The Legislative Box and the Economic Straightjacket

Former Clinton Chief of Staff John Podesta has a theory on why the President's poll numbers continue to sag. In an article by Matt Bai in the New York Times, John Podesta, who now runs the liberal think tank Center for American Progress, finds that the President who came into power facing an economic meltdown faced a “legislative box.” Mr. Podesta believes that Obama's most consequential decisions on domestic policy stemmed from "one overarching conviction — that the President’s most important job in a crisis, requiring nearly single-minded attention, was to pass" monumental once in a generation type legislation.

“By focusing on getting big legislative accomplishments, which was understandable, they necessarily gave up a larger image of him as president,” Mr. Podesta said, referring to White House advisers. “They cast him as the prime minister. They were kind of locked into the day-to-day workings on the Hill.”

This was not a given. All presidents have laws they want to pass, but they have broader thematic priorities, too. Ronald Reagan saw a renewal of American optimism as a vital goal. Bill Clinton publicly hammered away at his ideas about economic transformation and “reinventing government.”

Unlike his recent predecessors, however, Mr. Obama had spent his entire political career in legislative posts, and he seemed determined, above all else, to clear the Congressional hurdles that had thwarted the others. He chose a vice president and a chief of staff who were masters of the legislative arena, and he filled his most senior posts (aside from those occupied by longtime advisers) with former Congressional aides.

Mr. Obama’s central strategy was to concentrate on cajoling Democratic lawmakers into passing a series of bills — the stimulus package, the health care overhaul, a new set of financial regulations.

Mr. Podesta finds that the necessity of pursuing an intense, wide-ranging legislative agenda had other implications for President Obama’s image.

More from the Times:

A more national, outward-looking strategy for creating a “postpartisan” dynamic might have included White House partnerships with Republican governors or even with conservative foundations or industry groups. Because the president effectively boxed himself in to a Capitol Hill-only strategy, though, he handed the Republican minorities in Congress the power to sabotage his goal. 

“Once you became a legislative president, which is arguably what you needed to do, you couldn’t deliver on the nonpartisanship promise,” Mr. Podesta said. “And it’s something people wanted.” 

It’s not hard to extend Mr. Podesta’s theory about the legislative box to other areas in which the administration has faltered. One of the real surprises of the Obama era, for instance, has been the president’s sharp break with the business community. Perhaps it shouldn’t be so surprising, though, when you consider that Mr. Obama’s focus on legislation has forced him to be responsive, above all else, to the shifting tides of populist sentiment in Congress. 

Think of it this way: if your singular goal is to pass bills, and Democratic lawmakers are in a frenzy this week over A.I.G.’s bonuses or Goldman Sachs’s investments, then you might feel forced to castigate big business, too. 

Much of Mr. Obama’s anticorporate rhetoric was probably calibrated more to lawmakers than to business leaders, but what the executives heard were declarations of war against American industry. 

Perhaps the most damaging consequence of the legislative box is that it left Mr. Obama, who still regards himself as an outsider and a reformer, looking like a Congressional insider — which is about the last thing voters, and independent voters in particular, wanted him to be.

Mr. Podesta argues that part of the President’s significant appeal to voters, especially independents, in 2008 — “a big part of the secret sauce of getting him elected” — was his promise to transcend perennial partisanship and change the way Washington works. "Let's put the animosities behind us. Let's not have old arguments. Let's not have tired ideological arguments," implored candidate Obama.

Then, as now, such was a hopelessly naïve stance. To engage in rational discussion and empirical debate requires rational actors who live in a fact-based universe. Much, but not all, of the GOP lives in a world based on a failed faith in free markets with tax cuts über alles for the über-wealthy. Their worldview largely is largely surmised with the empty platitudes of limited government and that the private sector knows best. How does one engage in a debate with Iowa's Steve King or Minnesota's Michele Bachmann both of whom believe the President to be a shade to the left of Karl Marx?

To be fair to the President, his rhetoric has also included statements like these said at various points during the 2008 campaign:

"You got a problem with health care: tax cuts. You got problem with education: tax cuts. You got a problem with the economy: tax cuts. Poverty: tax cuts. That's not a policy, it's a dogma, a tired and cynical philosophy."

"At a moment like this, the last thing we can afford is four more years of the tired, old theory that says we should give more to billionaires and big corporations and hope that prosperity trickles down to everyone else."

"It's not because John McCain doesn't care. It's because John McCain doesn't get it. For over two decades, he's subscribed to that old, discredited Republican philosophy -- give more and more to those with the most and hope that prosperity trickles down to everyone else."

But while Obama fought hard to get himself elected in 2008, once in office Barack Obama has displayed a bizarre indifference to hard knuckled politics and challenging on a consistent basis that discredited dogma. He has demonstrated this strange aversion to confrontational politics with those on the opposite side of the aisle. One wonders, at this point, if it is some sort of a congenital defect. The left, professional or otherwise, members of his team are more willingly to demonize.

