Welcome to Part 2 of our business planner’s report card for the Obama administration’s first 100 days! Please refresh your memory of Part 1 by using the archive link to review last week’s column.
As you may recall, we gave the administration a B minus on its business model and a B plus on its economic volume plans. Now we’ll proceed to establish grades on its cost, revenue, and social value plans.
In the third section of our plan, we ensure that our costs are reasonably aligned with our revenues. We review whether certain products, services, or customer segments are more expensive to serve than others. And we check our contingency plans to verify that we can manage any unforeseen cost overruns.
Looking at our government’s fiscal budget, all we can say is “Yikes!” Our deficit has soared to levels unseen since World War 2. Cost expenditures by citizen group are extremely lopsided; senior citizens, for instance, receive full medical care and prescription drug coverage through the Medicare system, while the working poor pays for their care through payroll taxes while receiving no health benefits at all. Furthermore, there are no contingency plans to reduce Medicare services if the proposed universal health care system experiences cost overruns.
To be sure, some economists (like the Nobel Prize winning columnist Paul Krugman) argue that these expenditures are necessary to prevent an even greater economic catastrophe. Nevertheless, from a business planning perspective, it is very difficult to imagine how the federal government budget may become balanced in the foreseeable future.
Grade: C plus. But only if you’re feeling generous, and only if you agree with economists like Krugman.
In the fourth section of our plan, we confirm that our pricing structure can bring in sufficient resources to finance our operations. We also assess whether we should slash our prices if we are confronted with a price war. And we consider how our competitors are using their own pricing strategies to seize market share from us.
From the perspective of our national government, taxes are the prices that are charged to generate the revenue to finance public services. Certain industries are granted price discounts in the form of tax incentives to keep factories and other employment functions in the United States. And our competitors are nations such as China and India, as well as tax havens such as Monaco and Liechtenstein, that seek to attract American businesses and wealthy individuals to their shores.
How is the administration faring in their quest for new revenue sources? Not badly! Conservative Republicans may not appreciate the administration’s tax plans, but the revenue section of any business plan must explore such options if the preceding section indicates that costs are very high. Thus, in this context, proposals to increase income taxes on wealthy individuals and on polluting companies appear reasonable.
Grade: A minus. But only if you are willing to accept that new revenues are needed to repay the debt being incurred on our soaring costs.
In the final section of our plan, we ensure that our organization can remain solvent on both an accrual accounting and on a cash flow basis. We establish financial and nonfinancial goals and then measure our progress in achieving them. And we refer back to our first section to ensure that we’ve remained faithful to our business model as we’ve progressed through the planning process.
How has the Obama administration fared with these issues? Well, in the short term, every penny of government expenditure has been fully financed through the issuance of U.S. government securities to Chinese and other foreign investors. Nevertheless, the debate rages on whether demand for our debt will weaken over time.
And we’ve certainly established significant nonfinancial goals, such as the abolition of nuclear weapons and the conversion of our oil-fueled economy to one that consumes renewable energy resources. But progress thus far has been mixed; the market share of hybrid automobile models, for instance, has fluctuated along with gasoline prices.
Even arch conservatives admire President Obama’s ability to focus his efforts on just four essential initiatives: the economy, education, energy, and health care. But some believe that he should simply focus on a single issue: the economy.
Who is right? Who is wrong? It’s much to early to tell! The administration has determinedly chosen its path, but it is impossible to see what lies around the turn in the road.
Grade: B. And we can easily visualize this rising to an A+ or falling to an F within a year.
Across all five sections, we’ve given the administration an A minus, a B plus, a B, a B minus, and a C plus. That averages to a respectable B, with a note that our grade for social value may gravitate to virtually any level within a year.
In fact, time will tell whether our entire economy will soar, crash, or simply continue to muddle along at the low end of the economic spectrum. But we’ll continue to blog on a weekly basis, covering the stories that can help you develop your own report card for the Obama administration.