Where the Buck Stops
__________________________
Viewpoint: The first CEO president stands before America's shareholders. Rehire, or fire? A columnist's take on the record
By Jonathan Alter
Newsweek
Oct. 25 issue - At bottom, elections involving incumbents are always about rehiring or summarily firing the president. The voters are like shareholders in a messy proxy fight. They have to examine how current management is handling the country's business, then make a tough-minded decision about performance.
Even if comparisons between industry and government are inexact, it's fitting that Bush's performance be subjected to the type of rigorous review that, say, Jack Welch might undertake. This is a language that Bush understands. He is the first M.B.A. (Harvard, 1975) and the first former CEO and corporate board member to become president.
So let's dispassionately assess the president's record in six categories: risk management, finance, international operations, plant security, human resources and strategic planning.
RISK MANAGEMENT. The first priority for any chief executive is to keep the company thriving. This means balancing ambitious expansion efforts with the need to stay solvent and maintain the company's good name. It means dealing effectively with unanticipated market conditions. Bush has unquestionably shown leadership, but is it moving the enterprise in the right direction?
The president and his chief operating officer, Vice President Dick Cheney, have staked their reputations on a series of big bets. Among them: 1) That the tax cuts will boost the economy instead of continuing to drain the Treasury (the nonpartisan Congressional Budget Office reports that two thirds of the 2004 deficit results from the Bush tax cuts). 2) That the war in Iraq will lead to a beachhead for democracy in the Middle East instead of becoming a recruitment tool for terrorists and a costly quagmire for the United States. 3) That terrorists will not strike American ports, chemical plants or other places overlooked by the administration's homeland-security policy. 4) That the country's global lead in medical sciences can survive limiting the public funding for stem-cell research.
The job of the shareholders (voters) is to determine whether the chief executive's assessment of risk is prudent. Bush responded quickly to 9/11 and has avoided another attack on U.S. soil. But most of his other big bets have not yet paid off.
FINANCE. If the financial picture were rosy, Bush would be easily rehired. If it were grim, he would be quickly fired. Because the record is mixed, the vote will likely be close. The key economic indicators: Unemployment is at 5.4 percent, which is good by postwar standards but does not include hundreds of thousands of "discouraged workers" who have given up looking for work. On the other hand, it also doesn't reflect "household surveys" that do a better job of counting the self-employed. Interest rates remain at historic lows and inflation—except for health care, tuition and, more recently, energy—remains in check. Homeownership continues to climb. The number of Americans living in poverty, which declined in the 1990s, has moved back up. The minimum wage is $5.15 an hour, where it has been for seven years.
Job growth is a crucial benchmark for presidents. Bush is, in fact, the first president since Herbert Hoover to see net job loss during his term, though John Kerry doesn't point out that the losses under Bush—estimated to be between 600,000 and 1 million—are hardly on the scale of the Great Depression. Bush, for his part, doesn't acknowledge that the new jobs being created in recent months generally pay much less than the old ones. Most economists agree that if his tax-cut plan had been aimed at the middle class instead of the wealthiest 1 percent, it would have spurred more job creation. And the president has done nothing to close tax loopholes that encourage corporations to ship jobs overseas.
Bush didn't really "lose" those 1 million jobs, any more than Bill Clinton "created" 22 million. The economy is too big and complex for the president to control. But overall fiscal stewardship does affect the numbers. For presidents, job growth is the equivalent of sales growth for CEOs: while poor results may not be entirely their fault, they're held accountable anyway.
The same goes for bad balance sheets. Bush arrived in Washington with a roughly $400 billion surplus. Rebating that to the taxpayers was fine—until it was clear that the budget was headed for serious red ink. Then, arguably, a responsible CEO would have made a midcourse correction to cut spending and raise revenue, especially given the costs of 9/11 and the war in Iraq. Every other wartime president in American history has raised taxes to pay for his war. Bush not only didn't raise taxes, he cut them further (with more than a third of the benefits going to those who make more than $1 million a year) and signed expensive new bills helping farmers, seniors, transportation and schools. To the dismay of fiscal conservatives, he has vetoed no spending bills.