Part of what doomed Obama politically, as John Judis noted this week in The New Republic, was the way he dealt with the financial crisis during the first six months of his Presidency. In "an atmosphere primed for a populist backlash," he allowed the right wing, people from Dick Armey and Glenn Beck to Sarah Palin and Newt Gingrich to define him and frame his agenda as some sort of radical Marxist enterprise. It is significant that the only populist movement spawned in the Age of Obama was the Tea Party Movement, a movement that largely appeals to a nativist crowd in the South and West. 

But there's another problem with Barack Obama. Just what are his core convictions? He's like the weather here in San Francisco, wait fifteen minutes and it will change. One minute Obama is drenched in glorious delicious sunlight, the next he is lost in a cold bone-chilling fog.

On this note, just what is the President's take on the Córdoba Islamic Cultural Center? One day, he's forcefully making the argument for religious liberty and the rights of all Americans; the next day, he's backtracking saying that he was not commenting and will not comment on the wisdom of making the decision to put a mosque there. Why wade into that debate at all then? Either stand firmly on principle or allow yourself to be dragged in political quicksand by Sarah Palin on Twitter. From the Judis piece:

As Obama was delivering his inaugural address, the financial crisis was already in full swing; and it was already apparent that financial speculation, outright fraud, and irresponsible and sometimes illegal housing-loan practices had played a very large role in precipitating the crisis. The public was up in arms. But, instead of rallying the public against the “money changers,” as Roosevelt had done in his first inaugural, Obama, taking a leaf from Jimmy Carter’s infamous “malaise” speech, put the blame on the public as a whole. “Our economy is badly weakened, a consequence of greed and irresponsibility on the part of some, but also our collective failure to make hard choices and prepare the nation for a new age,” he declared.

Over the next month, Obama would periodically criticize bankers after embarrassing revelations–at various times calling the bonuses they gave themselves “shameful” and an “outrage”–but, after hearing complaints about his rhetoric from the bankers, he would back off. At a private meeting on March 28 with 13 Wall Street CEOs, the president, his spokesman Robert Gibbs said, “emphasized that Wall Street needs Main Street and Main Street needs Wall Street.” And, in his Georgetown speech, Obama returned to his theme of collective responsibility. The recession, Obama said, “was caused by a perfect storm of irresponsibility and poor decision-making that stretched from Wall Street to Washington to Main Street.”

Obama’s policy followed the same swerving course as his rhetoric. One week, he would favor harsh restrictions on bank and insurance-company bonuses, but, the next week, he would waver; one week, he would support legislation allowing bankruptcy judges to reduce the amount that homeowners threatened with foreclosure owed the banks; the next week, he would fail to protest when bank lobbyists pressured the Senate to kill these provisions. But, more importantly, Obama–in sharp contrast to Roosevelt in his first months–failed to push Congress to immediately enact new financial regulations or even to set up a commission to investigate fraud. (When Congress finally appointed a commission in July 2009, Obama and his party put a milquetoast Democratic politician, former California State Treasurer Philip Angelides, in charge of it.)

Obama’s appointments also conveyed an impression that he wanted to let Wall Street off the hook. He appointed Timothy Geithner to be treasury secretary. Geithner claimed that he was not part of Wall Street, but, in his capacity as president of the Federal Reserve Bank of New York, he had served under a board of directors headed by JP Morgan Chase CEO Jamie Dimon. As New York Fed president, Geithner had been partly responsible for the decision to let Lehman Brothers go under, for the unpopular tarp program, and for American International Group (AIG) paying back its Wall Street creditors with government money. Geithner chose as his chief of staff a former lobbyist for Goldman Sachs. Retiring Democratic Senator Byron Dorgan told me, “Most Americans were reading about the massive compensations and bailouts, and the administration largely hired people from the culture of Wall Street.”

The appointment of the Rubinite acolytes Lawrence "DE Shaw Hedge Fund Paid Me $5.2 Million" Summers and Timothy "Welcome to the Recovery" Geithner have been a disaster from the start. Summers failed to properly take stock of the gravity of the situation while dismissing those who were arguing for a more forceful response and Geithner has been nothing but the servile lapdog of Wall Street interests even going as far as intervening to save $165 million dollars in bonus money for AIG employees. 

Rep. David Obey, the third-most senior member of the House and chairman of the Appropriations Committee, told The Fiscal Times in an interview that Obama's Treasury Department asked initially for a $1.4 trillion bill. We know that the now soon to depart Christina Romer, the head of the Council of Economic Advisors, initially proposed a $1.2 trillion Keynesian jolt to the economy. Instead, the Administration in its quest for bipartisanship proposed a stimulus between $700 and $800 billion that included large tax cuts that were more likely to stimulate saving than consumption–and spending that would be unlikely to produce many jobs until the end of Obama’s first term. In the stimulus’s first year, the Administration spent only $17 billion of the $139 billion allocated for infrastructure spending.

