The Lessons of LBJ and Robert McNamara for Barack Obama

Robert McNamara died this week, but his life holds lessons for Barack Obama's presidency.   Arguably the leading light of JFK's stable of the best and brightest, McNamara's work as an architect and chief executive of LBJ's Vietnam debacle is well remembered by tens of millions of boomers who came of age during Vietnam, as well as by the President.   The caution for Mr. Obama's advisors lies in the conundrum of how McNamara's brilliance expedited the implosion of the most progressive presidency since FDR -- and how the spectacular failure of the Vietnam policy and the deep domestic divisions it produced helped deliver a generation-long majority to Republican conservatives.  

Mr. Obama came to his presidency at a moment of great opportunity to reshape the nation, the greatest  since LBJ and FDR.   Fittingly, his agenda - economic revival, universal health care access, abating climate change, and restoring effective American power and influence in the world - is the most sweeping since LBJ and FDR.  The core challenge he and his advisors face, however, involves their character more than their intellects, because the potential for greatness imminent in such moments can distort the decisions of the most brilliant leaders and advisors.   The prospect of grabbing history's golden ring breeds a powerful disposition for best-case scenarios, an indulgence which brought down McNamara and LBJ and now may threaten their successors.

Vice President Biden confessed about it this weekend, acknowledging the now risibly-obvious optimism of the administration's economic forecast.   The Obama team is certainly smart enough to recognize that after a year of real-life, worst-case scenarios which ultimately brought on the first systemic, cascading economic meltdown in three generations, it would be foolhardy to base the President's program on a supposition of a quick, sharp recovery.   Yet, they did.  It may be merely human to want to believe in such a miracle, because it could make everything else possible.   The catch is that without that particular miracle, there will be little money for health care reform, at least without risking the nation's credit-worthiness, and little public willingness to accept the costs of a genuine climate change program.  Most important, without the real prospect of people's incomes growing again, the American public could withhold the political support the President will need, again and again, to successfully deal with untold foreign crises and new domestic problems.

The issue here is not pragmatism, but realism.  Here's a dose to consider.  The yet-unreported chatter among New York financial people these days is that commercial real estate could be on the edge of the kind of crash suffered last year from home mortgage-backed securities and derivatives.  To make matters more dismal, the volume of commercial real estate securities and derivatives dwarfs last year's home mortgage market.  Moreover, commercial real estate lending and securitization are the business of not only Wall Street, but thousands of regional and local banks.  So, if that market goes south, the economic carnage will begin on Main Street.  The New York analysts who talk among themselves about thousands of banks going under in the next year may be suffering from their own kind of post traumatic stress.   But if they're right and the President and his brilliant advisors haven't planned for it, the blame will fall on them; and the most progressive presidency since LBJ could be left in the sort of ruins that can drive a political party and its agenda from power for a long time. 

Even if commercial real estate doesn't melt down - and sovereign debt defaults don't start springing up in Asia and Europe - a rosy forecast isn't the only economic trap waiting for the President and his indisputably brainy advisors.   During the last expansion, job creation fell by half even as GDP generally grew at healthy rates, and the strongest productivity gains since the 1960s didn't stop average real wages from falling.   President Bush and his less than brilliant economic advisors certainly mismanaged the run-up and onset of our current crisis, but we cannot also pin these new structural problems on their mistakes.

Yet, the administration agenda seems to depend on some faith that decent growth and productivity gains in the near future - which both remain problematic - will drive healthy job creation and income gains again as they did in the 1990s.   It's time to put aside that best-case scenario, too, and focus on reforms that might make a difference for these dynamics.  The President could get behind a proposal he supported as a senator, to make free computer and Internet training available to all American adults through community colleges.  He also could redirect the early stages of his energy and health care programs to restraining those costs for businesses.  For the last decade, intense competitive pressures from globalization have prevented businesses from passing along their higher costs in higher prices - the secret of our long, low inflation - but it also forces them to cut jobs and wages. 

If the President and his advisors can live with less than best-case scenarios, they can still achieve their agenda over time, as the economy and people's incomes come back.  In that way, they can escape the trap that snared LBJ and Robert McNamara.