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It's not the size of the stimulus package, it's how you perceive it.
BOSTON — A close friend of mine — a Democratic voter in Chicago — was worried the night Barack Obama was elected president. “People will turn on him,” she said.
Less than a month into his term, it appears my friend was right. A quick glance at headlines from around the world shows the extent of the damage:
As for the particulars, China’s official Xinhua news agency blasted the stimulus plan’s “Buy American” clause that compels the purchase of U.S.-made materials like iron and steel, calling it a “poison” that could worsen economic hardship.
Brazil threatened to take the U.S. to the World Trade Organization over the provision, Canada’s Prime Minister Stephen Harper called it a “serious matter,” and a leading opposition leader in Ottawa complained that “U.S. protectionism is about to make Canada’s recession a lot worse.” (More on the Canadian reaction to the "Buy American" clause.)
And I haven’t even mentioned Treasury Secretary Timothy Geithner’s stumbling, bumbling, light-on-the-details news conference on plans to fix the U.S. banking system. “Geithner’s Barrel of Gaffes,” is how Barron’s put it.
Of course, a president’s job isn’t to serve the interests of Brazilians, Chinese, Canadians or even British and American editors and columnists. And nobody thought that guiding a $13 trillion economy out of disaster would be easy.
But this early reaction is kind of a big deal.
That’s because it almost doesn’t matter what’s in the U.S. stimulus package — its final size, what gets spent, by whom, where, when, what percentage is government spending, what percentage tax cuts, and so on. As for the banking crisis, it almost doesn’t matter whether the government creates a market to buy up “toxic assets,” or if it conjures a "Super-SIV (special investment vehicle)" or "bad bank" to help unfreeze credit markets.
What matters is how this package — and the administration's response to this rapidly spreading global crisis — is being perceived.
That’s because in economics, confidence is everything. Consumers need it to spend. Banks need it to make loans. Business owners need it to hire new workers and buy new equipment. Investors need it, too — including, and maybe especially, those foreign governments, institutions and individuals around the world expected to finance this explosion of U.S. spending.
But right now the perception among the global chattering classes is that Obama’s economic team is in trouble. And that perception matters when your first job is to reassure consumers, bankers, business leaders and investors that help is on the way.
To make matters worse, these aren’t the usual media suspects. Martin Wolf isn’t right-wing talk radio. Neither is the Economist, Barron’s, Bloomberg and all the other respected news sources dissing the administration’s economic policies.
This global media drip, drip, drip is how public opinion is manufactured. This is when the narratives are created. This is the moment when presidents meet — or fail to meet — expectations. This is especially true when every word, gesture, hint and argument is analyzed and criticized in real time throughout the blogosphere.
Above all, this is the time to have your act together — when an entire country, and an entire world, is looking to you to make things right.
In other words, this is the time to lead.
Of course, it’s early in the game and Obama has shown a commanding grasp of these serious and complex issues. And no one really knows how to fix the mess that we’re in, including all the columnists, commentators and editors who are now piling on the Obama team.
But before the narrative overwhelms him or — even worse — events spin out of control, the president needs to show that his economic team has a comprehensive plan that can work.
And this message, whatever form it takes, isn’t only important for his constituents across the United States. It also matters in London, Berlin, Beijing, Tokyo, Sao Paulo, Moscow, Accra, Cairo and beyond.
That’s because global economics is — at its very heart — a confidence game.
For more on the global economic crisis: