The New New Deal (59 page)

Before the year’s end, Solyndra’s investors agreed to one last $75 million loan to stave off bankruptcy, but this time they insisted they had
to be first in line for repayment if the company failed anyway. So the Energy Department had a tough decision to make; as Jonathan Silver wrote in an internal document, the loan office first had to “determine if the company still had a viable business.”
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One OMB official noted in an email that politically, it would probably make sense to let Solyndra fail now, rather than risk a bankruptcy during the president’s reelection campaign. “The optics will arguably be worse later than they would be today,” the official wrote. Nevertheless, in January, the department agreed to restructure its original loan to give Solyndra a chance to finish its new factory, execute its new sales strategy, and try to raise new private capital. Even if the company still went under, it would be more valuable in bankruptcy if it had a completed plant.

“Our goal was taxpayer safety,” Silver told me. “We decided to give Solyndra a fighting chance to succeed.”

It was a risky move, but it looked like a smart one at first. The factory was completed on time and on budget. Sales steadily increased. Costs steadily decreased.

“We were executing our plan,” says David Miller, Solyndra’s corporate communications director. “We were so damn sure we were out of the woods.”

There was even low-level White House discussion about inviting Solyndra’s executives to sit in the First Lady’s box during the State of the Union, to illustrate the president’s theme of “winning the future.” Obama’s events director shot down that idea: “Can’t do Solyndra … they’ve run into some issues recently. :(”

That particular emoticon was probably appropriate.

“T
he stimulus worked!”

Ed Rendell—two-term Pennsylvania governor, two-term Philadelphia mayor, two-term district attorney, lifelong pol—had five days left in public office. A Tea Party governor was about to take over, and his activist legacy was at risk. At the final meeting of his Stimulus Oversight Commission, he wanted to set the record straight.

“I know it’s not popular to say it,” Rendell said. He had just been to the dentist, and he couldn’t feel the left side of his face, so he was slurring
his words a bit. “I know our citizens think the stimulus failed. But it’s not true! These investments helped us weather the storm. And they are changing the face of Pennsylvania.”

Rendell’s stimulus commission chairman, a Republican businessman named Ron Naples, had insisted on measurable outcomes; early on, he had bewildered staffers of a stimulus-funded domestic violence program by asking how they calculated their return on investment. So now the governor had numbers to back up his words. The Recovery Act had resurfaced 940 miles of Pennsylvania roads. Its clean-energy projects would power 36,000 Pennsylvania homes, and its efficiency investments would save enough to power another 16,000. It was bringing broadband to 255 health providers, 142 libraries, and 939 schools. It had filled a $2.6 billion gap in a $28 billion state budget, avoiding a fiscal blood bath. The Keystone Research Center, a Harrisburg think tank, estimated the state’s unemployment rate would have reached 14 percent without the stimulus; it was now 8 percent.
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Yawn. Most reporters hate numbers. When Rendell finished his blizzard of triumphant data, the media didn’t ask a single question about the stimulus. The event barely registered in the statewide press.
Philadelphia
magazine’s political blogger did file a bit of snark, titled: “Rendell Declares Stimulus a Success. Don’t You Feel Better?”

Afterward, Rendell invited me into his office, which was lined with portraits of past Pennsylvania governors.
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He pointed out Ben Franklin, who had held the job in his eighties, but had somehow persuaded the artist to make him look much younger. “Politicians never change,” Rendell mused. His point was that image matters. Politics matters. In a democracy, good works are never their own reward. Rendell showed me the portrait of William Penn, who served thirty-seven years as royal governor; okay, that guy didn’t have to worry about public opinion. But elected politicians do, and Rendell wondered whether Obama thought his policies were so brilliant they would sell themselves.

“We have a great communicator in the White House, but he failed to communicate,” Rendell said. “I’m not Barack Obama, but if you gave me an hour to explain the Recovery Act to the country, I could’ve made
the case!” I suggested that Obama was in a tough spot from the start, because no matter how he had handled the stimulus, jobs would have continued to disappear for months after it passed.

“Yeah, well, he should’ve explained that, too,” Rendell said. “The White House gets very defensive about this. They’re frustrated they’re not getting the credit they deserve. Okay, but whose fault is that?”

