The New New Deal (33 page)

“He basically said: ‘Fuck Boehner, it’s coming out,’” LaTourette recalls. “‘We’re not putting anything in for you if you guys aren’t going to help us.’”

Senator Isakson’s tax credit for homebuyers was another juicy target, partly because the CBO priced it at an astronomical $35 billion, partly because a program that would pay you $15,000 to buy your brother’s house seemed sketchy, partly because Isakson voted against the stimulus, too. “I don’t understand the Senate,” Rahm kept saying. “If you get your stuff in the bill, don’t you have to vote for the bill?” No? Well, then screw Senator Isakson. The final deal only included an $8,000 credit limited to first-time homebuyers, cutting its cost over 80 percent.

But Rahm thought the White House needed to put some skin in the game, too. After insisting that the Making Work Pay tax credit was non-negotiable, he now agreed to scale it back from $1,000 to $800 per year per family, trimming over $20 billion from the price tag to try to get the
deal done. The White House also reluctantly accepted only $5 billion for education reform, which had been in line for $15 billion a week earlier. At the last minute, even high-speed rail got trimmed to $8 billion.

“We had to show we were willing to shave our goodies, too,” one aide says.

“N
ancy, this ain’t gonna work.”

Jim Clyburn was not a happy camper. Democrats had just won a historic election, and now they had to shave their goodies and weaken their bill to make sure Republicans didn’t filibuster in the Senate? Clyburn wanted to see them actually filibuster, Mr. Smith–style. Let them haul in cots and explain to the public why they were so eager to block a recovery bill. But Pelosi said no, this is no time to play chicken. So the House plan to revamp the Farm Service Agency computers that seemed to freeze every harvest season was cut 79 percent to appease three Republicans from nonagricultural states. The House plan to aid struggling cities was cut 67 percent, because God forbid some money might go to ACORN. Senator Collins even killed a House provision that would have protected government whistle-blowers from retaliation if they raised alarms about waste or fraud. Clyburn decided it was time to draw a line in the sand, and he drew it at rural broadband.

Clyburn’s beef wasn’t even about how much money to spend, but which bureaucracy would spend it. The House had split its broadband cash between Commerce and Agriculture, while the Senate had given it all to Commerce. The White House sided with the Senate for policy reasons; Obama’s advisers wanted to promote “middle-mile” projects that could extend high-speed Internet to institutions like schools and hospitals, while Agriculture tended to favor “last-mile” projects serving individual homes at more modest speeds. And an independent watchdog had concluded that Agriculture’s program was an ineffectual mess.
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But Clyburn was sure his rural constituents would never get wired if Commerce got all the money. (An Agriculture Department lobbyist was making that very case to lawmakers behind the new president’s back.) While Pelosi was negotiating with Obama, Clyburn insisted he’d oppose
the stimulus if Agriculture didn’t get its share. She threw up her hands and handed Clyburn her cell phone.

“Mr. President,” Clyburn repeated, “this ain’t gonna work.”

In the end, Clyburn managed to steer about a third of the Recovery Act’s $7.2 billion in broadband grants to Agriculture. “Oh, Obama got it,” Clyburn says with a laugh.

At the time, many House Democrats felt like they were getting rolled on just about everything else. “It always felt like an unequal partnership,” Becerra says. “The president would say: You’ve got to jump, because otherwise the Senate will filibuster. And the House would say: How high?” Actually, House Democrats scored several victories over the Senate. For example, they secured $15 billion to expand the child tax credit, providing extra help to thirteen million low-income children. They killed the Senate’s risky plan for new nuclear loans, and most of its tax incentives for car buyers. Pelosi, who liked to say her top three priorities were science, science, and science, also protected the House’s line items for labs and basic research.

“Nancy said: Maybe we’ll have to compromise somewhere else, but we’re not compromising on science,” says Bart Gordon of Tennessee, the House Science Committee chairman.

But the most intense negotiations were about education, where the House really was getting rolled. “Oh, that was way beyond frustration,” Charlie Rangel says. “Whichever senator wants to be wooed, we’re just supposed to accept it.” Obey was scrambling to restore some of the Senate cuts, but that required trims to other items lawmakers liked: veterans hospitals, public housing repairs, construction at the Centers for Disease Control. Meanwhile, Rahm and Orszag seemed to be competing for a job as Susan Collins’s personal valet.

“I was getting vilified in the House,” Rahm recalls. “How could I be so disloyal? How could I be locked in a room with three Republican senators?”

Pelosi didn’t mind Rahm talking to the Republicans; she minded him caving to their threats. She had a hard time believing that anyone would vote against a jobs bill just because it included money to fix
schools, and she repeatedly screamed at Rahm and Phil Schiliro to drive a harder bargain. I asked Rahm if it was true that Pelosi was yelling at him daily. “Hourly,” he replied.

“There was a lot of frustration about the Senate Republicans driving the train,” says one Pelosi aide. “She wanted to see the administration pushing back.”

Rahm did try to steer $10 billion back into school construction, but the moderates said no. Orszag proposed limiting the money to repairs of existing schools. Still no. Could states at least use their general education aid to fix schools? That was at least something to talk about. But it raised other arcane questions: How much of the aid would be eligible? Would governors control the money? During one technical dispute over how some language would affect Maine’s school construction agency, Orszag begged Collins to give ground.

“Please,” he said. “Do this for me.”

Collins just laughed.

“That’s funny,” she said. “You still want people to like you.”

The final spat on the Senate side did not pit the moderates against the leadership, but Specter against Ben Nelson, who wanted to tweak the Recovery Act’s formula for distributing Medicaid funds to get rural states extra cash.
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Specter said: No way. Orszag did some calculations in his head, and informed Rahm that Nelson was hijacking the entire stimulus over $25 million. Rahm pulled Nelson aside and told him: Don’t fuck this up. We’ll get you $25 million some other way. This wouldn’t be the last time Nelson held up major legislation to extort some extra swag for Nebraska; his “Cornhusker Kickback” would become the most notorious provision in Obama’s health care bill.

It was perhaps fitting that on Wednesday afternoon, after Reid announced that the House and the Senate had reached a final agreement that would spend less money and create more jobs, Pelosi denied that the deal was done, and angry House Democrats blew off a public meeting with their Senate counterparts. By evening, the two sides had finalized a $787 billion deal, but House Democrats were still carping. Reid understood their frustration with the Senate’s get-to-sixty culture, and
the way it turned random backbenchers into power brokers. But this wasn’t his first game of Senate poker, and he knew Collins and her fellow moderates held all the cards.

“They give me three aces, Susan pulls out a full house,” said Reid, who got his start in politics on the Nevada Gaming Commission.
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“No matter what I was dealt, she had a better hand.”

Progressives like Becerra wanted to call the Republican bluff. He didn’t think this was the time to establish a precedent that Republicans could water down the Obama agenda whenever they wanted. When were Democrats ever going to have a better hand than they had when the president was at 70 percent, the Republican brand was radioactive, and the economy was teetering on the brink?

“My argument was: The public just hired us to produce,” Becerra says. “If we don’t produce, nobody’s going to care that the stimulus morphed into something less stimulative because we needed a few Republican votes. They’re going to remember that they gave us the reins.”

F
or Obama, it was time to escape the Washington bubble.

Somehow, the narrative had shifted from economic suffering and change to horse-trading and catfish subsidies. So while Rahm was haggling on the Hill, Obama took his first road trips, to try to remind Americans what the fight was about. His first stop was the recreational vehicle capital of Elkhart, Indiana, a hard-scrabble industrial town with the nation’s fastest-growing unemployment rate. He then visited the seaside foreclosure mecca of Fort Myers, Florida, where Governor Crist hugged him, warmly endorsed the Recovery Act, and reinforced his bipartisan message. But even back in campaign mode, the White House struggled to get its point across. The Elkhart trip was overshadowed by Obama’s first press conference. The Fort Myers trip was overshadowed by Treasury Secretary Geithner’s speech outlining his plans to address the real estate bust—and by the market’s brutal reaction to his inability to articulate those plans.

