The New New Deal (39 page)

But these debates were mostly about how to “score” the loan’s risk of default to determine how much money to set aside in reserves, not whether to make the loan in the first place. OMB did nudge the score upward to reflect a 20 percent chance of failure—risky, but nowhere near as risky as the 50 percent rating for a $5.9 billion loan to help Ford build factories for fuel-efficient cars, a loan that’s looking fine.

In any case, there was no evidence of any improper political influence in any of the emails, inside or outside the administration, and officials testified under oath that there wasn’t any. There clearly was logistical pressure in the last two weeks, when the White House wanted to make sure the loan was finalized in time for Biden’s announcement. Steve Spinner, the Chu adviser who had bundled money in Silicon Valley for Obama, said in an email that the White House was “breathing down my neck.” This later became grist for the scandal mill, because Spinner’s wife was a partner in Solyndra’s law firm, and he had recused
himself from decisions about the firm’s loan. But the decision to grant Solyndra a loan had been made months earlier, before Spinner joined the department.

It did turn out to be a bad decision. And it was not an entirely unforseeable bad decision. “When I heard they got the first loan, I thought: ‘Oh, no! Noooooooo!’” a department official told me in 2010, a year before Solyndra went bust. But busted loans are a part of project finance. In any case, Rogers says he never felt an iota of White House pressure to approve Solyndra’s application.

“It wasn’t a hard call,” Rogers says. “We were trying to drive change, right?”

T
he day the February jobs report came out, Obama traveled to Columbus, Ohio, to show what change looked like. It was graduation day at the cash-strapped city’s police academy, and the president shared the stage with twenty-five happy recruits wearing white shirts and caps with black ties and pants. A few weeks earlier, they had all received layoff notices, but thanks to a $1.25 million stimulus grant, they were being sworn in to protect and serve. It wasn’t clear if their jobs had been saved or created, but it was clear they wouldn’t have had their jobs without the Recovery Act.

In his speech, Obama invited stimulus skeptics to visit Ohio and talk to teachers who were still educating kids, nurses who were still caring for the sick, firefighters who were still keeping their towns safe.
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“I ask them to meet the 25 men and women who will soon be protecting the streets of Columbus because we passed this plan,” he said. “I look into their eyes and I see their badges, and I know we did the right thing.”

It was a nice day for the cadets, but their reprieve seemed insignificant compared to the news that 650,000 more jobs had vanished, spiking the unemployment rate to 8.1 percent. Two weeks into the stimulus, the White House forecast that joblessness would peak at 8 percent was already wrong. And while it made no sense to blame Obama for the 1.5 million jobs already lost “on his watch,” his aides knew they’d end up
on his political ledger. If Obama had been inaugurated in March, like FDR, Americans might have gotten a better sense that the economy he inherited was not just troubled but mangled.

“For the country’s sake, thank God he didn’t have to wait,” Obama strategist Anita Dunn says. “But politically, it would’ve been nice to have the January and February numbers accrued to the last guy.”

During the Great Depression, America had its holy-shit moment well before FDR took office; during the Great Recession, it happened with Obama already in the chair. It was hard to sell a message of a better tomorrow when today was so much worse than yesterday. The president’s cross-country trip to highlight twenty-five Americans who hadn’t lost their jobs seemed pitiful when 650,000 others had. And it didn’t fit the prevailing bad-news narrative. Axelrod liked to quote Walter Cronkite’s line about the media: “We don’t report the cats that don’t run away.” After her home state of California approved a massive anti-stimulus of spending cuts and tax increases, Romer tried to explain that without the Recovery Act, the cuts would have been much bigger, and the state might have defaulted. “It certainly doesn’t feel like we’ve accomplished anything, but we have,” she said.
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That was true, but as Barney Frank liked to say, no one ever got reelected with a bumper sticker that said: “It would’ve been worse without me.” The same rule applies to: “It certainly doesn’t feel like we’ve accomplished anything, but we have.”

