Updated from 7:02 a.m. EST
I certainly wish George Bush good luck. He'll need it. It would be so much easier to solve many of the problems facing Bush in his second term if a wave of good luck -- lower oil prices or higher-than-expected economic growth in Japan and Europe, for example -- swept across the next four years.
But Bush can't wait passively for luck to bail him out. If I could get Bush to listen to one piece of advice, it would be this quote from baseball's Branch Rickey: "Good luck is the residue of design." He must now begin putting structure and plans in place that will put good luck on our side.
Learning From the 'Lucky'
It may seem odd to offer the president advice from a baseball man, but Rickey's career justifies heeding his words. He constructed baseball dynasties in St. Louis in the 1920s (nine National League pennants and six world championships) and Brooklyn in the 1940s (seven pennants and, finally, victory over the Yankees in 1955), and built long-term success in a game often decided by an infield pebble or a moment's hesitation in throwing to home. Rickey did it by creating institutions that made him luckier, year in and year out, than competing general managers.
Rickey invented the modern minor league farm system to guarantee the Cardinals a steady stream of young talent. It brought him the "good luck" of Dizzy and Paul Dean, the pitchers who anchored Cardinal pennant winners, and Johnny Podres, the kid who finally beat the Yankees for the Dodgers.
Rickey pioneered the use of statistics to evaluate baseball talent. That brought him the good luck of Joe Medwick, who came back to hit .312 for the Dodgers one last time in 1946. It also brought him the good luck of trading Dixie Walker to the Pirates for Billy Cox and Preacher Roe in 1947, after Walker had hit better than .300 for the Dodgers for eight years. Two years later, Walker was out of baseball.
And Rickey broke baseball's color line so he could tap into a pool of talent from the Negro League that his benighted competitors were determined to ignore. That brought him the good luck of Jackie Robinson, Don Newcombe and Roy Campanella, critical players at the core of the great Dodgers teams of the 1950s.
Five Pointers for the Next President
Here's how I'd apply Rickey's advice to five critical issues facing Bush in his second term.
Make your good luck on oil prices.
Want to bet the future of the U.S. economy on oil not going to $60 a barrel? Applying technical analysis to the trend in oil prices, Phil Erlanger, editor of
Erlanger Squeeze Play
, has calculated that the recent pullback means that the price of oil probably won't hit $70 a barrel in either November or December 2004.
But, Erlanger calculates, oil could still go to $60 in December, and it would take a drop below $47 a barrel to break that trend. And $60-a-barrel oil would take a big bite out of U.S. economic growth, according to economists surveyed by
The Wall Street Journal
this month. Prices of $40 to $49 a barrel cut GDP growth by just one-tenth of a percentage point, the consensus of economists surveyed concludes. Prices of $50 to $59 would cut growth by one-half of a percentage point. But prices of $60 to $69 a barrel would take a full percentage point off annual growth.
The U.S. has been lucky so far: Today, America wrings twice as many dollars out of GDP from each barrel of oil as it did in 1975. But the U.S. economy still lags well behind Japan (which uses about one-third as much oil per dollar of GDP), Germany and the U.K.
Doubling the efficiency of the U.S. economy all over again by 2025 would save about $70 billion a year, calculates a study produced by Amory Lovins for those wild-eyed radicals in the Pentagon. One eye-catching projection by Lovins: It would cost about $12 in efficiency investments to save a barrel of oil.
Make your own luck on consumer demand.
This last recession proved to be one of the shortest and shallowest on record. Part of the reason was the willingness of consumers to keep spending, thanks to the Bush tax cuts and a tidal wave of mortgage refinancings.
But consumers sound increasingly worried: The University of Michigan consumer sentiment index for October fell again. It was the third consecutive monthly decline, and it takes the index to its lowest level since May. The part of the index that focuses on expectations for the future fell 5% and is now down 16% since January.
