THE BLOG
10/05/2011 11:57 am ET | Updated Dec 05, 2011

Zuckerman on Business Despair and Obama

The question for Mortimer Zuckerman is: Does he, widely viewed (by himself among others) as a smart guy, really believe the argument he unrolls in the Financial Times that the slumping economy is caused "by the anti-business policies of President Barack Obama," or is he just conveniently forgetting a few minor episodes, such as the financial crisis of 2008 or the euro-zone crisis?

Zuckerman tries to wrap himself in a kind of apolitical neutrality, but his argument is so sketchy, so tendentious, and so simplistic that you find yourself playing with two options: a) he is indulging in cynical politics or b) he's ideologically blinkered. That said, there is clearly a mood among American business that follows the Zuckerman line and blames nearly everything that has occurred in this shaky economy on failures by Obama: the prevailing uncertainty, his overoptimism about recovery and the fact that he has, on occasion, uttered the word "fat cat" in reference to CEOs and Wall Streeters. If Zuckerman is right, then American business leaders are so feckless and so thin skinned that the occasional criticism lobbed at them from the White House is enough to make them crawl up in little balls, hoard their cash and lay off superfluous workers. This is why we pay them millions of dollars in salary?

Fortunately, Zuckerman appears just to be playing an ugly political shell game, and American businessmen, like consumers, will continue to wrestle with a more complex set of economic problems than simply hurt feelings and pique.

Obama's original sin, according to Zuckerman, was the failure of the stimulus and his prediction of a V-shaped recovery. Zuckerman tosses out numbers that suggest the stimulus failed, but he offers no citations, no details, and his stimulus figure -- $4 trillion -- must include everything but the kitchen sink, from programs that extend back into the Bush administration to the Federal Reserve's quantitative easing. The usual figure for stimulus involves the program Obama pushed through Congress soon after his inauguration amounting to $800 million, much of it in tax breaks.

There is a vigorous debate about that program and its effectiveness -- much of it revolving around those tax cuts and its size -- but to more than quadruple it, then pluck figures out of the sky suggesting it generated $1 trillion in growth, boggles the mind. The failure to accurately predict is even dumber. Yes, the White House is no better at prediction than Wall Street, corporations, economists and Zuckerman himself, who was not exactly screaming housing bubble in 2007. But again and again he blames Obama alone for robbing consumers and businessmen of their animal spirits by that failure. He's a president, for god's sake, not a deity.

Zuckerman's entire argument rests uneasily on his armchair reading of psychology. Consumers and executives are depressed, anxious, and they will only spend again when they feel better -- not that they are over-leveraged and that aggregate demand is deficient. He creates a self-fulfilling prophecy: Obama's failure to predict recovery spawned a credibility gap and sucked confidence from consumers and executives. Zuckerman goes on to analyze all this with a lot of words saying the same thing, over and over. "When governments are shown to be powerless or incompetent, ordinary people suddenly recognize that their elected officials have neither the understanding nor the political power, and sometimes not the will, to do what is necessary." No doubt, though how all this is Obama's fault is mysterious. "At that point despair and alienation take control of public opinion and people concentrate on preserving what little of their long-term prospects and savings they can." Zuckerman, as a prose stylist, is no Keynes.

And now Obama has made it worse, because he's taken "a sharp turn to the left." Obviously, Zuckerman doesn't like talk of tax increases on the wealthy, although he skirts the details gingerly. Instead he makes a vague recommendation that the tax base be broadened by eliminating earmarks and exemptions and that everybody -- businesses and individuals -- get a tax break. Oh happy days. This is easy because it is "bipartisan," though he leaves the impression that Obama won't touch it. He never mentions Social Security or Medicare. He doesn't touch on the fact that Republicans have clearly decided not to support anything out of the White House, even those policies that once had bipartisan support. He says in passing that Republicans will only support deficit-reducing plans, as if that simple position was obviously correct, or at least, unalterable. Zuckerman here adopts the same position as The New York Times' Paul Krugman, whose politics are very different: They sail above tangled and toxic politics, tut-tutting Obama for getting mired in the muck.

Yes, Obama and his economic team have made mistakes, though in cases like the stimulus the debate still rages about what they might be. His prediction of a V-shaped recovery was wrong. Dodd-Frank is sort of a mess. Still, it's hard to evaluate what's taken place without looking at the rancid politics in Washington -- a dysfunction that existed well before Obama got into office, just as the financial crisis (this is apparently a little-known fact) and the resulting deficits were launched during the George W. Bush era. But to pretend that American consumers and businessmen are simply fixated on White House overoptimism and occasional populism, and not on Europe, natural disasters, China, soft housing prices or their own sense that they need to lighten up their credit cards, is absurd. Such cynicism can play in a presidential debate; finding it aimed at the FT readership really does suggest how dumb Zuckerman thinks even a financially sophisticated crowd is.

Robert Teitelman is editor in chief of The Deal.

Read more: Zuckerman on business despair and Obama -- The Deal Economy