The New New Deal (32 page)

He needed them, and they knew it.

S
pecter had only two ransom demands. First, the stimulus had to cost less than $800 billion, because—well, because. That was the hard limit for the three remaining Republicans, and for quite a few Democrats. Second, Specter wanted $10 billion in the bill for NIH, because medical research was underfunded.

“Are you fucking
kidding
me?”

Rahm seemed to think $10 billion sounded high.

“What the
fuck
does a vote cost around here?”

“Snarlin’ Arlen” was a stubborn coot, a former prosecutor who lacked the backslapping social graces of his fellow politicians. This isn’t a negotiation, he said. This is my bottom line. No, I won’t take $8 billion. No, there’s nothing to discuss.

“How the
fuck
am I supposed to keep this under $800 billion if I have to give every senator $10 billion?” Rahm screamed.

The Recovery Act was a complex bill, and the negotiations to get it through the Senate were complex, too. There were a lot of moving parts, and the different players had different priorities. But as they started cutting the deal in Reid’s office that Friday, February 6, the bottom line was pretty simple. The Democrats wanted a stimulus, and they couldn’t get one without Specter, Collins, and Snowe.

Lieberman was in the room to support Collins—she joked that she needed a Jewish lawyer—and he watched Specter’s shakedown with a mix of amusement and admiration. Rahm had all the logic on his side, but Specter had all the power.

“Everyone’s saying: ‘Come on, Arlen. Get real.’ But he wouldn’t budge,” Lieberman says. “He negotiated the most noble quid pro quo I’ve ever seen. It wasn’t like he was asking for some water project. It was NIH!”

The Republican trio clearly had all the leverage; Reid privately called them “the king and two queens.” And along with Nelson, they maximized
their leverage by agreeing that unless all four of them were satisfied, none of them would support the stimulus. That was the Democratic nightmare scenario: Republicans would get to say the only thing bipartisan about the Recovery Act was the opposition, Obama would look impotent, and the economy would crater. Rahm didn’t like the idea of negotiating at gunpoint, and he really didn’t like the idea of a few preening senators telling the leader of the free world what to put in his recovery plan. But unless somebody could figure out how to get Al Franken seated, Rahm didn’t see a route to 60 votes that didn’t involve serious ass-kissing followed by serious capitulation.
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“You’re confronted with what was possible versus what was ideal, with the prospect of inaction completely unthinkable,” David Axelrod says. “So yeah, the house was burning, and we had to haggle with a handful of senators over the cost of the hose.”

Reid knew the time for posturing was over. It was time to pay the kidnappers and free the hostage.

“Harry basically said: How do we get your vote?” recalls Senator Byron Dorgan of North Dakota, a member of Reid’s leadership team who attended the talks. “It was just: What are you willing to support? We had to get to yes.”

By late evening, the group had hashed out $110 billion in cuts, about half in education, with a final goal of slimming the package to $780 billion. Collins insisted on deleting the entire $16 billion for school construction, a presidential priority. Lieberman tried to broker some middle ground, but Collins wouldn’t budge. “Look, she wasn’t going for it,” Lieberman says. “So what could we do?” Collins also declared pandemic flu preparations a nonstarter, but Lieberman persuaded her to shift that $870 million to community health clinics rather than kill it outright.

“I hope they have that on my list of good deeds when I get to the gates of heaven,” he says.

The deal also whacked over $40 billion in state education aid, $8 billion for energy efficiency retrofits of federal buildings, and $6 billion in preventive health programs. Rahm managed to save Race to the Top,
but its funding was cut in half. There were also significant cuts to food stamps, Head Start, health care for laid-off workers, and other antipoverty spending. High-speed rail was whittled to $2 billion—more than the House bill, but a long trip from $40–$50 billion.

“We’ve trimmed the fat, fried the bacon, and milked the sacred cows,” Nelson crowed on the Senate floor.

Dorgan and Durbin, the New Deal liberals in the room, didn’t see what was so fatty about food stamps and preventive care. They thought slimming the stimulus would just lop off jobs and hurt people in need. But they didn’t have three votes in their pockets, so they had to accept whatever the swing senators would accept. They consoled themselves with the thought that $780 billion was still massive.

