News Release: Faculty Experts, Finance and Economics, Politics

Jan. 16,  2009

Experts: Will Obama's Groundswell of Support Survive the Inauguration?

From Knowledge@Emory

In the midst of a recession and with citizens' confidence shaken by government missteps, a new president takes the helm of the United States. His first steps involve trying to restore trust in the executive branch without promising too much.

It's an apt description of the Barack Obama administration, which will be sworn in January 20. But it also describes the challenges faced by former U.S. President Ronald Reagan when he took office nearly 30 years ago.

Reagan, a Republican who famously said that big government is the problem instead of the answer, could hardly be confused with Obama, who has proposed a New Deal approach to America's woes. Both men, however, staked their reputation on taking bold moves and on using their communications skills to help sway legislators.

When Barack Obama assumes the U.S. Presidency next week, the hopes of millions of Americans will accompany him. But his popularity may be a double-edged sword, say faculty at Emory University and its Goizueta Business School.

Obama's ability to connect with a broad swath of people -- across racial, religious and other lines -- undoubtedly helped him to win the race for the Oval Office. But he may now face the daunting task of continuing to energize the population even as he downgrades some of the expectations of his supporters.

"Obama is taking office at a time when the nation faces enormous problems that will not be quickly resolved,"says Zheng Liu, an associate professor of economics at Emory. "But some people expect a quick fix."

The concepts of change and hope were a central part of Obama's campaign. His well-received book was titled The Audacity of Hope; and the term "change" is sprinkled throughout his website, barackobama.com.

Slippery slope of 'change'

But even in good times, change can be a slippery concept. In the current troubled economy, it may be even more difficult to pinpoint just what kind of "change" is needed, adds Liu, who is currently on leave from Emory, and is conducting research at the Federal Reserve Bank of San Francisco, California. Liu also notes that his comments reflect his personal views, which do not necessarily reflect the views of the Federal Reserve Bank of San Francisco or the Federal Reserve System.

"Obama faces some unusual challenges," says Liu. "He is taking over at a time when the nation and the globe face a series of crises. Early in his campaign, Obama promised some change -- like higher taxes on wealthy individuals -- from which he has already backtracked in the face of a recession."

Although Obama and congressional leaders now indicate they will prevent the estate tax from disappearing in 2010, supporters of the President-elect and his administration may have their faith tested, says Liu, if they are bombarded by flurries of announcements that are later withdrawn and overhauled.

"The public is looking for answers, but has already seen numbers like the [Bush administration's] bank-stimulus package reach the $700 billion mark," he says. "And that's nowhere near the end of the federal spending. The Federal Reserve also got into the act by announcing it will purchase mortgage-backed securities, followed by additional moves to buy credit card and student loan securities."

On top of those and other bailout programs, Obama wants to pump up the national economy by flooding the country with federally funded construction programs, reminiscent of the Depression-era Work Projects Administration, to create two million or more jobs.

"Something needs to be done to stimulate the economy," says Liu. "But if Obama accelerates the pace of the federal government's marketplace involvement on an ad-hoc basis, it could send a signal that the administration is adrift."

Indeed, even before he takes office, some Obama supporters and others are already sounding discordant notes.

Late last month, the National Organization for Women, which endorsed Obama in the election, blasted his decision to pick Rick Warren -- a California pastor and author of The Purpose Driven Life who has inveighed against gay rights and abortion -- to speak at the presidential inauguration.

Further, despite naming five women to his Cabinet, including Senator Hillary Clinton as secretary of state and Rep. Hilda Solis as labor secretary, the nonpartisan women's rights group New Agenda accuses Obama of taking "shocking steps backward for the women of this country" by not taking more steps to give women equal representation in the 21-person Cabinet.

In a good spot

But though there may be early grumbles from some quarters, President Obama will actually be in an enviable position, observes Paul Rubin, a professor of economics and law at Emory.

"Even if Obama's programs don't immediately gain traction, he will gain some degree of cover simply because he has inherited a weak economy," says Rubin. "In the beginning, at least, there will be a lot of finger-pointing at the Bush administration. That's what happened with former president Franklin Roosevelt and the Great Depression: people blamed [his predecessor] Herbert Hoover."

Similarly, this perception will likely let Obama get a lot of early term legislation passed "by saying we need to spend to get out of this economic crisis," adds Rubin.

History provides examples of past presidents who came into office with high hopes but were unable to complete their agenda.

Republican Gerald Ford for example -- a Congressman who was appointed as Vice President in 1973 after Spiro T. Agnew resigned, and who ascended to the presidency following the 1974 resignation of Richard M. Nixon -- gained renown for signing the Helsinki Accords, that helped defuse the Cold war between the U.S. and Russia, but suffered when the domestic economy suffered from both inflation and a recession during his tenure.

Similarly Democrat President Jimmy Carter, who succeeded Ford in 1977, scored a memorable achievement by brokering a peace treaty between the nations of Egypt and Israel, but found his accomplishment overshadowed by several crises, including the 1979 Iranian takeover of that country's American embassy; a failed rescue attempt of the hostages, a series of fuel shortages in the U.S., and the Soviet invasion of Afghanistan.

Perhaps Obama can best be compared with Reagan, says Peter Topping, a professor of organization and management at Emory's Goizueta Business School.

"At the start of the Reagan Administration [in 1981], the U.S. faced a tough recession and inflation, and was further challenged by the turmoil of the Iranian situation," says Topping. "Reagan's election signaled a philosophical shift to a conservative, small-government mindset. That thought process may now be ending with Obama's election."

Based on studies of individuals, groups and organizations, Obama should establish credibility by seeking success with small projects, says Topping.

"He needs to engage with voters, and maintain lines of communication to keep them engaged," notes Topping. "The Democratic majority [in congress] will help to eliminate legislative gridlock, but remember that having a Republican majority did not always mean that George W. Bush could push through his favored programs."

Take small steps first

Instead of immediately jumping into big-picture projects, Obama should "first establish a baseline of expectations," adds Topping. "Once he has a series of smaller successes behind him, Obama can start on the big turnaround."

A president who takes office during a national crisis faces an unusual situation, says Emory Economics Chair Hashem Dezhbakhsh. He notes that the shared challenge can unite the nation behind the Commander-in-chief, or can unite the population against him.

"The Democratic majority in Congress will likely make it easier for Obama to get support for his legislative proposals," says Dezhbakhsh. "But if he is pressured by the party to deviate far to the left, there will perhaps be reaction and fear of pork barrel spending. How he acts will definitely set the tone."

Although Obama can also use his technologically linked, grass-roots support system to generate backing for his agenda, Dezhbakhsh warns that if Obama disappoints these supporters, they can quickly and publicly express their displeasure through blogs, and such social messaging services as Twitter.

Even before the inauguration, for example, Obama was hit with flack from bloggers and others when the Wall Street Journal revealed that his pick for Treasury Secretary, Timothy Geithner, allegedly failed to pay more than $30,000 dollars in self-employment taxes.

"Obama has a highly connected base of support, but it can quickly turn on him if his goodwill is exhausted," counsels Dezhbakhsh. "He needs to be transparent and needs to articulate the challenges ahead and communicate that to the public. In the World War II era the American people demonstrated that they could make necessary sacrifices, but asking them to do so means ensuring that they understand just what the challenges are."

As an incoming president, Obama will likely enjoy a grace period, adds Dezhbakhsh.

"Just about all presidents have this ‘honeymoon' period at the beginning of their administration," he explains. "During this time they can usually get a lot done. So this is when he should communicate with the public and curb their expectations."

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