Sometimes watching a president is like watching a small business operator. Or the CEO of a big business. Or the big business itself. This is particularly true with President Obama. It can help you understand why he does what he does.
A president arrives from his election with political capital. This is a currency he can spend. It is made up of the good wishes of the people who voted for him. And good wishes from many who did not. These are people who simply want a president to do a good job.
A small business also owns capital. This is money, assets of the business. And the good wishes of customers, employees, bankers who finance it.
A CEO has capital too. It is the support of the board that hired him or her. As well as the analysts on Wall Street who watch his moves under a microscope.
Meanwhile, a big business has capital in the form of money and other assets.
The vital question is: How wisely do each of these spend their capital?
Let us say the small business deploys its capital wisely. This earns more capital in the form of more customers, more business, happy employees. Since it made good use of its capital, it also can now borrow more easily from the bank.
If it spends its capital poorly, its business does not grow. Maybe shrinks. So its options get trimmed.
Likewise, the CEO. By deploying his capital wisely he earns more support from his board. If he deploys it poorly, he loses support. He will be less likely to get his way, because of his track record.
The story is the same for the big company. If it spends its capital wisely it builds markets, builds business. It earns more profit, which can be additional capital. Its shares have increased in value. It can more easily issue new shares, for additional capital. It can more easily sell bonds, for more capital.
If it spends its capital unwisely, the opposite happens. It loses capital. And thereby loses opportunities. Because it has less capital to pursue them.
President Obama spent most of his political capital on unpopular projects. On Obamacare, for instance. At no point has a majority of voters favored it. His green projects are another case. A majority of voters don’t like them. Especially now, when so many have failed. And when we learn how the guys who got the billions in government money gave tens of millions to the president’s campaign.
The President has spent smaller amounts of his political capital on a range of initiatives that were equally unpopular. And by creating policies that disappointed or angered majorities of voters.
The President’s moves clearly caused his party to lose control of the House and to lose ground in the Senate. This is like the CEO losing support of some key board members. It is like the small business losing the confidence of the loan officer at the bank. It is like the big company losing the confidence of Wall Street. Each of them will have to scrub some plans because they no longer have the capital to spend on them. This includes the President.
Lots of critics accuse the President of kicking various cans down the road. They point to the Iran crisis. And Social Security reform, so badly needed. And Medicare reform, needed even more. And tax reform, desperately needed.
The President kicks these cans down the road because he has no other choice. He has spent his political capital. He does not have the support to tackle them. Not in Congress, especially the House. Not with the public. His poll numbers have not been healthy. They tell us that on this run-up to the election he cannot afford to offend any of his supporters.
If he wins re-election he is likely to earn less political capital than four years ago. If the trends hold, he will have even less support in the new Congress than he has now. And at the moment, most experts don’t expect him to win by a landslide. A landslide would add to his political capital. Just as a squeaker would diminish it.
The President may not understand business very well. But a lot of people who run businesses understand his situation. Many of them will call it his predicament.
From Tom ... as in Morgan.

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