“Yeah, I would have liked it even more massive. But there simply wasn’t room for anything bigger,” Dorgan says.

Even after the deal was done, Rahm had a last minute freak-out: Are we sure Specter is on board? “He went radio silent,” Rahm recalls. He called Obama: We can’t find Specter! He called Biden: Can you find Specter? “I went to sleep not sure where he was, physically or on the vote,” Rahm recalls. But at six the next morning, he checked his Black-Berry and found a note from the vice president: Specter was okay. At that morning’s intelligence briefing, Rahm and Biden exchanged gleeful high fives, as the national security team wondered what exactly in the intel had gotten them so excited.

The Senate passed the slimmed-down bill, 61–37, with still-Senator Gregg abstaining and not-yet-Senator Franken cooling his heels in Minnesota.
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Pale and weakened, Ted Kennedy had to be flown in for the vote on a government plane, because no Republicans would risk the wrath of the right by voting his proxy. At least Obama could finally point to a bipartisan deal, with support from the Chamber of Commerce as well as the AFL-CIO, the National Governors Association as well as the U.S. Conference of Mayors, not to mention advocates for seniors and kids, the poor and the environment, technology and manufacturing.

Nevertheless, Washington Republicans continued to dismiss the stimulus as partisan giveaway to Democratic interest groups. On the
Sunday political shows, where he would remain a near-permanent fixture, John McCain scoffed that Obama would need more than three Republicans on his side to prove he was serious about bipartisanship.
²³⁹
Evidently, governors, mayors, and cabinet members didn’t count.

“That’s not bipartisanship,” McCain declared with the definitive air of an official arbiter. “That’s just picking off a couple of Republican senators.”

“I
am
so
happy bipartisanship is important to the Republicans again!” Pelosi sneered.
²⁴⁰
“For eight years, they didn’t seem to care about reaching across the aisle. But now it’s ‘Boo, hoo, what about us?’ After they treated us like sewer rats for eight years, we were worried that bipartisanship didn’t matter to them.”

Okay, that wasn’t really Pelosi. It was a
Saturday Night Live
actress playing Pelosi in all her crazy-eyed, ultra-partisan glory, bragging about how she didn’t pander to Republicans, chastising Reid for agreeing to cut education spending in the stimulus. “Let’s try to remember something,” the fake Pelosi said.
“We won!”

The real Pelosi’s reaction to the Senate deal was not that different. She said the Senate’s cuts would “do violence to what we are trying to do for the future.” And she fumed about Washington’s obsession with bipartisanship, the Beltway habit of judging legislation according to how many Republicans supported it rather than what was in it. The real Pelosi understood why Reid made concessions, but the House and Senate still had to reconcile their versions of the stimulus, and she did not feel bound by the demands of Presidents Specter, Collins, and Snowe.

“She was pissed,” says one senior Pelosi aide. “Look: She’s a whip at heart. She understands realpolitik, and she knows the Senate needs sixty votes. But she didn’t want the House taken for granted.”

I
n
The Audacity of Hope
, Obama had written about the pathologies of modern Washington: politics as an endless war between potbellied gladiators from the red and blue teams, split-the-difference centrists who assume they’re in the right as long as they’re in the center, Republicans
who don’t traffic in facts and can’t take yes for an answer.
²⁴¹
It still seemed surreal from his new vantage point.

The economy had shed nearly four million jobs, half of them in the last three months, yet he was stuck in a head-of-a-pin debate about how many Republicans it took to make a bipartisan deal bipartisan. Congress was on the verge of passing a sweeping bill to bandage a bleeding economy, cut taxes for working families, help victims of the slump, and attack intractable social problems, and the cable chatter was about “ACORN-eligible block grants” (McConnell’s creative rebranding of community development assistance to cities) and aid to small shipyards. Meanwhile, purity-test progressives were whining about the most progressive piece of social and economic legislation in decades. And Republicans who had praised his call for $300 billion in tax cuts were bashing a bill with over $300 billion in tax cuts.