This was the counterfactual problem that would haunt the Obama presidency, the impossible task of persuading people to be glad their broken arm wasn’t a crushed skull. People rarely ask: Compared to what? This problem came with what Rahm called “the gift bag,” the overseas quagmires, crushing deficits, and economic freefall that Bush bequeathed to his successor. Like the stimulus itself, Obama’s post-stimulus to-do list was heavy on catastrophe mitigation: a long-term budget plan to rein in unsustainable deficits someday; a housing plan to contain the foreclosure epidemic somewhat; “stress tests” to try to stabilize the reeling financial sector; a radical restructuring of the auto industry to try to limit job losses to a few hundred thousand rather than
a couple million. It was hard to get credit for disaster prevention, and it didn’t sound much like hope and change, but it beat disaster.

At one point, Axelrod mused to Obama that he wondered what it would be like to govern in good times. The president just laughed.

“Are you kidding?” he said. “In good times, we never would’ve gotten the job.”

T
he opposition response to a presidential speech is always a tough gig—no pomp and circumstance, no cheering crowd, hostage-video atmospherics—but Louisiana governor Bobby Jindal’s response to President Obama’s first address to Congress was particularly lame.
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Jindal was a rising conservative star, a Rhodes Scholar who was America’s youngest governor, but he sounded like he was reading a bedtime story to a nation of toddlers. The blogosphere instantly dubbed him Kenneth the Page, for the wide-eyed hillbilly dork on the sitcom
30 Rock
.

As Jindal became a punch line, so did his nitpicking about the Recovery Act, which seemed tone-deaf after the new president had urged Republicans and Democrats to work in harmony to fix the economy. Jindal seemed especially amazed that the stimulus included “$140 million for something called ‘volcano monitoring,’” as if monitoring volcanos was some kind of exotic fetish. Jindal overstated its funding by 1,000 percent, but he clearly thought the phrase was comedy gold.

“Instead of monitoring volcanoes,” he chirped, “Congress should be monitoring the eruption of spending in Washington!”

If it sounded silly for the governor of post-Katrina Louisiana to suggest that preventing disasters was self-evidently wasteful, it sounded even sillier a month later when Mount Redoubt erupted in Alaska, spewing plumes of ash ten miles above Anchorage. Sure enough, volcano
monitoring had helped alert people and planes to stay out of harm’s way—and stimulus-funded GPS systems that will measure ground tremors at Mount Redoubt and other volcanoes should make forecasts even better in the future.

The Kenneth the Page debacle just highlighted the Republican Party’s difficulties navigating the line between skepticism about government and hostility to basic services. Similarly, a swine flu outbreak served as a reminder that Senator Collins had stripped pandemic flu money out of the stimulus, and a terrorist’s failed attempt to blow up a flight to Detroit evoked memories of Republicans ridiculing a Recovery Act provision to upgrade explosives detection at airport checkpoints. Who was supposed to finance volcano monitoring and other disaster prevention efforts if not government? And if those weren’t government responsibilities, were there any government responsibilities?

“We can’t be the antigovernment party,” Senator Snowe told me that spring.
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“That’s not what people want.”

M
ount Redoubt did feel like a hint from the universe that the Republican Party was blowing itself up.
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Minority parties often look inept in the penalty box, but the GOP was starting to look like a new Donner party. In the words of one critic, it had become “a very narrow party of angry people,” “gasping for air,” consumed by “gratuitous partisanship”—and that critic was Utah’s Republican governor, Jon Huntsman. Party chairman Michael Steele confessed there’s “absolutely no reason, none, to trust our word or our actions.” McCain’s campaign manager said the party was extinct on the West Coast, nearly extinct in the Northeast, and endangered in the Mountain West and Southwest. It remained strong in the South, but while Texas governor Rick Perry’s speculation about secession resonated with the party’s base of older white conservatives, it was not a national outreach strategy.

“We’re excluding the young, minorities, environmentalists, pro-choice—the
list goes on,” Snowe said. “Ideological purity is not the ticket to the promised land.”

But Republican politicians couldn’t afford to ignore the Republican base, which was growing in influence as the party was shrinking in size. So they were catering even more to the base’s biases, trashing the New Deal, denying climate science, doubling down on supply-side economics. Washington Republicans also overcame their initial reluctance to attack a president with approval ratings in the mid-60s, denouncing him as a big-spending radical, a smooth-talking con artist, an affirmative action mediocrity who’d be lost without a TelePrompTer. Boehner accused him of launching “a new American socialist experiment.” To the base, Obama was a threat to American values.

