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Obama’s Opportunity to be a Transformational Leader

The election of Barack Obama has generated speculation that he can—and will—emulate the presidency of Franklin D. Roosevelt in the manner in which he manages the problems that overwhelmed George W. Bush in his second term.


In The Politics Presidents Make, Stephen Skoronek argues that presidents who come into office opposed to an existing vulnerable regime are authorized to practice reconstructive politics, the transformative politics associated with such successful chief executives as Jefferson, Jackson, Lincoln, FDR, and Reagan. The immediate predecessors of reconstructive leaders, presidents like Herbert Hoover and Jimmy Carter, pave the way for their successors by their failed policies, which delegitimate the regime they are defending.

The question now is whether Bush has provided a golden opportunity for Obama to fulfill the transformative role of a reconstructive leader. I believe the answer is yes. Bush claimed that the model for both his foreign and domestic policies was the Reagan presidency, but his efforts undermined the conservative regime his Republican predecessor constructed in the 1980s. Wounded by an unpopular war and an economic collapse, Bush has experienced the longest stretch of negative job approval ratings in the history of polling. (A poll of historians by the History News Network reported that over 90% of them considered the Bush presidency to be a failure.) In 2008, with his job approval ratings hovering below 30%, and 80% of the public believing that the nation was on the wrong track, the failures of the Bush administration justified Obama’s pleas for fundamental change.

In trying to duplicate Reagan’s successful foreign policy, Bush attempted to exercise “benevolent hegemony” and bring capitalist democracy to the Middle East. In response to 9/11, Bush launched a reasonable war against Afghanistan, but then initiated a preventive war against Iraq, largely based on the false premises that Saddam Hussein was involved in the 9/11 attack and was developing weapons of mass destruction. When it appeared that Bush had no viable plan to create a new Iraqi government, and we were faced with an insurgency that could inflict casualties on our military for the foreseeable future, public support for the war and confidence in Bush’s competence waned.

In domestic policy, Bush generally adhered to Reagan’s philosophy that government was the problem and market forces the solution. Hence, the emphasis on deregulation was continued, and taxes were cut to encourage economic growth and starve the federal bureaucracy. The result of Republican trickle-down economics and deregulation was the worst economic crisis since the Depression. When Bush assumed office in January 2001, there was a budget surplus; when he left the White House in January 2009, there was a projected budget deficit of $1 trillion. In 2008, the Standard and Poor’s 500 Stock Index plummeted 39.5 percent, approximately matching its decline in 1937. This meant that about $7 trillion of shareholders’ wealth was erased. In the last two months of Bush’s administration, over one million jobs were lost as the unemployment rate jumped to 7.2%.

The combination of deregulation, Alan Greenspan’s loose monetary policy, and China’s massive investments in the U.S. allowed the financial system to develop exotic new instruments, such as credit default swaps, hedge funds, and collateralized debt obligations, which encouraged corporations to believe they could take on much greater risks. But when home prices suddenly began to drop in 2008, and the value of securities based on mortgage loans became unknowable, the private sector was overcome by a paralyzing fear that was all too reminiscent of the Depression. As in 1933, the federal government was again the only major risk taker.

Confronted by the failures of a number of gigantic financial institutions, the Bush administration felt compelled to do the ideologically unthinkable—it proposed the biggest federal program in American history. In this crisis, Bush allowed his Secretary of the Treasury, Henry Paulson, to embrace a $700 billion bailout of banks, which provoked the absurd accusation from conservatives that a Republican administration was leading the country into socialism.

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The real explanation for the administration’s decision to turn to big government to rescue the private sector was that this was seen as the only viable action the government could take to save the financial system from total collapse. As Bush explained in a Fox News interview on December 27, 2008, “I’m a free-market guy, but I’m not going to let the economy crater in order to preserve the free market system.” In that same interview, Bush was asked whether he was worried about being the Herbert Hoover of the 21st century. He replied, “No,” but the economic meltdown which occurred during his watch and his responses to it which served to delegitimate the conservative regime he championed, certainly reminds one of Hoover’s fate.

Obama, therefore, has been given the rare privilege of practicing reconstructive politics, repudiating the axioms of the Age of Reagan and bringing about the fundamental changes that are usually inhibited by the check and balance system. The challenge for Obama will be to formulate a more rational liberalism that can reconcile, as much as possible, economic efficiency with compassion, economic growth with equality, economic security with individual freedom, and social change with respect for traditional values.

Although the New Deal was often experimental and chaotic, its policy goals could be summarized in three words which might be useful in examining Obama’s $825 billion stimulus package: relief, recovery, and reform. It is worth recalling that FDR chose the banks as the first group to help. Since banks play such an indispensable role in financing economic activities, Obama will also have to continue the politically unpopular step of rescuing the very institutions that contributed to the breakdown. In addition, perhaps over $100 billion will be needed to extend unemployment benefits and increase food stamp assistance. Other major relief projects would include providing federal money to states, most of which have constitutional obligations to balance their budgets, and would, without federal aid, be forced to cut their expenditures because of reduced tax revenues, thus making it impossible for them to meet their Medicaid and public education obligations. Such measures may be only stopgap, but, hopefully, they will serve to relieve misery and prevent further damage to the economy.

To promote recovery, Obama must foster the confidence necessary for banks to start lending again and for businesses to hire new workers. Inspired by Keynesian demand-side thinking, many billions will have to be spent to build schools, highways, bridges, public transit, and environmental projects, all of which will improve the nation’s infrastructure while lowering its unemployment rate. Today, unlike 1933, there are many shovel-ready projects throughout the country; the challenge will be to select shovel-worthy ventures that avoid corruption and provide social benefits at reasonable costs.

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Finally, Obama must take immediate and prolonged advantage of this crisis to enact reforms that will prevent future economic meltdowns and achieve liberal visions of a more socially just America. Clearly, the collapse of so many financial enterprises proves that our present Balkanized regulatory system needs to be thoroughly overhauled. The faith that Reagan and Greenspan had in the ability of markets to discipline financial leaders and to promote the public interest turned out to be faulty. Obama must demonstrate that his faith in government is justified by revising the tax system, creating a national health care system that will provide benefits at a reasonable cost, and halting the trend toward global warming.

Since the next few budgets are projected to have deficits in the trillions, it is essential that non-performing programs and the expanding tendency of Congress to load appropriation bills with earmarks (bridges to nowhere) be eliminated. Our economy cannot be sustained by trillion dollar deficits. Obama must take advantage of this emergency to mobilize bipartisan support for painful decisions concerning pay-as-you-go budgeting, tax increases (after an initial tax cut for those earning less than $200,000 a year), and reductions in entitlements. This is a daunting list, but in both the campaign and the transition, Obama exhibited the pragmatic skills to find ways around overwhelming obstacles, which fuels the hope that he can be a successful reconstructive president.

John W. Sloan

John. Sloan, a professor of Political Science at the University of Houston, retired in August 2008. He is the author of FDR and Reagan: Transformative Presidents with Clashing Visions (University Press of Kansas, 2009).