A Birthday Gift for President Obama
In 2008, I gave my money and my vote to Barack Obama. With somewhat less enthusiasm, I'll do the same in 2012. But on this his 50th birthday, it's time for a gift the President could really use.
After his latest capitulation to Republicans in this week's debt ceiling debacle, the presents would include a pair of Neuticles to give President Obama at least the appearance of having balls. But more than anything else, Barack Obama could use a mulligan, a presidential "do-over" if you will. With a little more information, better salesmanship and a lot more spine, President Obama and the American people could have found themselves in a much happier place on August 4th, 2011.
The alternative history of the Obama presidency starts with a better understanding of the magnitude of the Bush recession and the under-sized response to it. As The Economist reported yesterday, it was only after the passage of the $787 billion stimulus program that the Obama administration learned that the economic calamity they inherited was far worse than first thought:
The White House looked at the economic situation, sized up Congress, and took its shot. Unfortunately, the situation was far more dire than anyone in the administration or in Congress supposed.
Output in the third and fourth quarters fell by 3.7% and 8.9%, respectively, not at 0.5% and 3.8% as believed at the time. Employment was also falling much faster than estimated. Some 820,000 jobs were lost in January, rather than the 598,000 then reported. In the three months prior to the passage of stimulus, the economy cut loose 2.2m workers, not 1.8m. In January, total employment was already 1m workers below the level shown in the official data.
That difference might have made all the difference. With those grim numbers in hand, the White House likely never makes its disastrous prediction that the stimulus will prevent unemployment from moving above 8%. More important, Christina Romer might have won the argument that the American Recovery and Reinvestment Act (ARRA) needed to be much larger, perhaps $1.2 trillion. With larger infrastructure investment, expanded aid to the states and other greater "bang for the buck" spending than tax cuts, the Recovery Act would have been bigger - and better.
As the CBO and McCain economic adviser Mark Zandi concluded, the ARRA as designed succeeded in saving jobs, reducing unemployment and boosting growth. (An analysis last August by Zandi and Princeton economist Alan Blinder concluded that the federal government's actions prevented "Great Depression 2.0.") But sadly for President Obama, perception is reality. Americans will judge him by what is, and not what might have been.
That's where some better marketing could have helped. After all, President Obama as promised delivered tax relief to over 95% of working households. As Steve Benen pointed out, Obama gave Americans the largest two year-tax cut in their history. But that truth was drowned out by the right-wing noise machine which regurgitated "Taxes Enough Already" and other catch phrases. One year after the passage of the tax cuts as part of the stimulus package, CBS reported that a quarter of Americans thought taxes had gone up; only 2% of Tea Partiers knew that they had gone down. As the New York Times pondered:
"What if a president cut Americans' income taxes by $116 billion and nobody noticed?"
But much worse than Barack Obama's bad marketing was the precedent he set with the watered-down stimulus package. Despite reaching out to Republicans by reducing its scope and loading down the final product with over 40% tax cuts, President Obama was rewarded with exactly zero GOP votes in the House and just three in the Senate. The result of Obama's quixotic quest for bipartisanship is a triple whammy: no Republican support for bad public policy and all the blame when it is perceived to have failed.
In a series of columns in January 2009, Nobel Prize-winning economist and New York Times economist Paul Krugman articulated what could be called Krugman's Law. As he described the unfolding stimulus legislation on January 5, 2009:
"Look, Republicans are not going to come on board. Make 40% of the package tax cuts, they'll demand 100%. Then they'll start the thing about how you can't cut taxes on people who don't pay taxes (with only income taxes counting, of course) and demand that the plan focus on the affluent. Then they'll demand cuts in corporate taxes."
The next day on January 6th, Krugman warned that the $787 billion recovery package was not only too small, but would pose dire political consequences for President Obama:
I see the following scenario: a weak stimulus plan, perhaps even weaker than what we're talking about now, is crafted to win those extra GOP votes. The plan limits the rise in unemployment, but things are still pretty bad, with the rate peaking at something like 9 percent and coming down only slowly. And then Mitch McConnell says "See, government spending doesn't work."
