Given President Obama’s performance in the first debate in Denver – where he had to appear somewhat above the fray and may have come across as flat to viewers at home – political pundits have been wondering whether he was up to his game or ready to go head to head with Mitt Romney, who appeared to be a “busy beaver”, collecting many brownie points at the debating society.
David Axelrod immediately declared, “Mitt Romney’s performance in the debate was just that – a performance.” Clearly, Mitt Romney won a lot of new fans, but did he actually tackle any long term or substantive issues facing the country?
According to the US Competitiveness Project, the American economy has been suffering from several long term deficits. I hosted a panel at the Harvard Club in New York City a few weeks ago of business leaders and entrepreneurs to discuss some of these issues. Thus, while attending the first debate, I decided to rate the candidates on these points of interest.
These are hardly partisan issues, based on findings generated by the Harvard Business School study, led by the same group of business leaders who have trained many Republican business-friendly “job creators”, including Mitt Romney and previous president George W Bush.
The Great Recession
According to Michael Porter and Jan Rivkin, “We should have been worried before the Great Recession.” They believe there is something very different taking place within the US economy, unlike other previous transitions. The great recession masks stagnant wages, low productivity, and real lack of competitiveness in the US job market. These are clearly long-term issues that have been escalating since the end of the Cold War, the beginning of automation, and supply-chain or inventory management.
The candidates have been talking up their game plan on this issue. Romney has promised to create 12 million jobs in his first four years. During the debates, Romney said, “I’m concerned that we’re on the path that’s just been unsuccessful. The president has a view very similar to the one he had when he ran for office four years ago, that spending more, taxing more, regulating more – if you will, trickle-down government – would work. That’s not the right answer for America.”
President Obama has claimed he does not want to double down on trickle down policies of the previous Bush and Reagan administrations. The trends under his watch are in the right direction even though he may not have created as many jobs as he promised. His plan has created significantly more jobs in the past 30 months and the economy is gradually coming out of the recession.
During the debates Obama said, “We do have a difference when it comes to definitions of small business… Under Governor Romney’s definition there are a bunch of millionaires and billionaires who are small businesses. Donald Trump is a small business. And I know Donald Trump doesn’t like to think of himself as small anything but that’s how you define small business if you’re getting business income.”
According to Center for Budget and Policy Priorities, the “economic activity as measured by real (inflation-adjusted) gross domestic product (GDP) was contracting sharply when policymakers enacted the financial stabilisation bill (TARP) and the American Recovery and Reinvestment Act. The economy has been growing for 12 straight quarters, but the pace of recovery has been modest”.
The unemployment rate is hovering slightly below eight per cent, and, according to Bloomberg, consumer confidence has been rising “to a four-month high as Americans became less pessimistic about the outlook for the economy. The Thomson Reuters/University of Michigan final sentiment index rose to 78.3 this month from 74.3 in August.”
During the debates, both candidates talked less about job creation and more about taxes. Obama tried to pin down Romney’s $5 trillion tax cut, but met with evasions and partial answers. It was not clear to the audience whether the President was employing a rope-a-dope strategy or genuinely taken aback by Romeny’s evasion on taxes. Romney seemed to gain an upper hand on the tax issue, while joking about cutting public spending for Sesame Street and the character Big Bird on PBS but side-stepping the big issues.
According to Willy C Shih, former executive at Kodak and now a business professor, “There was no way for us to get to market in the US” when trying to innovate digital camera technology. Advanced digital capabilities had been outsourced, which weakened the production capability and innovation in manufacturing digital cameras. “Part of the problem is that people don’t think of manufacturing as knowledge work,” said Shih.
While both candidates have been bashing China on manufacturing, they have outlined different paths to retain manufacturing in the US. President Obama has been stumping that he believes in American workers, in American industry, and the American auto industry. Obama has been blaming Romney as the “Outsourcer-in-Chief” or “Outsourcing Pioneer” during his years at Bain Capital.
Romney has been attacking China and Obama for being co-conspirators: “We face another continuing challenge in a rising China… It is in our mutual interest for China to be a partner for a stable and secure world, and we welcome its participation in trade. But the cheating must finally be brought to a stop. President Obama hasn’t done it and won’t do it. I will.”
