Cristina, Obama, Light Bulbs & The New Deal

Mark my words: In the near future, Argentine President Cristina Fernández will say she was the first to do it. And she’ll be right.

A year ago Fernández announced plans to buy millions of low-consumption light bulbs and use them to replace less efficient bulbs in government buildings. The plan aims to cut power consumption and prevent blackouts.

This past Saturday, almost a year later, U.S. President-Elect Barack Obama announced details of a multi-billion-dollar plan to “jolt” the U.S. economy back into shape. Among other things, he said:

“First, we will launch a massive effort to make public buildings more energy-efficient. Our government now pays the highest energy bill in the world. We need to change that. We need to upgrade our federal buildings by replacing old heating systems and installing efficient light bulbs.” 

Though Fernández was surely far from his mind, with that simple reference to efficient light bulbs, Obama unwittingly lent tacit approval, and thus marketing power and newfound legitimacy, to Fernández’s own plan. It wasn’t the first time Obama has done this, at least in Fernández’s eyes. Obama recently spoke about the need to invest in schools and infrastructure. Fernández took his words to validate and market her own investment plans. 

Of course, there’s nothing wrong with this. When selling an idea, it’s always smart to cite others who’ve lent it their approval. It especially helps when those people are popular. This is why the biggest brands pay top dollar for endorsements from respected athletes and actors, etc. The same marketing rules that apply to cars, watches and tennis rackets apply to politics.

In politics, Obama is as close as you can get to a rock star. He’s the hottest possible political commodity. Hollywood loves him. Young people adore him. Madonna puts his face on gigantic flat-screens at her concerts. For now, nobody’s more appealing or inspiring and he’s as popular in Argentina as anywhere. It’s a no-brainer that Fernández would want to associate herself with him and his ideas. Almost to the same degree that she distanced herself from the toxically unpopular George W. Bush, she’s now associating herself with Obama.

Regardless of how effective the low-watt light bulb plan will be, the apparent kinship between Fernández’s plan and Obama’s raises questions about similarities between the two politicians. But while there are some similarities (both are young lawyers who made history – she as the first elected female president, he as the first African American – and both have talked about redistributing wealth) - the differences are profound in terms of style, credibility and substance.

A Matter of Style

Unlike Fernández, Obama is the opposite of divisive. He doesn’t question the motives or attack the integrity of his political opponents. Though he was harshly critical of Bush’s record during the campaign, he never attacked Bush personally. Nor has he attacked him since the election despite repeated invitations from journalists to do so. His response is always to say that engaging in partisan politics won’t solve the country’s problems.

Only a quarter of Americans approve of Bush’s record, but why alienate these potential political partners? Doing so would simply poison the political well at a time when building consensus is crucial. Obama seems to understand this better than anyone. It’s part of the reason he’s inspiring. He calls on people to unite and be better than themselves, not better than others.

Even the Argentine media took note of Obama’s post-election praise for John McCain. Obama even invited McCain to his office to discuss how they could work together. Argentina’s top newspaper, Clarin, wrote this editorial:

“These (kind words between the candidates) are naturally expressions of political diplomacy: the candidates surely feel less amicable toward each other than they admit publicly. But in their public speeches, which shape our political and social lives, they opted to move the country forward during a crisis. Here (in Argentina), these kind of gestures are not abundant.”

Clarin noted how local politicians embitter political and social life instead of enriching it. A good example came last year when Porteños voted against Fernández in the presidential election. Her cabinet chief at the time – considered one of the more diplomatic people in her inner circle – told Porteños to “stop being arrogant.”

Obama’s conciliatory and collaborative style contrasts sharply with that of Fernández, who has fostered ill-will with political opponents. (Some of Fernández’s opponents, like Elisa Carrió, are equally adroit at poisoning the well.) During the farm strike earlier this year, Fernández described farmers as “coup-mongers.” Whether or not the farmers’ ideas had merit, the vast majority of farmers just wanted lower taxes.

Fernández also backed the physical violence of Luis D’Elía, the former government official who literally punched peacefully protesting farmers in the Plaza de Mayo. Shortly after D’Elía drove men, women and children from the Plaza de Mayo (which he did just minutes after attending a ceremony with Fernández at the Casa Rosada), D’Elía appeared near the president at an official government speech.

As I wrote back in April, Fernández’s appearance with D’Elía wasn’t just a public validation of D’Elía’s violence. It was an implicit warning to everyone who had protested at the Plaza de Mayo: “Do this again and you’ll be met with force.”

