Obama Home Alone

Barack Obama is losing one of his most important economic advisors – again. And at exactly the moment when the U.S. president must change his economic policy and so urgently needs advisors.

Beyond the American borders, how unpopular Barack Obama has become at home is still underestimated. Almost half of all Americans think he is doing a poor job. It is not unusual for voters to be disappointed in their president by the middle of his time in office; what is unusual is the magnitude of the disappointment.

That has to do, above all, with the economy. Obama has in fact stopped the free fall into depression, but voters do not give him credit for it. Instead, they hold him responsible for the damage the financial crisis has left behind.

Against this backdrop, the resignation of Larry Summers, the president’s most important economic advisor, marks a turning point. It is an outcome of the crisis, but it also gives Obama a chance for a new beginning. Summers is the third person from Obama’s economic team to leave the White House within a short time. The first was budget director Peter Orzag, followed by advisor Christina Romer. That Treasury Secretary Timothy Geithner might also now leave appears unlikely, but not impossible.

For Summers’ resignation there is a simple explanation: the economist had hoped to become Ben Bernanke’s successor as head of the Federal Reserve. When Obama did not give him the job, it drew him back home to Harvard. His reinstatement guarantee there runs out in January; he had to act now.

This explanation does not exclude the deeper realization that Summers embodies the contradictions of Obama’s economic policy up to this point like no other, and in this respect had become an encumbrance. Summers is a brilliant economist but a poor manager. He has a great talent for making enemies.

As president of Harvard, he had to resign after declaring that women were less suited than men for academic careers. As Treasury Secretary under Bill Clinton, he prevented the regulation of trade in new, highly speculative financial products. In this sense, he bears part of the responsibility for the financial crisis. The combination of arrogance and proximity to Wall Street is the exact opposite of what a president needs when his party has a difficult election to survive in November.

The actual problem with Obama’s economic team is that it was – in the literal sense – a crisis team. It was extremely successful at curtailing an epochal crisis quickly. The difficulties began after the worst was over and it was time to convert the hopes candidate Obama had awakened into practical politics.

However, the charismatic Obama lost the connection with his voters. The ever-acrimonious opposition mobilized the other side, while his fans backed down, disappointed. Much of what the President tackled, including health care reform, was good in principle but insufficient in implementation. For too long, no one knew what the president stood for, and it remains unclear today whether the law can really contain the costs of the health care system. Unequivocal successes were communicated poorly. General Motors, sent into controlled bankruptcy by Obama, is again chalking up profits, and his reform of financial markets has become a model for the rest of the world. Both change nothing about the anti-Obama sentiment in the country.

It is not getting easier for Obama

The fate of the presidency now depends on whether Obama can change his economic policy – less in substance, therefore even more so in style. The Americans are right to be anxious and angry. Unlike here in Germany, the crisis led to a dramatic climb in unemployment.

That’s not Obama’s fault; rather, it has to do with structural problems like the plight of the educational system. But independent of the question of blame, Americans demand from their president that he understand their urgency, that he show empathy and make the question of jobs the most important priority. Above all, he has to make it clear to the public that the trillion dollar budget deficit was a consequence of the crisis and therefore unavoidable, and that he is now willing and able to mitigate the dangerous debt problem quickly.

The economic situation is not going to get easier for Obama. All data suggest that the U.S. has a decade of continuing low economic growth ahead. A national economy accustomed to excessive private and public debt cannot return to normality overnight.

There is a great deal at stake: everyone who applies himself or herself has a chance of advancement – that is the essence of the American Dream. Americans have every reason to hold on to this dream today, but they have to be ready for uncomfortable reforms: save energy, trim the budget, raise taxes. Obama’s previous economic team understood this, but was not able to make itself understood. Now the president needs advisors and salespeople.