From the April 2011 issue of Investment Advisor • Subscribe!

Nixon and China, Obama and Retirement?

Can Barack Obama play against type and solve the most pressing problem that America faces not just right now, but for decades to come?

Nixon and China. Johnson and civil rights. Reagan and glasnost. There’s a long tradition of our nation’s leaders taking bold steps to change the national dialogue. Richard Nixon was the ultimate anti-Communist, yet his trip to Communist China opened the world to the once-hidden kingdom of Mao. LBJ was a southerner through and through, but he made the Voting Rights Act happen. Ronald Reagan railed against the “evil empire” of the USSR, but responded to Mikhail Gorbachev’s perestroika opening and remarkably, the Iron Curtain was torn down bloodlessly.

Perhaps the most telling example of a leader working against type was Bill Clinton instituting welfare reform. Has Barack Obama learned the lessons of the 2010 mid-term election? Can he play against type and solve the most pressing problem that America faces not just right now, but for decades to come? The albatross around the necks of nearly every governor, the millstone around the neck of every president, is not Libya or education reform or nuclear proliferation, but Social Security, Medicare and Medicaid. The IOUs made by the states to their workers and the national government to older Americans keeps the country from making the investments necessary to promote economic growth and add jobs. When the Chinese and other “foreigners” buy our debt, that doesn‘t bother me. When they stop buying our debt, I’ll worry: Those purchases represent a vote of confidence not simply in our government’s ability to repay debt, but in our nation’s ability to grow our economy, to innovate, to add good jobs that an educated work force will snap up. The head of Singapore’s sovereign wealth fund said in early March that foreigners are more sanguine about the health of the U.S. economy, about our ability to innovate, than we are about ourselves.

In an interview with Liz Ann Sonders of Schwab on the occasion of the two-year anniversary of the financial crisis’ March 9, 2009 market nadir, she said she was encouraged by the “tough decisions” being made at the state and local levels on handling the nation’s debt crisis. Does our current president have the political will and courage to respond to Republican leaders like House Speaker John Boehner who said in an interview on March 3 that “it’s time to have an adult conversation with the American people about the big challenges we’re facing … Social Security, Medicare and Medicaid were important programs for tens of millions of Americans. But they’re not sustainable at their current levels.”

What’s your role in this? The leaders of the groups within which many of you network and which advocate for you in Washington are well aware of the problem we face. I’d suggest supporting those groups’ efforts to fix retirement for all Americans. We’re all good at ignoring problems that aren’t staring us in the face and yes, tough decisions will need to be made. If we’re doing it for our children and grandchildren and for the country we love, it will be worth it. Are you listening, Mr. President?

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