That's troubling enough, but the other leg that supported the economy during the recession also looks wobbly. Many big U.S. companies, especially the big U.S. automakers
, kept their factories running at full speed as the economy slowed, even if it required extraordinary consumer subsidies to sell the resulting product.
That certainly helped head off the classic recessionary cycle of slower sales/layoffs/smaller paychecks/even slower sales/more layoffs. Now, though, GM and Ford at least have finally decided to cut production, under pressure from auto dealers who say they're getting eaten alive by the higher interest costs created by overflowing lots. Both companies now plan cuts in overtime and the temporary layoffs of thousands of workers.
Granted, Congress has spent us into a deep hole in the last four years. That makes it tough to increase government spending to head off a weakening of the economy, but it does look like consumer demand will need another boost in 2005. Maybe this time it will come through increased spending on domestic infrastructure such as roads, schools, bridges, homeland security and the like. After all, workers without income don't get much of a jump-start from tax cuts.
Make your own luck on the dollar.
Everybody knows the only way out of the huge trade deficit the U.S. is currently running is a decline in the value of the dollar of as much as 30%. Still, the speed of this decline makes all the difference in the world. Go too fast and the odds of recession and financial panic go way up. Slow the pace enough and the decline could almost go unnoticed.
So instead of everyone at the
talking about the dollar's inevitable decline, how about a credible commitment to a federal budget that may run a deficit to head off a recession but that will strive for balance or even a surplus when the economy is in good shape? That could keep the foreign central banks that now hold the fate of the dollar in their hands from dumping their greenbacks in a rush to be first out of a sinking currency.
Make your own luck on outsourcing.
There isn't a tariff high enough to make a U.S. worker earning $18 an hour competitive with an overseas worker earning $2 an hour or less. But we can close the benefit gap with industrialized competitors such as Japan and Germany.
At GM, for example, the average cost of providing health care and pension benefits is around $1,360 a car. At
U.S. operations, the health care and pension benefit cost is only $107 a car. Back home in Japan, the benefit costs are even lower because taxpayer-supported nationalized health care systems pick up the costs.
Closing this benefit gap would require a major overhaul of health care insurance in the U.S. that would shift costs from employers to the U.S. government. That's been a hard sell as long as the change has been presented as one based on the social justice of guaranteeing health care to the millions of Americans who now can't afford it. A proposal might face easier going if it were targeted at making the U.S. more competitive globally.
Make your own luck on the stock market.
Alan Greenspan and the Fed engineered a boom market in real estate that distracted investors from their losses in the aftermath of the bursting of the stock market bubble in 2000. With home values soaring, the losses in 401(k)s didn't seem as crushing. But that play is almost over: Even if home values don't come crashing back to earth -- and I don't think they will -- the period of rapid appreciation is over. Homeowners can look forward to much more modest gains. So it's time for a vigorous and credible program that would restore investor confidence in the stock market.
Sarbanes-Oxley and the tepid response to corporate scandals from the
Securities and Exchange Commission
certainly haven't done the trick. I get emails every week from readers asking, "Why would anyone ever invest in stocks again?" Too many potential investors still see the game as fixed. The president can't do much, if anything, to make stocks rise, and probably shouldn't do anything, as the Fed demonstrated to our pain in the late 1990s. But because a rising stock market is a key building block of consumer confidence, the market shouldn't be laboring under a cloud of suspicion that makes equity gains more difficult, and less likely to persist for the long term.
Policies like these won't guarantee good luck, but they certainly make it more likely. But after a campaign that's been long on vitriol and has raised the issue of leadership often enough that voters can be pardoned for thinking that a president should lead, make-your-own luck policies are a chance to demonstrate that the country has direction.
As that other great baseball philosopher Yogi Berra put it: "When you come to a fork in the road ... take it."
At the time of publication, Jim Jubak owned or controlled shares in none of the equities mentioned in this column. He does not own short positions in any stock mentioned in this column. Email Jubak at