That base now had a name: the Tea Party. Two days after Obama signed the stimulus, a CNBC commentator named Rick Santelli unleashed an antigovernment rant on the floor of the Chicago Mercantile Exchange, attacking Obama’s plan to help homeowners as Cuban-style statism, calling for a Chicago Tea Party.
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The historical reference seemed off; the original Boston Tea Party was a protest against an unelected leader who raised taxes, while Obama was an elected leader who had just cut taxes. But Santelli’s diatribe went viral. At a time of economic pain and anxiety, it tapped into widespread resentment of Obama and big government, deep-seated suspicions that the deserving were being looted to reward society’s moochers.

“The real nerve struck seems to be the pent-up emotions felt by millions of Americans regarding spending TRILLIONS of dollars to fix the housing market, the banks, and the economy,” Santelli wrote later.
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“SPECIFICALLY WHO WILL PAY … WHO WILL BENEFIT … and above all the government’s role in all of this.”

Washington-based conservative groups sprang into action, organizing the first Tea Party rallies in forty cities a week later. A movement was born. And it got a boost with the news that bailed-out AIG executives would get to keep $165 million in bonuses after producing the worst results in capitalist history—in part because of Senator Dodd’s late stimulus addition preventing the feds from rescinding perks retroactively.
The rest of the Recovery Act was directed at Main Street, and even Dodd’s provision was mostly about limiting pay at TARP-funded firms. But the bonus furor helped critics caricature the stimulus as another Wall Street bailout. For casual observers of politics, the $700 billion giveaway to banks and $787 billion package of tax cuts and investments for ordinary Americans all started to blur together.

The Tea Parties made for great TV—the mad-as-hell suburbanites in colonial hats; the fiery rhetoric about Marxism and Obama’s birth certificate; the wacky signs depicting the president with the Joker’s makeup or a Hitler mustache. But embracing the spectacle did not seem like great politics for Republican politicians, who would risk looking like extremists and having to play defense every time an overcaffeinated protester said something racist or dumb. Anyway, the organizing principle behind the Tea Party was resistance to spending and debt, and Hoover-style austerity during a vicious recession seemed like self-immolating politics. The Recovery Act’s debt-expanding components—middle-class tax cuts, roads, research, schools—were extremely popular. Taking the other side didn’t sound like a path to regaining swing voters.

Yet Boehner called for a national spending freeze, and Republican governors Jindal, Perry, Barbour, Palin, and Mark Sanford of South Carolina vowed to turn down stimulus dollars headed for their states. Sanford, a former congressman who had been one of the most committed deficit hawks in the Gingrich revolution, bragged to me about the unpopularity of his austerity policies. “Nobody likes Dr. Doom,” he chortled. Like a modern-day Andrew Mellon, he argued that the nation needed to purge the rottenness from its system, even if that meant enduring even deeper pain. For too long, he said, the GOP had been a party of pastry chefs, urging Americans to eat all the dessert they wanted.

“We need to become a party of country doctors, telling people that this medicine won’t taste good at all, but you need it,” Sanford said.

Not all Republicans adopted the politics of castor oil. Governor Schwarzenegger offered to take any money his colleagues didn’t want. Governor Huntsman said the stimulus should’ve been even larger. And
scores of Republicans who had opposed and denounced the stimulus took credit for stimulus funds in press releases and public events, or wrote letters seeking stimulus funds for colleges, broadband providers, military bases, and clean-energy projects in their states.
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“All that matters is the politics,” Schwarzenegger told me. “They attack and attack, isn’t this terrible, and then when it’s time for the photo op, they say: Fantastic!”

The staunch conservative Mike Pence asked LaHood to approve a TIGER grant for a “Cultural Trail” of bike and pedestrian pathways in Muncie, Indiana, while Republican budget hero Paul Ryan urged Labor Secretary Hilda Solis to fund a green jobs training program in Wisconsin. Fire-breathing Tea Party Republicans like Michele Bachmann of Minnesota and Joe “You Lie!” Wilson of South Carolina made multiple requests to multiple agencies. Senate minority leader Mitch McConnell wrote at least five letters pushing transportation projects, House minority whip Eric Cantor lobbied for a high-speed rail line to his home-town of Richmond, and Congressman Pete Sessions made at least nine pitches for Recovery Act funds that would “create jobs [and] stimulate the economy.” Even Boehner said the bill would fund “shovel-ready projects that will create much-needed jobs.”