Activist would contest Obama’s capital allocation
By Daniel Indiviglio
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
If Barack Obama were the chief executive officer of the United States, an activist investor would have a field day contesting his allocation of capital – political capital, that is. In the CEO analogy, an uppity shareholder would want more focus on the economy, jobs and fiscal challenges.
In both politics and business, leaders have limited resources to produce results. In business, the key investment resource is cash; in government, it has more to do with time. In the White House, hours spent persuading the public or politicians, brokering deals and crafting strategy earn the president more capital, as expenditures should in boosting corporate returns.
In this spirit, Breakingviews tried to pinpoint Obama’s capital allocation by analyzing news, speeches, and Oval Office blog posts. Though unscientific, the results are worth considering. Defense and security issues snagged the most attention, including the Syrian conflict, Afghanistan and Iraq, and leaks by a rogue National Security Agency contractor.
The economy and jobs came in second, absorbing 16 percent of Obama’s output. Arguably these areas deserve significantly more capital – perhaps 25 percent or more of the president’s effort. Growth remains modest, and unemployment is too high at 7.3 percent. If he can get the economy cranking faster, it should make other things easier to tackle – like his third most significant talking point, education.
Social issues like immigration and gun control garnered nearly the same 15 percent portion of Obama’s rhetorical pie as education. But spending and deficits, where potential emergencies loom, accounted for only 6 percent. Poorly constructed budget cuts threaten the tepid recovery. And Congress looks poised to make raising the federal debt limit as painful as it did two years ago. The broad economic risks make this an area demanding far more presidential attention.
Capital also needs to be deployed effectively. Much was wasted on intervention in Syria, which is unpopular and has been avoided for now. Education and social reforms may be popular with the Democratic base, but capital has also been poorly spent there because they’re being blocked by today’s House of Representatives.
Shareholders can, eventually, sack an ineffective CEO. Voters, too, can oust weak leaders – or their partisan proxies. Obama has three more years in office, and one more before 2014’s midterm elections. Unless he allocates his capital better, Democrats risk suffering poor returns.