It’s hard to imagine Obama doing anything like this. Throughout his life, Obama has striven to bring people together across racial, religious and political boundaries. Fernández, in contrast, isn’t even on speaking terms with her own vice president.

Despite growing up a minority in a racist 1960′s culture, Obama seems to be constantly looking to move past America’s sometimes dark past. Fernández, in contrast, often talks about the need to remember Argentina’s historical stains. She seems to feel a need to combat not only her contemporary rivals but also ghosts from Argentina’s past. 

A few months ago, when provincial governors sided with farmers in the farm conflict, Fernández, they say, ordered the social security agency, ANSES, to stop sending retirement funds to the provinces. ANSES director Amado Boudou denied any wrongdoing. But Cordoba Governor Juan Schiaretti said publicly that Fernández was blocking the funds to punish him for siding with farmers.

Meanwhile, Obama and Fernández have communication styles that differ dramatically. Obama seems to craft his policies and the words he uses to communicate them with exceptional care. On the campaign trail, he often spoke off-the-cuff, but his most serious speeches were very carefully written and delivered. Compare that with Fernández, who almost never writes her speeches.

As a reporter, I watch her speak almost daily, listening carefully to every word. Only rarely have I seen her read from a paper while speaking, and never from a script. Her ability to speak extemporaneously is remarkably impressive. In a recent Council of the Americas speech in New York, COA President Susan Segal was impressed: “I want to thank President Fernández de Kirchner for her presentation, her frankness and I just want to note, once again, as always, she has given her presentation without a single piece of paper. It’s incredible.” Fernández replied: “It’s the way I always do it. The first day we met, (Susan) said to me, ‘You speak without any paper. I just can’t believe it.’”

But this can be a bit risky, and during moments of crisis, this off-the-cuff approach can convey a paucity of prudent preparation. Fernández recently delivered a major policy speech on proposals to prevent the economy from sliding into recession. Though the speech itself was mainly extemporaneous, she occasionally glanced at a paper to remember key details. But this wasn’t enough. On national television, with the speech over, her audience got up to leave, but TV cameras then focused on a disconcerted Fernández as she tapped the microphones, trying to get everyone’s attention. She had just been told that she had forgotten to mention key points. 

It was a minor gaffe, the kind that can happen to any public figure. But it seemed indicative of a hasty, ad hoc approach to both policy design and communication. In times of crisis, content and communication as well as substance and style, can be equally important. Obama seems to understand this intuitively in a way that Fernández doesn’t.

Credibility

While style can be important, credibility is even more so. Obama hasn’t taken office yet, and he could well lose credibility when in power. But for now, his seriousness of purpose, polished policy prescriptions, cabinet choices, and thoughtfully-delivered responses to intense questioning have given him a high level of credibility. So far, he has inspired confidence with credible steps as a candidate and as president-elect.

Fernández, in contrast, didn’t take questions while running for office. She provided no details about how she would govern once in power. So once in office, it was hard to gauge her credibility by comparing her policy decisions with her campaign proposals because the latter didn’t exist. During the campaign, she didn’t give her word, or at least never tied it to specific policy pledges. Obama spoke repeatedly and in detail about the policies he would pursue once in power. In this sense, it will be easier to measure his credibility in the months and years to come. He campaigned on a precise platform, and will be judged accordingly. 

Credibility can be measured in many ways. In some ways, a government’s credibility can be measured by the yields on its bonds. One simple, if flawed measure of a president’s credibility is public opinion polls. According to such surveys, Fernández has lost a great deal of credibility since taking office, with her approval rating at just 28%. But people can be unpopular while still being credible. You don’t have to like someone to believe that person keeps his word. Obama hasn’t had much of a chance to keep his word, but Fernández has had plenty of time. So what’s her record?

In terms of credibility, the president seems to have two problems. One is the pervasive perception that she and her administration have lied repeatedly and deliberately about inflation. Prices have risen quickly and consistently for years. Everyone knows this. Even so, both Fernández and her predecessor and husband, Néstor Kirchner, have denied this repeatedly in public. Both vociferously defended data from the national statistic agency, INDEC, which, economists say, has severely underestimated inflation. The Grand Canyon of a chasm that has long existed between real inflation and INDEC’s inflation has cost Fernández credibility.

On a similar note, almost no analyst believes the government is truthfully reporting poverty data. INDEC estimated poverty at 17.8% in the first quarter of 2008, down from 23.4% a year earlier. Assuming a population of 40 million Argentines, that would put the number of poor at around 7 million. But poverty experts say the percentage of poor people easily tops 30%, putting the number of people in poverty at around 12 million. Even people in the president’s own administration say (off-the-record) poverty is getting worse. As with inflation, seemingly inaccurate poverty data crimp the president’s credibility.

