The Welch Way
Not So Fast, Mr. President
Is the President taking on too much—or is the media having trouble keeping up? —Tim Moore, Louisville If only a dunderheaded media was the problem, we'd be a lot less worried. But no. With his everything-all-at-once overhaul of our country's $13 trillion economy, President Obama is unquestionably taking on too much. And we don't say that because of politics. We say it because of process. Look, every leader wants to galvanize change; that's what leaders are supposed to do. And in times of crisis, the change imperative is even more heightened. People are scared; many are angry. They want problems fixed fast. But change—especially massive, frame-breaking change along the lines the President is pushing—can't just be about getting things done. It has to be about getting the right outcomes, and right outcomes rarely get sorted out in a rush. They emerge from vigorous debate, from grappling with ideas and wallowing in the details of options and their consequences, intended and not. O.K., so maybe "grappling" and "wallowing" don't sound like much of a process, but when it comes to change, they're an absolutely essential prelude. And they're not happening in Washington right now. Part of the reason, of course, is that America is currently a one-party nation, with a popular Democratic President and supportive Democratic Congress. Exacerbating this, the Republican Party has been discombobulated since the election, operating without clear leadership or a cohesive point of view.
Steamrolling Down Three Paths As a result, we have three major "reform" initiatives steamrolling forward before they should.
Let's start with health care, almost 20% of our economy. The Administration's current plan involves spending money on new programs—$1 trillion give or take a few billion—to save money. Please! Somebody identify a time when such an approach worked. New government programs (think Medicare) only beget bureaucracy and spending, never higher quality and lower costs.
What's worse in our minds is that the health-care plan is moving forward before the nation grapples with the difficult questions at the root of the mess. Why are malpractice costs so high, for instance, and how much money should be spent on technology for end-of-life care? Yes, such topics are controversial. But until we sort them out, health care in America will remain a money pit.
We're seeing the same kind of rush with reforms in the financial industry and business overall. The government is moving to oversee and regulate a wide swath of territory. It has to—the argument goes—to save the system. But a "this is an emergency" approach is just a way to silence debate over long-term consequences. The government's upending of bankruptcy law in the bailout, as an example, will set back capital formation in some industries for years.
And then there's the push for cap-and-trade legislation, change that will affect us all. Forget due process of change, though. In this rush-and-hush environment, it could be law in months.
Inflated Revenue Projections Perhaps the scariest part of the lack of debate right now is that there's no real plan to pay for all the change ahead. Instead, the President is doing what leaders do when they want to overspend on programs: He's inflating revenue projections. His budget shows GDP growing in the next decade faster than in the '70s, '80s, and '90s, an unlikely possibility. Our globalized world is more competitive than ever, and debt-laden companies and consumers are deleveraging, which means lower spending. The result can only be slower GDP growth and a deficit Americans can't afford, even with the tax hikes ahead, which will further hamper GDP growth and thus revenue.
In business, budgets with revenue projections built on hope rarely bring happy endings. They end up undermining the leader who set them in motion.
Will that happen to President Obama? We don't know. Without question, every area of our economy that he is trying to upend could and should be remade to some extent. Our pushback has to do with pacing and scope.
We'll never argue against change. But achieving the right outcomes requires the right process. If you want to avoid unintended consequences, you've got to grapple, you've got to wallow.