The New New Deal (42 page)

“I suggest that those highfalutin economists get out of their chauffeured limousines and get on the street and drive like the rest of America,” he complained.

That summer, as health care bogged down and the Tea Party caught fire, the prairie populist Byron Dorgan of North Dakota visited the Oval Office to beg Obama to focus full-time on the economy.

“If I had been elected president,” Senator Dorgan said, “I’d want people to know one thing and one thing only: That I was spending every waking moment focused on putting people back to work and getting the economy moving again.” Obama reminded Dorgan he had promised to reform health care during the campaign. “Yes, and then the bottom fell out,” Dorgan said. “We’re sitting in a much deeper hole, and you’re still trying to reach just as high.”

The White House did schedule frequent events about jobs. For example, when Boehner scoffed on Fox News that in Ohio, not one Recovery Act infrastructure contract had been awarded, Biden promptly visited his district to show that over fifty transportation projects were under way in the Buckeye State.
³⁰²
Obama then used his weekly address to chide critics who “are already judging the effort a failure although they have yet to offer a plausible alternative.”
³⁰³
But at times it felt like he doth protest too much. If he was so focused on the economy, why was it so weak? If he cared so much about jobs, why were they disappearing? And whenever he made the elephant-in-the-room observation that Bush had gifted him a calamity, critics tsk-tsked about his un-presidential finger-pointing.

“I know voters in Ohio, just like voters in my state, are beginning to understand this economy is owned by Barack Obama,” Eric Cantor said the day of Biden’s visit.
³⁰⁴

House Republicans were amazed by how often the White House
took their bait, elevating attacks that would have been ignored without a presidential response. On July 14, in the battered auto town of Warren, Michigan, Obama veered off his text to swallow Cantor’s bait hook, line, and sinker. “I love these folks who helped get us into this mess and then suddenly say, ‘Well, this is Obama’s economy,’” he said. “That’s fine: Give it to me. My job is to solve problems, not to stand on the sidelines and carp and gripe.”

Back in Washington, Republicans could not believe their good luck. Obama was
already
taking ownership of the Bush economy?

“I remember when he did it,” says one Cantor aide. “We were like: Heyyyyyy!”

A
ctually, the stimulus was working.

Bernstein didn’t have the evidence to prove it yet when he ventured into that hostile briefing room, but the Recovery Act’s medicine was already stabilizing the patient. After plunging another 6.4 percent in the first quarter, GDP only dipped 1.0 percent in the second quarter, the second-biggest improvement in twenty-five years. The second-quarter jobs numbers, while still grim, were the biggest improvement in almost thirty years. Economists later calculated that the Great Recession ended in June 2009, “just when the Recovery Act was providing its maximum benefit to the economy,” notes Mark Zandi, the former McCain adviser from Moody’s.
³⁰⁵
Google searches for “economic depression,” which had spiked over the last year, were returning to normal levels.

The Recovery Act didn’t end the recession by itself. TARP stopped the financial meltdown, and Obama’s stress tests helped restore confidence in the banking system. His auto rescue provided vital anti-anti-stimulus by bringing GM and Chrysler back from the dead, preventing the collapse of the industrial Midwest. The White House also goosed demand for cars by reviving its Cash for Clunkers idea, ginning up 700,000 purchases in two months; the program’s initial funding
ran out in a week, so Congress raided $2 billion from the Recovery Act’s clean-energy loans to keep it going. And Bernanke helped save the global economy with his aggressive improvisations, loaning trillions of dollars to hedge funds, investment banks, manufacturers, and other borrowers who had never dreamed of receiving Fed cash.
³⁰⁶

But the data told a powerful story of how the Recovery Act was pulling the economy out of the ditch.
³⁰⁷
State and local government spending that had plummeted for months increased 3.6 percent in the second quarter, after the aid to states helped governors cancel layoffs and cuts. The states that got the most aid lost the fewest jobs, and outside government, the sectors with the biggest improvements were the sectors targeted by the stimulus. Globally, countries that enacted larger stimulus packages had better economic results than countries with more modest ones.

“If you study the data and look at the timeline, there’s no question the Recovery Act saved us from something much, much worse,” Zandi says.