From the start, he said, Obama overpromised on the Recovery Act’s short-term benefits, and failed to sell its visionary long-term investments. “Even people who keep up with this stuff don’t understand how this is laying a foundation,” Rendell said. “The only time you hear about infrastructure or clean energy, someone’s saying it’s too slow, it’s not stimulus.” I agreed about the overpromises, but didn’t Obama talk about investing in the future all the time? What about his New Foundation speech in April 2009?

“Too late,” Rendell said. “By that time, the Republicans had already spun the stimulus into the graveyard.”

We’ll never know how much better messaging would have improved the Recovery Act’s reputation. It’s another unanswerable counterfactual. For what it’s worth, I suspect it wouldn’t have made that much of a difference. It was always going to be hard to sell a recovery package during a tepid recovery. And it’s incredibly hard to recover from financial cataclysms. It’s preferable not to have them in the first place, which, of course, was why Obama had enacted financial reform.

Anyway, change is always a tough sell. And Washington isn’t the only city with a status quo bias. The day before I saw Rendell, one of his former aides, Philadelphia deputy mayor Rina Cutler, told me about BigBellies, the stimulus-funded, solar-powered compactors that were replacing traditional trash cans in downtown Philly. BigBellies had reduced trash pickups from three times a day to five times a week, saving the city big bucks. And they were cute, painted bright colors to look like garbage-eating monsters. But some residents were outraged. I asked Cutler why.

“Oh, people love change,” Cutler said. “As long as it looks exactly the same.”

T
he first two years of the Obama presidency were two of the most productive years in modern political history. Then in 2011, nothing happened.

Okay, that’s an exaggeration. The president did order the raid that killed Osama bin Laden. He brought the last combat troops home from Iraq, as promised. And he helped lead a NATO intervention against Libyan dictator Muammar Gaddafi, which critics predicted would become a quagmire. It didn’t. It didn’t end well for Gaddafi, either.

On the domestic front, though, it was a year of sound and fury, signifying very little. Politically, divided government produced constant drama, as House Republicans engineered a series of new hostage negotiations that made Washington look nuttier than ever. At times, there seemed to be an imminent danger of a chaotic government shutdown, or even a catastrophic government default. At other times, there seemed to be real hope for a bipartisan deal to rein in long-term deficits. The GOP rallied around a radical plan to reinvent Medicare and shrink spending, and Obama floated a new stimulus plan to inject $450 billion into the economy. But none of those things came to pass. Substantively, the clashes of 2011 produced a stalemate.

The first showdown dominated the spring, as House Republicans refused to pass a routine bill to keep the government running unless Obama accepted severe spending cuts, plus restrictions on Planned Parenthood and other right-wing demands. Minutes before the deadline, Boehner and Obama cut a deal to slice $38 billion out of the budget, which both described as “the largest spending cuts in history.” The left erupted, accusing Obama of repeating FDR’s slam-on-the-brakes mistakes of 1937, capitulating to hostage takers and validating their antigovernment worldview. At the progressive Netroots Nation conference, there was a panel discussion on “What to Do When the President Is Just Not That into You.”
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But the fine print revealed that Obama paid a paltry ransom to rescue the hostage. Republicans wanted to whack Democratic priorities like Head Start and Pell grants, but the deal only trimmed $352 million-with-an-m in 2011, mostly smoke-and-mirrors cuts of money that never would have been spent. It didn’t rescind one cent of stimulus funds, and expanded stimulus programs like Race to the Top, TIGER, and ARPA-E. Republicans did block Obama’s push for new investments in clean energy, science, and high-speed rail, but they didn’t dismantle his earlier investments, or Planned Parenthood for that matter. Basically, the deal extended the status quo, neither advancing Obama’s agenda nor rolling it back. And that posed a problem for Boehner, whose Tea Party freshmen thought they had a mandate to repeal the Obama presidency. The speaker was reduced to bragging about eliminating four “czars,” Fox News shorthand for Obama policy aides, and even those four aides had already left government.

The next showdown dominated the summer, after House Republicans threatened to force the Treasury into default unless Obama agreed to more cuts. The insane spectacle of a superpower debating whether to pay its bills led to an unprecedented downgrade of the U.S. credit rating. And the bipartisan negotiations over a $4 trillion “Grand Bargain,” which would have attacked long-term deficits with tax hikes and entitlement reforms as well as spending cuts, inspired endless what-if rehash. But after all the melodrama—Cantor blowing off Biden, Obama walking out on Cantor, Boehner refusing to return Obama’s calls,
Boehner quelling Tea Party rebellions—there was no default, no grand bargain, and no overthrow of the speaker. Republicans refused to accept any tax hikes, and Obama resisted short-term cuts that could tank the economy. The result was a last-minute mini-bargain that stretched $2 trillion worth of paper cuts over a decade.