At 4.5 percent of GDP, the deficit is not as bad as 20 years ago (when it was 6 percent), but it goes down on the books as an $800 billion loss in four years. For any company, that's real money.
INTERNATIONAL OPERATIONS. After 9/11, Bush had full global support to topple the Taliban in Afghanistan. But then Bush rolled the dice on a far bigger hostile takeover of Iraq. At the same time Bush decided to concentrate on Iraq, Osama bin Laden and most of the leadership of Al Qaeda were still holed up at Tora Bora. According to multiple accounts, the military wanted more troops to chase Al Qaeda but Bush and Defense Secretary Donald Rumsfeld would not supply them because they would eventually be needed for Iraq. One test of a leader, in business or war, is whether he can prioritize and persevere. By sending only a tenth as many troops to Afghanistan as to Iraq, Bush failed that test and Osama lived to fight another day.
Bush gets credit for ridding the world of Saddam Hussein, an evil man. But even his aides now admit that Saddam was not an imminent threat. The president went to war in Iraq despite intelligence he knew to be sketchy and in the face of opposition from global business partners he would need afterward to share the costs in blood and treasure. After a fine campaign to capture Baghdad, poor management of the occupation led to a series of counterproductive decisions, from insufficient troop strength to disbanding the Iraqi Army to allowing the violation of human rights (at Guantanamo Bay and Abu Ghraib) he had pledged to restore—all part of the Bush record as commander in chief. More than 1,000 U.S. soldiers are dead and $120 billion has been spent, with the costs expected to go into the hundreds of billions. (The 1991 gulf war, by contrast, was 90 percent paid for by the allies.) Even before the failure to find weapons of mass destruction, the marketing of the Iraqi subsidiary became a fiasco, full of confused and even deceptive advertising of the reasons for the invasion. This, in turn, has hurt the American brand throughout the world. Moreover, the Iraq war discredited Bush's new policy of pre-emption, which could make it harder to apply when the United States really needs it.
Elsewhere in the region, the lack of progress in the Arab-Israeli conflict is not Bush's fault: Yasir Arafat has proven himself a man one cannot do business with. The first-ever elections in Afghanistan are a victory for Bush, as is the decision of Muammar Kaddafi to end his nuclear program in Libya.
The rest of the president's performance on the No. 1 national-security threat of the age—nuclear proliferation—has been less impressive. North Korea has, by some accounts, quadrupled its nuclear threat on his watch, and American policy toward denuclearizing Iran has yet to pay dividends. Most puzzling, after 9/11 Bush actually cut spending for dismantling loose nukes in the former Soviet Union that could easily fall into the hands of terrorists. When Senate Republican Richard Lugar demanded an explanation this year, Bush pledged additional nonproliferation funding. Even so, he seems more intent on building missile defense and a new generation of bunker-busting nuclear bombs.
PLANT SECURITY. This was once a minor issue for both business and government. Even after 9/11, the president for six months resisted Democratic calls for the creation of a new cabinet-level department of homeland security. Finally, Bush established the department and tripled spending. Airport security has been federalized and hospitals are developing better early-warning systems for bioterrorism. Coordination among different agencies has improved. Bush claims without offering proof that 75 percent of the Al Qaeda leadership has been caught, though experts agree that the organization has decentralized and spread in the last three years.
The issue is whether Bush has shown the sense of urgency and follow-through necessary to prevent another attack. Terrorist watch lists are still a mess; new technology has not been fully implemented at the still-porous borders (only 1,000 agents patrol the 5,000-mile Canadian border) or at the FBI; the money for first responders and local fire departments has been cut since last year; a mere 2 percent of cargo is inspected at highly vulnerable American ports; the railroad system is unsecured; only a fraction of checked baggage on airliners is scanned. Recently the GAO found that even though chemical plants are "attractive targets for terrorists," the chemical industry is still not even required to assess vulnerabilities, much less take action, because Congress and the administration backed down under pressure from the industry.
