Another View: Itís Time for Obama 2.0
Originally Posted in the New York Times DealBook on October 8, 2010.
In boardroom discussions and individual talks with numerous chief executives in recent days, I have heard repeatedly just how wide the gulf of distrust is between leading business executives and the Obama administration. Chief executives lack clarity about where the White House’s policies are headed and are deeply concerned they will have a long-term negative impact on the private sector. In addition, they feel their concerns are not being heard.
As a result, they are holding back on further investments in this country, preferring to shift resources to faster-growing emerging markets.
These are not just talking points of the business community looking for short-term profits. And this is not about wealthy people fighting higher taxes. The debate taking place is about policy. As a board member and an educator, I am seeing how the Obama administration’s approach to business is impacting day-to-day decisions in both big and small companies across the nation.
It’s time for a sharp change in direction. Rahm Emanuel’s decision to step down asPresident Obama’s chief of staff and run for mayor of Chicago marks the end of Obama 1.0. Joining Mr. Emanuel on the train out are Mr. Obama’s chief economic adviser,Lawrence H. Summers, and his political adviser, David Axelrod. His budget director, Peter R. Orszag, and his economic forecaster, Christina D. Romer, have already departed.
In Obama 1.0, the president stabilized the economy with government spending that minimized job losses and personal bankruptcies. But the economy has stagnated as these policies have been ineffective in stimulating private sector growth, jobs and innovation. Relying on monetary policies and deficits to drive consumer spending is not working, because the economy is experiencing fundamental structural changes that are impervious to these macroeconomic approaches. That’s why there are 26 million people — 16.5 percent of the workforce — who would like to be working full time but are not.
Now is the time to introduce Obama 2.0 by initiating pro-growth economic policies that will invigorate job growth. This means investing in America to unlock the $2 trillion currently in corporate coffers and to stimulate private-sector hiring. Mr. Obama also needs to make fundamental changes in relationships with the business community, overcoming the distrust that has developed on both sides.
The president’s Labor Day proposals were encouraging. He offered a 100 percent deduction for capital investment until the end of 2011, an increase in research and development tax credits that would make them permanent, and an additional $50 billion in infrastructure spending. All three initiatives suggest Mr. Obama is finally moving away from trying to cure the economy’s ills with deficit-fueled government spending and beginning to enact policies that foster private-sector investment and job creation.
It is none too soon. A new economic direction will give the Obama presidency a much-needed shot in the arm at a time when the Democrats are in danger of losing a significant number of seats in Congress and quite possibly control of the House of Representatives.
The situation is similar to President Bill Clinton’s problem after the 1994 elections swept Republicans into House leadership. Mr. Clinton brought in a Republican presidential adviser, David Gergen, to help reshape his presidency, and relied on Treasury SecretaryRobert E. Rubin to guide the economy to its strongest growth period since World War II. Mr. Clinton’s policies shifted to the center and won the confidence and praise of the business community. By stimulating private-sector spending, corporate growth and profits surged and 23 million jobs were added.
Personal earnings and capital gains were exceptional, buoyed by the strongest stock market in 50 years. With low unemployment and high earnings, tax receipts surged and the federal government produced a surplus for three consecutive years. That is a sharp contrast with the enormous deficits compiled by the Bush and Obama administrations.
President Obama needs to surround himself with more diverse advisers with private-sector experience. There is still no one in his cabinet or in the higher levels of his White House staff who has ever worked in the private sector. In my business years, I found it essential to surround myself with people who had different expertise and contrary opinions. This need is even greater in the isolating White House environment. I witnessed this first-hand regarding Vietnam during the presidency of Lyndon B. Johnson.
The president should appoint a savvy business leader to replace Mr. Summers, to advise him daily and be in constant touch with business leaders. Mr. Obama should follow the lead of Prime Minister David Cameron of Britiain, who appointed HSBC’s chairman, Stephen K. Green, as his minister for trade and investment. There are many strong candidates from which to choose, but the position must have adequate authority and influence for someone to give up his current position, just as Henry M. Paulson Jr. did in 2006, when he left the top post at Goldman Sachs to become Treasury secretary.
Here is my short list of recommended candidates:
Anne M. Mulcahy of Xerox: Ms. Mulcahy did a remarkable job in saving Xerox from bankruptcy and restoring its innovative spirit while serving as chief executive. She has also served on an important set of corporate boards. (Full disclosure: we served together on theTarget board for nearly a decade.)
Eric E. Schmidt of Google, John T. Chambers of Cisco Systems or John J. Donahoe of eBay: All three of these chief executives are extraordinary leaders who could refocus the American economy on research and development, innovation and creativity that will add sustainable jobs for the next decade.
John Doerr of Kleiner Perkins Caufield & Byers: Mr. Doerr is the nation’s leading venture capitalist, whose firm has invested heavily in renewable energy and information technology, and would be a great advocate for new company formation.
Edward E. Whitacre Jr. of General Motors: Mr. Whitacre did a spectacular job in turning around G.M. with his practical, no-nonsense style. If President Obama wants to reinvigorate mainstream American companies, Mr. Whitacre is the perfect person.
Carlos M. Gutierrez of Kellogg: A former Commerce secretary who previously led the cereal maker Kellogg, Mr. Gutierrez is a superb leader who has the confidence of the business community. In adding a Republican, Mr. Obama would signal he is serious about bipartisan, centrist approaches.
Richard K. Davis of US Bancorp: Mr. Davis is an extraordinary commercial banker who largely avoided the 2008 meltdown. (His bank was among the first big institutions to repay TARP loans.) As chairman of Financial Services Roundtable, he worked toward sound regulation in the Dodd-Frank Act.
That’s an abundant list of strong individuals who can hold their own amid Washington’s political infighting. As innovators and company builders with long-term vision, all bring distinctly non-Washington experiences that would be useful to President Obama.
The country needs leaders with courage to make the hard choices necessary to sustain economic growth. Mr. Obama has an opportunity to rival Mr. Clinton’s economic success, but this will not happen with the usual suspects by his side.