U
nfortunately for Obama, the American people were not studying the data or looking at the timeline. The economy was getting better. His poll numbers were getting worse. His policies were working. His politics weren’t. And his opponents, whatever they lacked in credibility, had an unmuddled message: Big government is bad.

“What can you sell when you do not have the White House, the House or the Senate?” a Republican National Committee staffer wrote in an internal strategy document.
³⁰⁸
“Save the country from trending towards Socialism!”

Maybe Obama had inherited a mess, but it was his mess now.

For example, his overhaul of the auto industry would become a stunning success, minimizing taxpayer losses, avoiding the erasure of countless jobs, and restoring the Big Three to profitability. But at the time, the intervention was a political drag. Republicans accused Obama of engineering a Soviet-style assault on free enterprise, bailing out his union pals, and creating a doomed Government Motors. While he got little credit for the meltdown that didn’t happen, he was savaged for the
inevitable layoffs at the restructured firms, and the downsizing of politically connected car dealers.

“It’s a classic avoided problem,” says Ron Bloom, an investment banker and union adviser who cochaired Obama’s auto task force. “We were preventing a disaster that would have had multigenerational impacts. But the reaction was: Why are you cutting jobs?”

Health reform and cap-and-trade—Obamacare and cap-and-tax, to Republicans—further inflamed the Tea Party. Obama’s health bill was modeled on Governor Romney’s reforms in Massachusetts, and cap-and-trade was a market-based energy policy the McCain-Palin ticket had supported. But the grassroots right came to see them as evidence of Obama’s insatiable desire to dismantle capitalism. Even beyond the Tea Party, polls suggested that Americans were skittish about government rearranging two of the nation’s largest private industries during tough times. The Republican drumbeat about fictitious “death panels” and “$3,000 energy taxes” did not soothe their anxieties.

Obama let Democrats in Congress take the lead on both issues, and they didn’t do him any political favors. Senator Baucus tried desperately to negotiate a health care deal with his pal Grassley, resisting Rahm’s pressure to end the futile talks until Grassley publicly accused the president of trying to “pull the plug on Grandma.” It was, Axelrod says, “like waiting for Godot.” At the White House, Obama asked Grassley point-blank whether he would support the bill if Democrats gave him everything he wanted; Grassley said no, unless ten other Republicans agreed to vote with him.
³⁰⁹
In other words: No. In fairness to Baucus, he felt he had to go to extremes to show good faith toward the Republicans, because the same centrist Democrats who had helped keep the stimulus under $800 billion did not want to support partisan health reforms.

Meanwhile, still irked by the way the Senate had rolled the House on the Recovery Act, Pelosi rammed through a cap-and-trade bill that had no chance in the Senate, despite Rahm’s pleas to wait until there was a real chance of getting something done. Many Democrats were furious about taking a hard vote for no apparent reason. And the handful of Republicans who voted yes were furiously denounced as traitors by their base, which would make them think twice about crossing the
aisle in the future. Americans for Tax Reform founder Grover Norquist, Washington’s most influential antigovernment activist, says Republican lawmakers learned during that Tea Party summer that their core constituency did not want them to work together with a Euro-socialist president. The base wanted knife fighters, not “collaborators.”

“You could make a list of guys who thought their job was to cut the best deal that they could,” Norquist says. “Then they’d go home and find out their voters wouldn’t be pleased. They’d be pissed.”

The Recovery Act remained at the heart of the case against Obama as a spread-the-wealth big-government radical. Inside the conservative echo chamber, Porkulus was all about dubious-sounding projects like a $3.4 million “Turtle Tunnel” designed to prevent wildlife from getting squashed on a Florida highway, along with made-up scandals like a $1.19 million purchase of two pounds of ham.
³¹⁰
(It was really 760,000 pounds of ham in two-pound packages, a cost-effective way to get food to the hungry, but the Drudge Report led with it anyway.) A former health care CEO named Rick Scott, whose firm had engineered the largest Medicare fraud in history, bankrolled ads claiming an “innocent-sounding board” created by the Recovery Act to oversee comparative effectiveness investments was “the first step in government control over your health care choices.” For the Tea Party, the stimulus was the ultimate symbol of Obama’s reckless deficit spending, even though he had inherited the record deficit. The rallies were full of signs like “Stimulus: The Audacity of Dopes” and “Hey, Barack, Go Stimulate Yourself!”