A second credibility problem entails a failure to follow through on publicly-announced plans. Among other things, Fernández announced plans 1) to build a multi-billion dollar high speed train connecting Buenos Aires, Rosario and Cordoba; 2) to pay off more than $6 billion in debt to members of the Paris Club; and 3) to restructure billions of dollars in debt with so-called “holdout” investors who rejected Argentina’s 2005 bond restructuring plan.

These announcements have gone nowhere. In part, this isn’t Fernández’s fault.  The global financial crisis made it harder to fulfill these pledges. A person who knows both Kirchners says keeping their word is important to them. As for these announcements, he says, the Kirchners’ goals simply fell prey to events beyond their control. Nonetheless, the failure to act on them has increased skepticism.

This became even more evident recently when Fernández announced a massive 71-billion-peso plan to invest in infrastructure. The plan, Fernández said, would create 400,000 new construction jobs. As a percentage of the population, that’s even more ambitious than Obama’s plan to create or save 2.5 million jobs. As Fernández made her announcement, my colleagues and I filed headlines and rushed to get details and commentary from economists.

After all, Fernández was announcing a huge plan. How is the government going to pay for this?This would be a good story for The Wall Street Journal, I thought. As a percentage of GDP, this plan appeared huge. I expected the announcement to be in bold print on the cover of every newspaper the next day. Fernández had linked her plan Franklin Roosevelt’s New Deal. However, when I saw the papers the next day, there was relatively little to be found. The announcement was reported but downplayed. Most papers didn’t even make it their lead story. 

What happened? In part the announcement didn’t get much play because it was in reality a kind of “pre-announcement.” Fernández said she’d reveal details of the plan on December 15. But another reason was that it lacked credibility the in the eyes of local journalists, economists and political analysts. Few people believed either a) that Fernández would follow through on the announcement or b) that the announcement was as important as she was making it out to be.

Fernández didn’t say how she’d pay for the plan. So many people assumed she was simply repackaging infrastructure plans that had already been announced or were already included in the 2009-2011 budgets. Fernández’s lack of credibility took the bang out of her announcement. Instead of being met with shock and awe, it was met with silence and skepticism. 

While reporting about the plan, almost everyone I spoke with voiced skepticism: “They don’t have the money for this.” Or, “This is just cosmetics.” To skeptics, Fernández’s speech was merley marketing. It lacked substance. But most importantly, in their view, it lacked credibility. For now, at least, this credibility gap is much more of a problem for Fernández than for Obama.

In La Nación, Joaquín Morales Solá wrote the following in a column titled “The Problem Now Is Trust:”

“Trust. That is what’s missing here and there. The Kirchner’s government has shown in recent days that it still has the ability to confront adversity, but its problem consists in the fact that neither Argentines nor foreigners have any faith in it.”  

Like so many others before it, today’s economic crisis is grounded in psychological problems related to trust and confidence. Consequently, a credibility gap is a major impediment for any government. Compare the following newspaper leads from last month in Argentina and the U.S.

Clarin on Cristina:

“The president won the election with one priority: reinserting Argentina into the world. In that sense, there have been no advances. Nor have there been any advances in other areas. The way in which they nationalized the private pension fund system increased incredulity. We have few partners in the region.”

USA Today on Obama:

“Americans have soaring hopes for the incoming Obama administration and an even higher opinion of the Democrat they just elected president, a new USA TODAY/Gallup Poll shows. Nearly seven in 10 adults, or 68%, said they have a favorable opinion of President-elect Barack Obama. Almost that many — 65% — said they think the country will be better off four years from now.”

Of course, I could cherry pick newspapers for articles more or less favorable to Fernández or Obama. But these two leads reflect widespread sentiment in Argentina and the U.S. Fernández, who began her presidency with relatively high expectations and a 54% approval rating, has lost credibility while Obama is flush with it.

Obama’s openness to questioning and debate (he’s already held more press conferences than any president-elect in modern history), combined with his elaborate policy prescriptions and apparent frankness, lend him a degree of credibility incomparable to anything possessed by Fernández, even when she was at the apex of her popularity. For now, at least, this means Obama is better positioned to deal with the confidence crisis rocking the global economy.