Why? In the Fiscal Times interview, Rep. Obey points to the answer:

The problem for Obama, he wasn’t as lucky as Roosevelt, because when Obama took over we were still in the middle of a free fall. So his Treasury people came in and his other economic people came in and said "Hey, we need a package of $1.4 trillion." We started sending suggestions down to OMB waiting for a call back. After two and a half weeks, we started getting feedback. We put together a package that by then the target had been trimmed to $1.2 trillion. And then [White House Chief of Staff] Rahm Emanuel said to me, "Geez, do you really think we can afford to come in with a package that big, isn’t it going to scare people?" I said, "Rahm, you will need that shock value so that people understand just how serious this problem is." They wanted to hold it to less than $1 trillion. Then [Pennsylvania Senator Arlen] Specter and the two crown princesses from Maine [Sens. Olympia Snowe and Susan Collins] took it down to less than $800 billion. Spread over two and a half years, that’s a hell of a lot of money, but spread over two and a half years in an economy this large, it doesn’t have a lot of fiscal power.

In the Bai piece today in the Times, Mr. Podesta notes one other point, an assumption made by Obama and his team of advisors. The strategy for political success "was built on the no-economic-stall option." Mr. Podesta said, “In other words, the idea was that you didn’t have to get the unemployment rate to a certain number, but you had to get unemployment going in the right direction, and people would feel that, and it would be palpable.”

If your strategy for success was built on a no economic stall, the folly of listening to Rahm Emanuel's political advice over the economic advice of the Treasury Department  and other notables that included Paul Krugman and Joseph Stiglitz is self-evident. The Obama Administration put politics of placating the unappeasable before the necessity of tackling the harsh economic environment bequeathed to him by the Bush Administration. It's bizarre that the Obama Administration choose so willingly to place themselves in an economic straightjacket.

Now it seems we are all headed for the asylum where insanity shall rule.

 

 

Tags: Obama Administration, US Economy, Secretary of the Treasury Timothy Geithner, Rep. David Obey, John Podesta, rahm emanuel (all tags)

Comments

11 Comments

The Jimmy Obama meme

It's taking hold, bit by bit.  Obama's problem is still largely the economy, but he appointed so many out-of-touch incompetents from his campaign team and from Wall Street.   I don't think he comes out of this funk, even with economic improvement.  The GOP will come to their senses and nominate Romney or Huckabee, and get more of the same tax-cut, race to the bottom, bloated defense budget mentality.

All we need is a primary opponent--any ideas?

 

by esconded 2010-08-18 09:01PM | 0 recs
RE: The Jimmy Obama meme

Howard Dean is sounding more and more heroic these days.

But now I that I finally like Dr. Dean, I'm starting to worry that our old flame, Hillary, actually may upstage him with a challenge to Obama of her own. Things could get that ugly.

by Jack Landsman 2010-08-18 11:52PM | 0 recs
RE: The Jimmy Obama meme

Jack, take up frontpage posting here. I've given you the permission set (may need to logout log back in)-- sent you an email.

I love the idea of Dean challenging Obama. Afghanistan, the corporate mandate... Obama is so far out of touch that he's open to an ass-kicking.

I mean, just look at this Mosque debacle he kicked off.

 

by Jerome Armstrong 2010-08-19 12:07AM | 0 recs
Then why are progressives just sitting pat?

At this point in 1978, liberals already had their eye on Kennedy and were set to draft him to run against Carter.  If the progressive movement could get some distance from Obama, it may yet survive this Presidency. 

by Kent 2010-08-19 01:20AM | 0 recs
Howard Dean

I would support Howard Dean in a second.  Obama pissed all over him by not even offering him a spot in the cabinet. 

by Kent 2010-08-19 12:05AM | 0 recs
From what Podesta says

They thought that the economy would get better and they would reap rewards without doing anything. What disappointment

by bay of arizona 2010-08-19 12:15AM | 0 recs
RE: From what Podesta says

That's really the crux. They thought that they had done enough and that as unemployment came down that would provide a political headwind. 

Summer-Geithner-Emanuel sunk this Presidency.

by Charles Lemos 2010-08-19 01:09AM | 0 recs
History will be kind to Barak Obama.....

It will forget him.

 

by BJJ Fighter 2010-08-19 01:04AM | 0 recs
The Mosque thing is heartbreaking to watch

It was funny when Sarah Palin was tweeting about her refutes.  It is just heartbreaking now, to think that we live in a land of 68%b**otry!!

by Ravi Verma 2010-08-19 02:15AM | 0 recs
As an add on...

If Michael Bloomberg were to ever run for any elected office that required my vote, I would vote for him !!

by Ravi Verma 2010-08-19 02:16AM | 0 recs
RE: As an add on...

Bloomberg put the tolerance/anti-bigotry theme out there, but he is either not being followed or the press is giving inordinate attention to the GOP bigots, of which Reid and Dean have now inadvertently joined in an apparent attempt to nullify the issue for the Democrats. What a faux pas.

by MainStreet 2010-08-21 10:56AM | 0 recs

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