Obama's 'Overleveraged' presidency

So Obama, like a banker who made a bad loan, is confronted with a problem of his own making. The president said Bush acted too hastily in setting up Guantánamo. But Obama's announcement, two days after his inauguration, of a deadline for closing Guantánamo was a rash decision made in even greater haste.

Most presidents propose two or three risky policies in their first year--risky because there's a significant chance of failure to deliver what's promised. In 1981, President Reagan's policies of deep cuts in taxes and spending and aggressively confronting the Soviet Union were dicey. But the economy rebounded 18 months later and the Soviets buckled, though not until Reagan's second term.

Obama has outdone Reagan or any president since Lyndon Johnson, perhaps even since FDR, in risk-taking. He's adopted or proposed eight or nine risky policies (by my count). Re-election doesn't require all of them to succeed. If his policies bring about a briskly growing economy and nothing more, that may be sufficient for Obama to win a second White House term.

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The difficulty is that some of his policies are likely to hinder others. Tax hikes, increased energy costs, and new regulations work against the economic recovery that soaring spending and peacetime deficits at historic highs are supposed (by Obama at least) to spur. A more likely result: stagflation, a simultaneous surge in inflation and interest rates.