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Friday, January 13, 2012

David Brooks, "The C.E.O. in Politics": Ignoring Cost-Benefit Analysis

This is one of those rare days when David Brooks and Paul Krugman reach similar conclusions in their respective New York Times op-eds.

As observed in my prior blog entry (http://jgcaesarea.blogspot.com/2012/01/paul-krugman-america-isnt-corporation.html), Paul Krugman today opines that the US does not need a successful businessman as president, inasmuch as "Making good economic policy isn’t at all like maximizing corporate profits." Likewise, in his op-ed entitled "The C.E.O. in Politics" (http://www.nytimes.com/2012/01/13/opinion/brooks-the-ceo-in-politics.html?hp), David Brooks concludes:

"Today’s candidates have to invent bogus story lines to explain their qualifications to be president — that they are innocent outsiders or business whizzes. In reality, Romney’s Bain success is largely irrelevant to the question of whether he could be a good president. The real question is whether he has picked up traits like emotional security, political judgment and an instrumental mind-set from his upbringing and the deeper experiences of life."

I agree with Brooks that "leadership" is a trait required by successful presidents, but before dismissing business acumen, consider whether cost-benefit analysis ("CBA"), which is necessary to manage any large corporation, doesn't also figure into the equation of determining presidential policy.

Example:

President Obama can add to the current budget deficit with the expectation of resultant economic growth and improved employment statistics. On the other hand, he needs to consider whether any additional sum that is borrowed can ultimately be repaid, whether profligate spending could erode the value of the dollar and increase the US trade deficit, and whether the spectre of a US default on its debt (yes, I know -- more dollars could always be printed) would tear the world economy asunder.

Another example:

President Obama decided to send additional troops to Afghanistan in an attempt to stabilize this war zone in a manner akin to Bush's Iraqi "Surge." On the other hand, he could have decided that sending additional ground forces to Afghanistan was unlikely to achieve lasting political results within Afghanistan, that there were no foreseeable regional benefits to maintaining a US presence in Afghanistan, and that this escalation would contribute meaningfully to the US budget deficit. Not a businessman and not attuned to CBA, Obama made the wrong decision.

Bottom line: CBA is critical in both business and government.

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