The New New Deal (41 page)

“I get it: I’m supposed to be
proactive
,” Sanford said. “But we’re at an incredible tipping point. The principles that made this country great are being eviscerated.” America had too much credit card debt, too much housing debt, too much government debt; the deleveraging had to start now. “I know, more spending is supposed to lead to recovery, and then we’ll be able to pay back all our debts,” Sanford said. “Everything’s going to be beautiful. That’s a hope, not a plan.”

Sanford wasn’t surprised he was taking flak from fellow Republicans. He thought fiscal conservatism should be to the GOP brand what tasty chicken is to Chick-fil-A, but he had watched his party binge on spending and debt for years. He regularly clashed with the fraudulent Republican franchisees in his legislature, and once brought live piglets to the Capitol to protest their pork. They reminded him of his former Washington colleagues whose anti-spending fervor cooled once they got a chance to do some spending themselves. He was pleased to see Republican congressional leaders rediscovering the old-time religion of No, but it seemed mighty convenient that their passion for limited government only reignited once they lost control of the federal purse strings.

“They were on the opposite side just a few months ago when they had the keys to power,” Sanford said.

Ultimately, Sanford didn’t even have the power to turn down the
free money. Jim Clyburn, the Democratic whip who represented Columbia, had anticipated a situation like this during Obama’s transition, when Sanford and his fellow Southern Republicans began trashing the stimulus preemptively. Clyburn saw racial politics at work. “Let’s just say they were states’ rights governors,” he told me. So he inserted language into the Recovery Act allowing state legislatures to accept stimulus money that governors refused, and the Republican legislature in South Carolina did just that.

So economically, Sanford’s stand had little impact. And politically, it seemed to highlight the limited appeal of antigovernment absolutism. Even South Carolina Republicans sounded like ACORN when their own handouts were at risk. I remember thinking that Sanford could be Obama’s opponent in 2012—a handsome, principled, non-rage-aholic spokesman for the Tea Party philosophy—but that the philosophy would never attract 50 percent plus one.

I didn’t expect that two months after we met, Sanford’s political career would implode. After telling his staff he was going hiking on the Appalachian Trail, he vanished for a few days, prompting a Where’s Waldo?–style frenzy in South Carolina. After his return, he admitted at a weepy press conference that he had gone to visit his mistress in Buenos Aires. His local paper published his love emails about “magnificent gentle kisses” and worse.
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When we spoke again two years later, Sanford said the ruckus over the stimulus bothered him more than he let on, and hinted it may have influenced his erratic behavior. “There’s a remarkable loneliness when you push against the current,” he said. “It was the loneliest I’ve been in my life. It doesn’t justify my actions. But it was an unbelievably lonely time.”

O
bama’s first hundred days were a whirlwind of activity.

“I think even our critics would agree that at the very least, we’ve been busy,” he said April 14 at Georgetown University.
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The Recovery Act was the centerpiece of his crusade for change, but he also loosened Bush’s restrictions on stem cell research; began winding down Iraq and ramping up Afghanistan; kept his promises to boost fuel efficiency rules for vehicles and energy efficiency standards for appliances; banned torture; imposed strict White House ethics rules; passed S-CHIP and Lilly Ledbetter; fired the General Motors CEO, setting the stage for his overhaul of the auto industry; approved the plan to help homeowners that got Santelli so irate; and conducted “stress tests” that would stabilize the financial industry without nationalizing banks. And in case anyone thought he was ready to take up smallball, he passed a budget blueprint signaling his desire to enact universal health care and cap-and-trade in his first year.

So yes, he’d been busy. This was serious stuff, a barrage of government activism at a time when many Americans had lost faith in the institution. Not every move worked out. His executive order closing Guantánamo did not, in fact, close Guantánamo. His plan to prevent foreclosures was much less aggressive than advocates had hoped or Santelli had feared. But beyond the Tea Party fringe that considered Obama an anti-American usurper, most Americans still thought he was trying to make the best of a tough situation.