By the summer’s end, independent analysts like Macroeconomic Advisers, Goldman Sachs, and Moody’s all agreed the stimulus had added at least 2 percent to GDP.
³¹¹
And the administration had fulfilled all of its pledges for the Recovery Act’s first two hundred days: saving 135,000 education jobs, funding 200,000 summer youth jobs, starting work on 2,200 highways, 500 military facilities, and 100 national parks.
³¹²
In the soft economy, bids were routinely coming in under budget; the FAA was using its savings to fund another 60 airport projects. Things were in motion. A Buffalo veterans hospital was building a state-of-the-art hospice wing. Families in the Tar Creek mining region of northwest
Oklahoma, where the lead-poisoned creek dyed turtles orange and lead-poisoned children struggled in school, were relocated through a stimulus-funded Superfund project. And the paychecks of 120 million working Americans earning less than $200,000 were a bit fatter.

But these short-term benefits didn’t register with the public, not when the jobs numbers were still negative. And the long-term benefits at the heart of Obamaism weren’t visible yet. One poll found that 45 percent of Americans wanted to cancel the stimulus and return its unspent funds to the Treasury; only 36 percent wanted it to continue.
³¹³
Biden wrote a
New York Times
op-ed titled “What You Might Not Know About the Recovery,” bemoaning how the stimulus “remains misunderstood by many and misconstrued by others.” In politics, when you’re explaining, you’re losing. In a speech at Brookings, Biden tried to remind his audience just how awful things had been when Obama was sworn in, how every day “there was a new revelation to be added to the economic parade of horribles.” He recounted the headlines from February: “Automakers Bankruptcy Looms.” “Credit Freeze Leaves Thousands of Student Borrowers Stuck in Default.” “Governments Brace for Hard Times.” “Newly Poor Swell Lines of Food Banks.”

“It’s hard to remember, even though it’s only been eight months,” Biden said.

Inside the White House, Ron Klain pushed for Obama to attend stimulus events to help revive the Recovery Act’s popularity. (Other aides wanted to keep Obama away from stimulus events to protect his own popularity.) One day, Rahm felt an urge to put the president in front of workers in hard hats; the best excuse the Transportation Department could come up with was a celebration of its two thousandth stimulus project. An initial plan to bring the president to the Baltimore airport raised logistical problems, so the event ended up in a department briefing room, a dispiriting place to discuss a lane widening in Kalamazoo.
³¹⁴
When the event was over, Obama told his staff: “This is bullshit.”

“Everything about it was wrong—nothing exciting, nothing real, nothing visual,” one White House official says. “And of course the press just said: Nyah, nyah, unemployment is still going up.”

Around the same time, Rahm persuaded the president to hold an even sillier pseudo-event in the Cabinet Room to broadcast his concern about wasteful spending. Rahm dubbed it “Project
Dave
,” after the cinematic pseudo-president who secretly invites his accountant to the White House to slice fat out of the budget. So Obama announced that to restore public confidence in government’s ability to spend wisely, he was challenging his cabinet to report back to him with … $100 million in cuts.

Huh? After spending $787 billion-with-a-b on a stimulus, then unveiling a $3.6 trillion-with-a-t budget plan, Obama was proposing $100 million-with-an-m in rollbacks? That was supposed to restore confidence in government?

The ultimate visual representation of the muddled message could be seen at stimulus projects around the country: the Recovery Act logo.
³¹⁵
Designed by a hipster Chicago ad agency, it was supposed to evoke a retro New Deal feel. And its bottom half was supposed to represent long-term investments: a plant for green energy initiatives, gears for infrastructure projects, and a tiny red cross for health care investments. But it just looked cluttered. I never even noticed the cross, much less connected it to health care, until I Googled an explanation of the logo.

“We just couldn’t get our story straight on the Recovery Act,” says one senior White House official. “We had no message. And every time there was a bad story in the paper, we’d all turn into kids at a soccer game, everybody chasing the ball.”