An effective CEO doesn't just preside and delegate; he reaches down into the ranks to make things happen and find the truth. Bush has been slow to spend the antiterrorism money authorized by Congress and opposes protection for the whistle-blowers who first alerted the public to the security lapses that allowed the attacks. Accountability has been absent. After months of resistance, Bush established the 9/11 Commission only under pressure from 9/11 widows. His administration cooperated reluctantly and is resisting the commission's recommendations.
Nonetheless, the war on terror remains an asset for the president. While Bush officials say another attack within the United States is inevitable, none has occurred since September 11, 2001. Elsewhere in the world, terrorist incidents are at a 20-year high.
HUMAN RESOURCES. An educated work force is critical for any enterprise, and the president undertook the most significant education reform in a generation. Working with Ted Kennedy, he won passage of the No Child Left Behind Act, which imposed federal accountability for the first time. While critics complain that after-school programs have been cut and that schools need more money to implement the new standards, Bush has increased federal funding for education by 65 percent since 2000. The rest of his "compassionate conservative" agenda is largely unfulfilled.
Health-care costs have risen 36 percent in four years, a burden that falls heavily on business. Any CEO would want to reduce those costs but Bush has offered no comprehensive plan to cover the 45 million uninsured Americans or otherwise overhaul the system. He has proposed bills to cap malpractice awards and to allow small businesses to band together to bargain for lower insurance rates. But these wouldn't do much to dent the problem.
Bush's big health-care achievement was passage of a $400 billion prescription-drug benefit for Medicare recipients. But in a major concession to drug companies, the bill bans the reimportation of much cheaper drugs from Canada and prevents the government from negotiating lower prices through bulk purchases. This is like a company's telling its supplier that it wants to pay higher prices.
STRATEGIC PLANNING. Despite plenty of grand talk about vision, few presidents or CEOs think much beyond their time in office. Bush insists he is different. On reforming entitlements, he has accomplished nothing so far but is offering a plan for overhauling Social Security by allowing private investment for a better return. With baby boomers set to begin retiring in 2011, this is gutsy. But in addition to potentially jeopardizing retirement savings in the volatile stock market, his plan offers no way to pay for the $1 trillion or more in transition costs to a new system.
Bush's environmental record has been savaged. He has offered no leadership on global warming or on preserving wetlands and other open public spaces. While the EPA has moved aggressively to impose new regulations on diesel fuel, its lawsuits to enforce air-pollution regulations are down 75 percent in three years. Washington still won't force Detroit to improve its miles-per-gallon standard, though Bush has begun to fund research on hydrogen cars. As oil prices pass $50 a barrel, Bush has cut support for renewable energy and offered plans for more drilling at home, which will not do much to reduce dependence on foreign oil.
The president failed to get an energy bill passed, in part because it contained so many giveaways to special interests, many of them apparently negotiated by Cheney behind closed doors with lobbyists from Enron and other energy companies. This preference for corporations over consumers and for secrecy over openness has permeated the administration.
Transparency has become an issue. Budget projections have been repeatedly shown to be phony and politically inspired, which would lead to punishment or even prosecution in the corporate world. From the real cost of Bush's Medicare plan to the real cost of his war, truth tellers have often been intimidated internally or drummed out of government.
Bush's longest-lasting impact may be on the courts and the Constitution. Although he has not yet had a Supreme Court vacancy to fill (three or four are expected to open up in the next four years), the president has made it clear through his lower-court appointments that he favors placing only conservatives on the bench. Unlike past Republican and Democratic administrations, no moderates need apply. And Bush backs at least two constitutional amendments that would change the Bill of Rights, one banning flag burning, the other gay marriage.
As they make their final assessments, shareholders will also have to evaluate what President Bush has done to the tone of American politics. How much of his admitted failure to be "a uniter, not a divider" was his fault, and how much the fault of his adversaries? Did he squander the unity and sense of purpose after 9/11 by playing to a narrow conservative base, then rushing to war? Or was he simply sticking to principle and staying the course? Shareholders in the United States will complete their job-performance analysis on Nov. 2.
With Rebecca Sinderbrand, John Barry, Holly Bailey and Jonathan Murad
© 2004 Newsweek, Inc. |