“The obsession with race, the slurs about celebrity politics, the doubts about preparedness all seem dated now,”
Politico
concluded in its hundred-day overview.
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“This is a presidency at light-speed that looks and feels remarkably mature.”

The challenge would be converting all that light-speed activity into a coherent message. At Georgetown, Obama made his most comprehensive case for his economic program, expanding his inaugural theme of “The New Foundation.” He borrowed his central image from the Sermon on the Mount, comparing the old economy’s reliance on maxed-out credit cards and sketchy subprime mortgages to the proverbial house built on sand. He vowed to create a sturdy post-bubble economy built on a rock, “a new foundation that will move us from an era of borrow-and-spend to one where we save and invest.” The New Foundation consisted of his four pillars of prosperity from the
campaign—economic reform, health reform, energy reform, and education reform—plus long-term deficit reduction. And deficit reduction would depend mainly on health reform, since the skyrocketing cost of care was the reason Medicaid and Medicare were driving long-term shortfalls.
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The Recovery Act, Obama said, began that foundation—through Race to the Top and a dramatic expansion of early childhood education, to prepare kids to compete in a global economy; unprecedented spending on renewables and efficiency, to create clean energy and green jobs; and the largest investments ever in preventive care and electronic health records, to save money and lives.

His presidency, in other words, would be about revamping the economy for the long term. Anita Dunn, who took over the rudderless White House communications team shortly before the speech, thought this made more sense as an overarching theme than jobs-jobs-jobs. Why pretend long-term investments like health IT and high-speed rail were about short-term jobs when they weren’t?

“The New Foundation should’ve been the message of the first two years,” Dunn says. “I actually thought about setting up a website and trying to brand it.”

The phrase appeared in fifteen Obama speeches over the next month, and the
New York Times
ran a story suggesting it was being groomed as Obama’s unofficial slogan, his answer to the New Deal. But it soon faded away, overshadowed by the furor over autos, the war over health care, and the Tea Party jihad against spending. At a dinner Obama hosted for presidential historians, Doris Kearns Goodwin said it sounded like a woman’s girdle.
²⁹⁵
“It wasn’t translating in that chaotic environment,” says Dan Pfeiffer, Dunn’s deputy. “We weren’t as disciplined as we should have been about repeating it.”

Instead, the main White House message was: Jobs.

Which were disappearing fast.

M
arch and April were as ghastly as February: over 1.2 million more jobs lost, with unemployment shooting up to 8.9 percent. Analysts were happier about May: only 345,000 jobs lost, although unemployment
soared to 9.4 percent. Yes, the economy was still shrinking and jobs were still vanishing—but not as quickly. And jobs are always a lagging economic indicator. Consumer confidence was creeping back.

“The recession has entered a new phase, pulling away from an economic abyss into a period of steep but orderly decline,” the
Washington Post
reported.
²⁹⁶

Hooray! A steep but
orderly
decline!

Well, it beat the abyss.

Inside the White House, nagging fears that at any minute a bank collapse or foreign crisis or market hiccup could plunge the economy back into Lehman-style chaos did subside. But it was hard to get too excited after a month when enough Americans to fill seven Yankee Stadiums had received pink slips. Candidate Obama had not promised “steep but orderly decline,” and 9.4 percent unemployment would’ve been tough to explain even if his economists hadn’t predicted the stimulus would keep the rate below 8 percent. Lagging indicator or not, the jobless rate was a PR nightmare, and public support for the president’s handling of the economy started to droop. The White House was still talking about saving or creating 3 or even 4 million jobs with the stimulus, but over 6 million had been lost since the start of the recession. Republicans now had a stock response to anything Obama said or did: Where are the jobs? Boehner released a YouTube video of a bloodhound named Ellie Mae searching for stimulus jobs around the country. “She hasn’t found any yet, and neither have the American people,” Boehner said.
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“By any objective standard, this has been a failure,” McConnell sniped.
²⁹⁸

By any objective standard, this was baloney. As Romer pointed out, if your doctor gives you an antibiotic for strep throat, and then your fever spikes anyway, it doesn’t mean that antibiotics are useless. It means you were probably even sicker than you thought—and it’s a good thing you started the antibiotics when you did.