At his first press conference, Obama mused that he probably should have pretended he didn’t want tax cuts, then let Republicans take credit for adding them.
²⁴²

“I get the sense that there’s some ideological blockage there that needs to be cleared up,” Obama said. “But I am the eternal optimist. I think that over time people respond to civility and rational argument.”

T
he Senate passed its version of the stimulus on Tuesday, February 10. Now House and Senate leaders had to negotiate a deal in time for both chambers to pass a final version by Friday. There was no longer time for polite suggestions and hints. That night, Rahm delivered a White House list of funding directives to Pelosi and Reid, who immediately instructed staff to convert them into legislative language.
²⁴³
The critics who mock Obama for punting the stimulus to Congress have never seen this list, which designated specific dollar amounts for over 150 specific programs. It looks an awful lot like the final bill.

The one shocker on the list was high-speed rail. With school construction in danger, Rahm believed the stimulus badly needed a new marquee project. Initiatives like the smart grid and education reform would be transformative, but virtually invisible. High-speed rail would put men in hard hats to work on a visionary mission that Americans could see and appreciate. Obama loved the idea, and while his economists didn’t, Rahm told them a massive investment in fast trains would persuade moderate House Republicans to support the stimulus.

“They’re horny for high-speed rail!” he said.

Normally, high-speed rail would have ended up somewhere between
the House mark of $300 million and the Senate’s proposal of $2 billion. But the White House list pegged it for $10 billion.

“Whoa, where did this come from?” one Senate staffer asked.

It came from a four-letter word that starts with R and rhymes with bomb.

“This is the way it’s going to be,” Reid told the staff. “Just get it done.”

T
he delivery of the White House list kicked off twenty-four hours of chaotic shuttle diplomacy. Rahm and Peter Orszag—who was thrown into the talks because of his strong relationships with the Senate moderates as well as his budget chops—met Tuesday night with Democratic leaders in the speaker’s office to discuss tweaks. After the meeting broke up around 11:30
P.M
., staffers worked all night drafting, before their bosses started negotiating again in the morning.

Aside from the abrupt expansion of high-speed rail, the talks were about subtraction. The Congressional Budget Office had priced the Senate bill at $838 billion, even after the cuts demanded by the moderates; the House version was $819 billion without the Alternative Minimum Tax patch.
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So there would have to be further shrinkage to keep the moderates on board. “We were backed down by Specter and the twin princesses of Maine,” Obey grouses.

The obvious place to start cutting was the AMT fix. Initially, the White House hadn’t objected to its inclusion in the stimulus, even though it wasn’t really stimulus. Everyone knew Congress would get around to passing it sooner or later, and many Democrats—including Pelosi—were happy to deal with it now, to avoid a messy fight over how to pay for it later. But once the overall size of the package was capped, $70 billion for the AMT meant $70 billion less stimulus, a stiff price to pay to help Congress with its housekeeping. Obama’s economists were clamoring to get rid of it, but the Senate moderates said no, the AMT had to stay, even though averting a tax hike no one expected wouldn’t
create jobs.
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Snowe was particularly insistent; she had promised her friend Chuck Grassley she would protect the patch.

“She wants to make Grassley happy, even though he’s not voting for the bill,” Rahm says. “It was the weirdest $70 billion I ever spent, and it wasn’t my money!”

Rahm was tired of sucking up to Republicans and getting nothing in return, which is why his next target was the carryback tax credit for banks, builders, and other businesses with severe losses. Boehner had told Rahm it was the GOP’s top stimulus priority, so initially Rahm had lobbied hard to get skeptical Democrats to include a $15 billion carry-back, hoping it would entice Republicans to support the overall bill. “The way Rahm was screaming, you would’ve thought it was the thing he cared about most in the world,” one staffer recalls. But his here-kitty-kitty strategy hadn’t attracted GOP votes, so now Rahm lobbied just as hard to kill the carryback. The final deal limited the credit to small businesses, which slashed its cost below $1 billion. Rahm warned his Monocle pal Steve LaTourette that the disappearing carryback should be a lesson to Republicans about the consequences of intransigence.