Again, liberals were enraged, denouncing Obama’s focus on deficits during a jobs crisis, his acceptance of spending cuts without new taxes, and his willingness to consider squeezing Social Security and Medicare. While Summers, Romer, Bernstein, and even Orszag were all calling for short-term stimulus now that they had left the White House, the deficit-minded Geithner, the only survivor from Obama’s original economic team, was now his dominant adviser. In a hostage crisis where Tea Party Republicans seemed downright eager to shoot the hostage, and the global economy depended on the survival of the hostage, Obama didn’t think this was the time to make a public stand for Keynesian principles. And after a conservative wave election, his political advisers hoped a big bipartisan deal would reassure independent voters about his fiscal responsibility.

But again, the deal Obama actually struck was quite modest, delaying the vast majority of the cuts until 2013 or later. So they’ll depend on the 2012 election.

Which was what 2011 was really about.

T
he recovery stalled again while Washington was obsessing over spending and debt. Economists cited supply chain glitches created by the Japanese nuclear disaster, high fuel prices spurred by Middle East instability, and European austerity measures in response to the Greek crisis. The U.S. debt limit circus didn’t help, either, and the new stimulus from the lame-duck tax cut deal did not quite offset the loss of stimulus from the Recovery Act winding down. Meanwhile, states and cities kept slashing services and employees, creating more fiscal drag on the recovery.

In the fall, once Obama no longer needed Republican permission to keep the government from shutting down or stiffing creditors, he pivoted back to jobs, unveiling an American Jobs Act to give the economy
more gas. Republicans called it “son of stimulus,” and it did feature more payroll tax cuts, unemployment benefits, public works, and state aid, plus the school construction binge that Senator Collins stripped out of the Recovery Act. Once again, Obama was betting his presidency on the unspoken S-word.

Even the political theater critics who usually panned Obama for failing to market his policies clearly and repetitively had to admit he followed their advice on his jobs bill. He proposed it in a prime-time speech to Congress, then led raucous rallies for it around the country, including an in-your-face event at the creaky bridge connecting McConnell’s state of Kentucky to Boehner’s state of Ohio.
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At every stop, he led chants of: “Pass this bill!” But Congress didn’t pass the bill. Reid broke it into individual components, but those didn’t pass, either. They were dead on arrival in the Republican House, and some Democratic senators were distancing themselves from the Obama agenda, too.

Whatever muddled-message or
mythos-logos
problems Obama had, his real problem was 9 percent unemployment. He had said that if he couldn’t fix the economy in three years, he was looking at a one-term proposition. Time was almost up. Republicans mocked him as Herbert Hoover 2, Jimmy Carter Jr., and after an August jobs report with no jobs, President Zero. (The report was later revised to 100,000 jobs. Nobody revised the nickname.) The people had spoken, and Republicans were flexing their muscles. When independent economists warned that the GOP plans for sharp short-term spending cuts would kill hundreds of thousands more jobs, Boehner blithely responded: “So be it.”

But now that he had no chance to pass legislation, Obama was happy to “get caught trying,” fighting losing battles that would highlight his differences with the GOP and start framing the 2012 campaign. He was positioning himself as a Reasonable Man with a Balanced Approach, supporting investments in education, innovation, and other popular things, paid for by modest tax hikes on oil profits and million-dollar incomes. He contrasted that with the extremism of so-be-it Republicans, who wouldn’t even close a tax loophole for corporate jet owners. They had closed ranks around House Budget chairman Paul
Ryan’s plan to replace Medicare’s health care guarantee for the elderly with private vouchers and shred nonmilitary spending; after Gingrich called the plan “right-wing social engineering,” he took so much heat from the Limbaugh wing of the party he had to call Ryan to apologize. At one Republican debate, the candidates vying to replace Obama were asked if they would reject a deficit reduction deal that included $10 in spending cuts for every $1 in tax hikes, and all eight raised their hands.