During the debate Romney continued his tone of attacking China. When talking about cutting spending he said, “I’m not going to keep on spending money on things to borrow money from China to pay for. That’s number one.”
Obama on the other hand opened with championing the auto industry:
“You know, four years ago we went through the worst financial crisis since the Great Depression. Millions of jobs were lost, the auto industry was on the brink of collapse. The financial system had frozen up.
“And because of the resilience and the determination of the American people, we’ve begun to fight our way back. Over the last 30 months, we’ve seen 5 million jobs in the private sector created. The auto industry has come roaring back. And housing has begun to rise. But we all know that we’ve still got a lot of work to do. And so the question here tonight is not where we’ve been, but where we’re going.”
On manufacturing, the president’s plan seems to be working and may need to be applied to other industries, he said. Romney couldn’t really counter this claim.
Compensation and incentives
“The twin crises of modern American capitalism… can be traced in part to the proliferation of these very high-powered incentive contracts,” said Mihir A Desai at Harvard Business School. Clearly, the economic gap between one per cent vs 99 per cent vs 47 per cent has been widening. However, neither of the candidates touched on this issue with any depth; the controversial claim by Romney that 47 per cent of the population is “dependent” on the state was never discussed.
Mr Romney, who has been dealing with attacks on his own corporate compensation and taxes, believes that “corporations are people” and we need to “adopt reasonable compensation incentives for CEOs”. The top donors to the Romney campaign have been major banks, according to OpenSecrets.com. Thus, this may not be an issue he can attack seriously.
Obama on the other hand has been receiving top donations from technology companies, universities, and healthcare or non-profit organisations. During the debates, Obama did not attack Mitt Romney on his record at Bain Capital as he took the high road.
21st century workforce
According to Thomas Kocham, a management professor at MIT, “All of the other things we used to think about as a social contract” have eroded. The main problem may be that the American economy has mainly become a financially driven economy.
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US presidential debates: Fact or fiction?
American corporations, while they value their workers as the most important assets, have somehow slipped in creating the jobs of the 21st century. They need to retool and rebuild the jobs for the next century, a message President Obama has been hitting repeatedly. This is partly a solution to the manufacturing crisis as well.
Romney has been making the same claims:
“The dynamism of the American workforce is our country’s greatest renewable natural resource. Jump-starting economic growth therefore requires that American workers have the skills that are needed to unleash their potential. One of the troubling features of the American economy today is the mismatch between the skill set of the American workforce and the requirements of the employment market. The gap between the two lies at the heart of our jobs crisis.”
During the debate, Obama talked about his education plan – “Race to the Top” – and the investment in junior or trade colleges. Romney lurched towards the centre and tried to agree with many of the initiatives already begun by education secretary Arne Duncan, while at the same time attacking the lack of anemic job growth.
Has America become complacent about its assets? Does America need more business ecosystems like Silicon Valley tech start-ups around the country? Clearly, this is one way out of the recession, which has been exacerbated by the politics of the moment and gridlock in the congress. Neither candidate seems to have pitched their message loud and clearly enough to draw the majority of the country behind them.
During the first debate, Romney may have enhanced his persona, according to many pundits, but he failed to take on the substantive issues facing American competitiveness in the globalised economy, which Obama has been clamouring about for four years with obstructionism from the opposition.
Romney may have scared off the Big Bird, setting off a Twitter frenzy, but he did not take on the big issues. “With the enormous problems facing our country, the fact that we are the focus is just unbelievable to me,” said PBS chief Paula Kerger. Sesame Street workshop is not only “America’s biggest classroom” but a global classroom America has introduced to millions of children in 150 countries. Kerger found Mr Romney’s statement simply “stunning” – as did hundreds of thousands of others tuned in.
Dinesh Sharma is the author of Barack Obama in Hawaii and Indonesia: The Making of a Global President, which was rated as the Top 10 Black history books for 2012. His next book on President Obama, Crossroads of Leadership: Globalization and American Exceptionalism in the Obama Presidency, is due to be published with Routledge Press.