In October, Krugman updated his grim assessment. "I went back to my first blog post -- January 6, 2009 -- worrying that the Obama economic plan was too cautious...Alas, I didn't have it wrong -- except that unemployment will, if we're lucky, peak around 10 percent, not 9." A second stimulus would almost surely be required, an economic necessity that politically would be almost impossible to produce.
But besides having a much greater impact on what was a much more weakened economy, the Obama stimulus program could have produced one other great benefit. It could have successfully concluded the debate over the Bush tax cuts for the rich that dogs him still.
A Recovery Act that immediately ended the Bush tax cut windfall for the wealthy might have altered the trajectory of Barack Obama's first term. While raising taxes during a recession is not ideal, the small bump in income and capital gains rates for the top 2% of earners would have had limited impact on the recovery. (It certainly would have had no impact on the united Republican opposition to even a watered-down bill.) The $70 billion in additional revenue annually would have offset both the cost of a larger stimulus program and reduced the national debt. And by making a move that was and still is very popular with the public, Barack Obama could have preempted the hostage crises he faced in December and again this month.
Instead, Republicans used the looming expiration of the Bush tax cuts to hold unemployment benefits and other aid hostage in December. Their price? A dramatic reduction in estate tax revenue and a two-year tax extension of the Bush tax cuts for the rich as part of December's $814 billion compromise package. (For his part, President Obama failed to secure a debt ceiling increase as part of that package, despite warnings from Republicans and White House reporters alike of what was to come.) And in the debt ceiling deal just concluded, President Obama didn't secure a single penny in new revenue from the Republicans' job creators who don't create jobs.
In May 2010, President Obama told Newsweek's Jonathan Alter:
"I said during the transition that my political capital would go down pretty rapidly."
Which is why, in the alternative history of the Obama presidency, an all-out effort to define and secure health care reform by the summer of 2009 was so critical.
That spring, the Obama administration made a series of fateful decisions on health care reform. Hoping to avoid the experience of Bill and Hillary Clinton, Obama let Congress write his signature health care bill. As the process dragged on through the summer and fall of 2009, Obama made clear he would not commit his personal prestige and political capital to policy choices like a public insurance option or buy-in to Medicare. Those moves would have provided coverage at lower cost while being much easier to explain to the American people.
Political momentum is a fleeting thing. And by the August recess in 2009, Obama missed his opportunity to use it to bulldoze a better health care plan through Congress. Instead, he got the town halls, the right-wing astro-turf campaign, the Tea Party movement, "death panels", Scott Brown and the loss of a filibuster-proof Senate majority. The Affordable Care Act, while increasingly popular, continues to befuddle the public. While the health care bill squeezed through in March 2010, the damage to his policy, his standing and his party was complete. November's midterm disaster put an exclamation point on a two-year period that could have ended much differently.
Instead, Barack Obama's 50th birthday isn't a very pleasant one. As Politico reported:
The consensus has been that for all his problems, Obama is so skilled a politician -- and the eventual GOP nominee so flawed or hapless -- that he'd most likely be reelected.
Don't buy into it.
This breezy certitude fails to reckon with how weak his fundamentals are a year out from the general election. Gallup pegs his approval rating at a discouraging 42 percent, with his standing among independents falling 9 points in four weeks.
His economic stats are even worse. The nation has 2.5 million fewer jobs today than the day Obama took office, a fact you're sure to hear the Republicans repeat. Consumer confidence is scraping levels not seen since March 2009.
It didn't have to be this way. The stimulus could have been bigger, health care more robust and done sooner and, most of all, the counterproductive effort to accommodate Republicans abandoned long ago. (Of course, that would have meant Barack Obama would have to be less like himself and more like his predecessor.) But for one day, it's worth reflecting on what might have been.
Happy Birthday, Mr. President.
Your eagerness to vote for Obama, no matter WHO the Republican candidate is, instantly makes your logic suspect.
