, explain their reasoning and push ahead. Some, like Jimmy Carter, go into hiding and let things fall apart. Some, like Bill Clinton, recognize the battles they can’t win, cut their losses and regroup for the next proposal. And some, Like FDR, pull back from a sure loss, embrace the other side’s solution, and build credibility and support from that action in advancing his broader agenda. I mentioned Democrats who were President, because it reminds us that Barack Obama is in no way the first or last President who has had to face an angry public for a misstep, either in the way he delivers his decisions or who just plain gets the call wrong. But in every successful President’s administration, the solution begins with recognizing what is wrong, and why. Barack Obama has been stubborn in holding on to the pretense that his plans are perfect from the go, and if he pushes hard enough he will inevitably win. Given his record in getting to the White House, but the guy is no student of history.

Admitting you are wrong is hard for many people, and flat out impossible for some folks. I personally know some very fine people who have been completely wrong, yet won’t admit their error in the least, much less make necessary changes. It’s not about intellect, but ego. Certainly we’ve seen many debates in politics where the truth came out in an obvious way, but the party in the wrong refused to budge from its position, no matter the cost. This obstinacity is relatively harmless and can even be amusing at the low level debates we see on the blogs, but it’s a bit more serious when the President of the United States, in effect, puts his fingers in his ears and yells “I can’t hear you! I can’t hear you!”. Not smart, just plain dumb.

The problem comes down to sensitivity. Barack Obama is about as tetchy a POTUS as we’ve had since Richard ”They’re all out to get me” Nixon. Any criticism of the man’s policies and politics is immediately tagged as “racism”, which would just be a crude spin tactic if it were not so obvious that our Narcissist-in-Chief buys into that conspiracy theory himself. Or that President Orwell engages in so much NewSpeak, like telling us that taxing people if they don’t have health insurance would not really be a tax, and certainly not a tax on the poor, even though the people who do not have insurance now and who would be most likely not to have insurance in the future, are the poor. Like telling us that he has personally “created or saved” millions of jobs, in spite of a national unemployment average rising above 10 percent at times, with some urban minorities seeing local unemployment above thirty percent. Like telling us that there is no risk in “investigating” CIA agents through political committees on the assumption that the ‘civil rights’ of foreign terrorists may have been violated by men doing their jobs. The man imagines himself spotless, but that’s only because his moral vision is so poor.

That’s not to demean President Obama. Every President makes mistakes and has areas of weakness. Most of them are aware of their deficiencies and work to improve them and to avoid the worst mistakes. Almost all have to face situations which result from such mistakes. Sooner or later, President Obama is going to have to face the consequences of his mistakes and errors. The delay only means the consequences may be much more serous than he imagines.