Meanwhile, Fernández’s ability to solve Argentina’s problems – or launch a “New Deal” – is limited because of the government’s low credibility in the eyes of investors. Argentina can’t borrow money. In contrast, the U.S. government is still considered a credible lender. In fact, people are even paying the U.S. government for the right to lend it money. Obama has virtually no limit to the amount of money he can borrow to invest in new schools, roads, bridges and Internet connections.

Substance

This leads to a major substantive difference between what governments in Argentina and the U.S. can do to solve their respective problems. Economists heatedly debate the effectiveness of Roosevelt’s New Deal. But while Obama will be able to engage in massive deficit spending, Argentina will be unable to do so. It will simply have to shift money from one part of the budget to another. Meanwhile, though inflation seems to be diminishing as a problem, the country’s recent and past trouble with inflation will impede the government’s ability to print money. In short, Fernández is stuck with the cash she’s got now. Obama isn’t. 

Beyond style and credibility, on major matters of public policy, the gap between the two leaders appears to be even wider. Detailed descriptions of many Obama policy plans have been online and in the public domain for almost two years. Obama’s web site even allowed people to type in their income and find out exactly how much of tax cut they would get (or wouldn’t) if he were elected. 

If this seems like a minor point, consider the people Obama has named to fill his new cabinet. Most analysts say Obama’s economic team is one of the most qualified ever. Larry Summers, Obama’s pick to head the National Economic Council, is widely viewed as one of the smartest and most experienced economists around. Even if that’s an exaggeration, the contrast with Fernández’s pick to head the Argentine Economy Ministry couldn’t be sharper. When Fernández picked Carlos Fernández (no relation) to head the ministry, the first question on many people’s minds was, “Who’s this guy?” 

“Carlos is a good person, and he’s very good with numbers,” says a government official who has worked with him. “But he’s extremely shy and he has a phobia of speaking in public. He also hasn’t had much exposure to other economists around the world and his understanding of the global economy may be somewhat limited because of that.”

In comparison, Obama chose a cabinet of intellectual power houses who are on the cutting edge of their fields. They will present Obama with clashing ideas about how to deal with the economy. As Obama has repeated in press conferences, he says he’ll listen to his advisors’ ideas – especially when their ideas differ from his – and he’ll analyze them before making policy decisions. It’s too early to know where this approach will get us. The “Best and the Brightest” approach didn’t always work well for John F. Kennedy. But hiring the smartest people around surely is better than the alternative, which seems to characterize Fernández’s approach to personnel and policy.

Those familiar with Fernández’s decision-making method say it is very insular. ”All of the decisions are made at the night table,” between Fernández and her husband, said an official familiar with the formation of government economic policy. (“Todo se arregla en la mesita de luz“.) If this official’s description is accurate, policy is made by Fernández and her husband with little previous debate or consultation. Fernández has no National Economic Council or Council of Economic Advisors to guide her in policy matters. In many ways, public policy seems to be formulated on the fly after events have made new policies obligatory. Many policies are even announced retroactively, indicating a lack of adequate planning. 

Energy experts have been calling on the government for years to raise rates on electricity and gas. Doing so, they have said, would curb power demand, give energy companies incentives to invest in production and distribution capacity, and reduce billions of dollars in government subsidies that keep prices artificially low. The government, which dismissed these calls for years, only recently started letting rates rise, saying this was necessary to reduce demand and reduce subsidies. The rates hikes were made retroactive, leading analysts to cite this as evidence of ad hoc policy making. 

Last month Fernández announced the creation of a new Production Ministry. She made the announcement at an annual meeting of Argentina’s leading manufacturers group, the UIA. I stood next to her Cabinet Chief, Sergio Massa, as he said the ministry’s goal was to promote Argentine production. Apparently, however, nobody in the UIA was consulted about the plan. When I asked the person who organized the UIA event what he thought about the new ministry, he said the announcement took him by surprise: “We didn’t know anything about this.”

How substantive could have been the planning behind the Ministry’s creation if those who will be most affected by it – car manufactures, poultry producers, etc. – weren’t consulted about it? It’s hard to know for sure. But it’s also hard to imagine Obama proposing to reform the American automobile industry – which is in truly disastrous shape – without first consulting a broad range of industry leaders and analysts to discuss the most prudent ways to help the industry.

On Monday Fernández will announce the details of Argentina’s “New Deal.” When she does, she may compare herself to Barack Obama. Some of the challenges the two leaders face are indeed similar. But they seem to differ a great deal in terms of style, credibility and substance.

Both have plans to implement massive public works projects. Both think filling government buildings with low-watt light bulbs is a bright idea. But beyond that, it’s unclear what else they have in common.

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