Moody's Standard & Poor's, the CBO, the GAO, the Bowles-Simpson debt commission, and even the Chinese have all said that our current rate of debt --granted unprecented under W.Bush, but now vastly further expanded by Obama, more in 2 and 1/2 years of Obam than under an entire 8 years of Bush-- is simply unsustainable.
In the last 2 weeks of haggling over conditions to raise the debt cieling, the Republicans were holding out for 4 trillion in cuts before raising the debt cieling, and a serious attempt to prevent its continued meteoric rise.
Republicans offered 4 different plans: Cut Cap & Balance, the Gang of Six, The Boehner Plan and the much earlier Ryan plan.
The Democrats... no plan, other than tabling any Republican proposals.
$4 trillion in cuts is what every external agency and commission advised as the MINIMUM to create U.S. solvency and take us off the downward spiral, back toward fiscal responsibility.
Republicans repeatedly proposed this.
Democrats repeatedly rejected this.
Okay, sure, Democrats want to raise taxes. I wouldn't have a problem with that, if the money wasn't going to be hosed away on more frivolous social programs.
The only way I would support raising taxes is if that money were used only to pay down the debt. And only if we see the cuts first for a year or so, to prove our leadership is serious aabout debt reduction, and not taxing more while spending twice the new revenue raised.
I certainly concede that Republicans had a part in raising the deficits. But at every point over the last 30 years it was a bipartisan decision to increase the debt, no matter who was president.
You spin it as "Reagan tripled the debt". But Reagan all 8 years had a Democrat-controlled House. Reagan proposed offsetting cuts that the Democrats rejected, and that game of chicken resulted in tripling the debt.
You spin it as "Bush (Sr) doubled the debt". But Bush Sr did the responsible thing, acquesced and raised taxes to fill the gap, against his pledge. Which partisan Democrats like yourself used to demonize him and deny him re-election. (Although without Ross Perot siphoning off the Republican majority in the election, Bush Sr would have beaten Clinton.)
The Persian Gulf War that was the bulk of new debt spending was approved by virtually every Democrat.
You spin it as Clinton balancing the budget, and ignore that Clinton was on the same tax-and-spend trajectory as Obama in 1993-1994, and that it was only because Clinton lost both the House and Senate in Nov 1994 and "triangulated" on a different ideological path more aligned with voters, adopting Gingrich's Contract With America issues, including balancing the budget, that the balancing occurred in 1996 to 2000. It was Gingrich's plan that Clinton signed, but partisans like yourself act like it was Clinton's idea and that he drafted the plan for a balanced budget!
Quite the reverse.
I won't make apologies for W. Bush, I didn't vote for the guy in 2000. As Pat Buchanan said in WHERE THE RIGHT WENT WRONG (Oct 2004), W.Bush abandoned conservative principles.
But... much of what he signed into law (No Child Left Behind, etc) was either to placate Democrats, or with the congressional Democrats' complicity.
The $750 billion TARP bailouts (bipartisan approval) were an investment, loans to be paid back.
And they recently were, with interest.
I read about the actual profit off of TARP in The Hill yesterday.
In contrast, Obama's Stimulus, Onmibus, etc., are just money thrown into the streets, at a frivolous cost of $250,000 for every job created, many of them just temporary Census jobs. They are a slush fund for every pet project Democrats have wanted to fund for the last two-plus decades.
It was bipartisan action that got us into this mess, and I don't support a number of things the Republicans have done to take us in that direction.
But what you've posted just scapegoats all blame on the Republicans, as you yell "YAY TEAM!" for the Democrats and ignore their clear and equal responsibility.
Guys like Barney Frank, Chris Dodd, John Kerry, Hillary Clinton, and Obama himself.
For at least one well-researched counterpoint to your blog and columns, read OBAMANOMICS by Tim Carney. His detailed report dumps plenty of blame at both doors, and isn't just scapegoating everything onto the Republicans.
Take off your partisan blinders, and stop being part of the problem.