“Fiscal stimulus is a well-tested antibiotic, not some new-fangled gene therapy,” she said in a speech.
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“The economic theory of how tax cuts and increases in government spending can help counteract a recession
is almost as widely accepted as any in economics—practically up there with supply and demand.”

Absolutely right. Impeccable logic. On the other hand: nine-point-four percent! Even some White House officials thought they were overplaying a losing stimulus hand.

“It’s fucking irrelevant to be talking about how many jobs you’re creating when the economy is shedding so many more,” one Obama adviser grumbles.

On June 8, Jared Bernstein learned this the hard way during his Recovery Act update for the White House press corps, a half hour of vultures feasting on roadkill.
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Bernstein suggested the stimulus had already saved or created 150,000 jobs, but it was too early for him to specify how many saved and how many created, or catalogue what kind of jobs, or provide any supporting data other than the original Romer-Bernstein forecast—the forecast that had wildly underestimated the jobless rate. And 150,000 jobs sounded anemic when forty times that many had vanished.

“With hindsight, what we did was throw raw meat to wild dogs—and then ask them politely to step back while we explain,” Bernstein recalls.

After Robert Gibbs finally intervened to stop the feeding frenzy, reminding the media the stimulus wasn’t designed to fix the economy overnight, he endured a half hour pummeling of his own. “Do you think there’s a danger here of a credibility deficit developing on the issue of the economy?” one reporter asked. As McConnell aide Don Stewart watched Bernstein stammering about “confidence intervals,” Gibbs spinning about “the best available data that we had,” and the press piling on about “saved or created,” he kept thinking: We’re winning.

“The press smelled blood, and ate ’em alive,” Stewart chortles.

Some Obama aides saw this as the inevitable result of a flawed messaging strategy, a shortsighted focus on jobs—saved, created, green, direct, indirect, whatever. Jobs bills are expected to add jobs, and the best Obama could hope for while Americans were forming their opinions of the Recovery Act would be to lose jobs at a slower rate. “We set ourselves
up for surefire failure,” one aide says. In private, Biden also argued the message was too jobs-centric, too much about “numbering jobs” at a time when the numbers were unavoidably dismal. He didn’t expect the White House to get much credit for averting a depression once the depression was averted.

“The inclination is: ‘See? You were wrong. There wasn’t a depression,’” Biden says. He suggests that while Obama’s young Ivy Leaguers might have expected gratitude for their Keynesian heroics, “I have some sense of human nature.”

O
ther Obama aides and allies thought his message should have been even more jobs-centric. Rahm liked to joke that Obama’s big mistake was passing the Recovery Act too quickly; if he had dragged it out, there might have been a depression, but at least the country would have seen him focused on the economy. Oprah wasn’t the only American who forgot that he tackled the economy first, before the political conversation shifted to health care. When times were this tough, talking about anything but jobs-jobs-jobs made the president look detached.

In June, Obama’s shift in focus contributed to an underappreciated blunder, his decision to scuttle a $450 billion, six-year transportation bill that could have helped revive the construction industry. Transportation Committee chairman Jim Oberstar had waited his entire career for this moment, and he had bipartisan support for his blueprint. It would have financed some of the more ambitious long-term projects that were bypassed during the stimulus because they weren’t shovel-ready. But hours before Oberstar’s press conference to unveil the bill, Secretary LaHood informed him the White House wouldn’t support it. “Poor Jim,” says his Republican counterpart, John Mica. “I’ve never seen him that mad.” Obama’s political team didn’t think the president had enough time or political bandwidth to deal with another huge spending bill while health care was heating up, especially since Oberstar hoped to raise gas taxes. The White House had a rare opportunity to work out a compromise; congressmen love concrete, and the six-year funding stream would have given contractors more confidence to make permanent
hires. But after reading a memo about Oberstar’s plan, Obama wrote “No”—and underlined it.
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Oberstar went on the warpath, seething that White House economists who had never held a shovel in their delicate hands couldn’t understand the anxieties of unemployed workers, or even the frustrations of commuters stuck in traffic.