Obama’s third trip of the week, to the bellwether city of Peoria, Illinois, was another messaging mess. The president visited a Caterpillar
plant that had just announced mass layoffs, and declared the heavy-equipment company would start hiring again once Congress passed the stimulus.
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But after the event, the company’s CEO told reporters he might let even more workers go regardless of the stimulus.
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That did not play well in Peoria or anywhere else. “You had the story that whole day: The president said this, Cat said that,” recalls Aaron Schock, the area’s Republican congressman. In his speech, Obama called out the twenty-seven-year-old Schock, who had hitched a ride to the event on Air Force One, and urged him to follow the bipartisan example of his predecessor from Peoria, Transportation Secretary Ray LaHood. But afterward, Schock told reporters that not a single Caterpillar employee had asked him to support the stimulus—and that he still intended to vote no, because it didn’t include enough infrastructure spending that would put Caterpillar’s earthmovers to work.

As if Caterpillar and Schock weren’t doing enough to drown out Obama’s message of jobs and bipartisanship, news broke while he was on the factory floor that Senator Gregg was withdrawing from consideration for Commerce. Gregg let it be known that the main reason for his bait-and-switch was his discomfort with the stimulus he had called “extraordinarily bold and aggressive, effective and comprehensive.” Gregg publicly apologized for changing his mind, but his sudden withdrawal made it sound like the Recovery Act must be egregiously partisan to provoke such an act of conscience.

When I spoke to Gregg two years later, he called the stimulus a “monstrosity,” and seemed to forget he had ever praised it. “It was fundamentally flawed from the beginning,” he told me. “A serious package would have been mostly infrastructure: schools, research, transportation, things that add physical value to the economy. I mean, health IT? A bunch of hospitals wanted money. Basically, the stimulus was walking-around money for appropriators.”

So why on earth did he pursue an administration job?

“I guess I got caught up in the euphoria of the moment.”

In fact, Gregg’s
Wall Street Journal
op-ed in January specifically called for stimulus investments in “integrated IT in public industries
like health care,” describing them as twenty-first-century infrastructure.
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Schools? Republicans were blocking additional investments, not Obama. Research? The Recovery Act included the largest funding increase in history. Transportation? Again, the stimulus had plenty of it, and again, Republicans blocked efforts to add more of it.

No, Gregg’s about-face was less about the substance of the stimulus than his own identity as a Republican. He was under intense pressure from McConnell and other party leaders not to give Obamaworld a bipartisan imprimatur. Even former First Lady Barbara Bush called to tell him to come to his senses. Once Gregg agreed to flip-flop, he swiftly began denouncing the “Obama Spend-o-rama.” He even wrote a bill to ban the use of stimulus funds on signs identifying stimulus projects. “Those signs cost $2,000 apiece!” he says. “That money could have stimulated the economy. It’s pure self-promotion. It’s Chicago politics.” In fact, sign makers are part of the economy, signs routinely inform taxpayers how their money is spent, and Gregg had never expressed concern about self-promotion when he was earmarking $500,000 for the “Judd Gregg Meteorology Institute.” But once Gregg—or “Secretary Gregg,” as he was derisively known at the White House—decided to stick with the red team, he fully embraced the party line that the blue team was run by thuggish radicals.

“I suspect this was an eye-opener for them, too,” Gregg admits. “From that point on, there was no bipartisanship.”

N
ot enough bipartisanship. Not enough presidential leadership.

Not enough infrastructure. Not enough tax cuts.

Not enough stimulus.

As Congress prepared for its final vote on the Recovery Act—on Friday the 13th—the national debate focused almost entirely on what it lacked. “Mr. Obama’s victory feels more than a bit like defeat,” Paul Krugman wrote.
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Nobody seemed to be dwelling on what the stimulus had.

With so many big numbers being thrown around, it was easy to forget how impressive $787 billion actually was. It was about the size of the annual economic output of Florida or the Netherlands.
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It was bigger than the military budget or the nonmilitary discretionary budget. Since it included the nonstimulative $70 billion AMT patch, plus a few long-range projects like high-speed rail and health IT, the immediate fiscal jolt was shaping up as a bit less than $700 billion. But it was still the boldest countercyclical push in U.S. history, far more aggressive as a percentage of GDP than the New Deal’s ever was.
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It dwarfed the stimulus packages passed by most of our economic rivals, with the glaring exception of China, which had announced plans to pour $586 billion into an economy one third the size of ours.
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