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Chapter One
Before the Shellacking
āWE KNEW THIS WOULDNāT BE EASY.ā
It was mid-May 2010āhalf a year before his big decision on a tax-cut dealāand President Barack Obama was addressing hundreds of high-dollar Democratic contributors (celebrities, financiers, power players) from a stage in a ballroom at the ritzy St. Regis hotel in New York City. The goal, as at every fund-raiser, was to squeeze them for money. He had to show them something special, reveal a little bit of himself and his thoughts, so they would feel part of his presidency and attuned to his vision.
Obama was not an enthusiastic fund-raiser. Some politicians actually enjoy grubbing for moneyānot him. After he became president, some big-dollar donors grumbled about the lack of attention the White House paid to its wealthy contributors. There werenāt sufficient invitations to the White House or requests for advice. Fair or not, this was regarded as a reflection of Obamaās own jaundiced view toward the money chase. But when Obama wanted to reach out and touch the donors, he could. And now he truly needed to mobilizeāand motivateāhis partyās money people.
Two months earlier, the Democrats in Congress had finally passed Obamaās comprehensive but controversial health care overhaul. Tens of millions of Americans would eventually obtain health insurance coverage (which would be subsidized for low-income recipients); insurance companies would be prevented from denying coverage to customers with preexisting conditions; young adults could remain on their parentsā plans; older Americans would receive additional assistance in paying for medicine.
But the passage of this landmark law, which included an individual mandate that would compel people to obtain coverage (to the horror of conservatives), had not won Obama much, if any, political credit. The whole effort had exhausted Washington and alienated independent voters, especially those who wondered if Obamaās devotion to this reform had come at the expense of repairing the still-tattered economy.
The president had been left with a let-me-explain, hard-to-understand win that had prompted rage on the right and fired up the Tea Party forces now threatening his party.
Unemployment had topped 9.5 percent for nearly a year, and the presidentās approval rating was just below 50 percent. Congressional Democrats were faring worse. In Gallup polls, approval of the Democratic Party, which controlled both the Senate and the House, had plummeted in the past year from 55 to 41 percent. Republicans, who had embraced a consistent stance of anti-Obamaism, had crept up from 34 percent to 42. One survey showed that more than 70 percent of the public disapproved of the Congress.
All this confirmed the obvious: Obama and the Democrats were hurtling toward a cliff in the 2010 midterm elections. And for months leading up to the St. Regis fund-raiser, strategists at the Democratic Congressional Campaign Committee, the outfit tasked with preserving the Democratic majority in the House, had been urging the White House to unleash the president.
They wanted Obama to mount up and lead the charge against the say-no-to-everything Republicans. Obamaās aides, though, were not eager to set Obama loose as a partisan bulldozerāwhich aggravated the Democratic strategists. āTheyād say, āLook, the president won the 2008 election because he was beyond politics,ā ā one House Democrat recalled.
But at this swanky $15,000-a-person event featuring food prepared by chefs of the French Culinary Institute, with actors Matthew Broderick and Sarah Jessica Parker in the crowd, Obama was delivering his first campaign speech of the season. After those months of back-and-forth between the White House and the DCCC, he was finally leaping into the 2010 mix. With gusto.
āI hope you knewā that it would be tough, he told the faithful. āBecause I told you. If you didnāt know, you werenāt paying attention at my inauguration address. Remember that? Washington, couple million people, really cold?ā
He pounced on the Republicans: āYou would have thought at a time of historic crisis that Republican leaders would have been more willing to help us find a way out of this messāparticularly since they created the mess.ā
Unsheathing the biting sense of humor he only rarely displayed in public, Obama went on: āWe got our mops and our brooms out, weāre cleaning stuff out, and theyāre sitting there saying, āHold the broom better.ā āThatās not how you mop.ā Donāt tell me how to mop. Pick up a mop!ā The well-heeled Democratic loyalists laughed loudly.
Obama insisted that the GOP strategy had been āto gum up the works; to make things look broken.ā And āif it didnāt work out so well, maybe the other side would take the blame.ā He was on a roll: āSo after they drove the car into the ditch . . . now they want the keys back. No! You canāt drive! We donāt want to have to go back into the ditch! We just got the car out!ā
Representative Chris Van Hollen, the bright-eyed congressman from Maryland who headed the DCCC, flashed a thumbs-up at House Speaker Nancy Pelosi, who was also at the dinner. The president was using the car-in-the-ditch line Van Hollen had been quipping for months. But Van Hollen wasnāt thrilled merely because Obama had cribbed a talking point from him. More important, the president was at last doing what House Democratic strategists had yearned for: pounding the Republicans.
But was this coming too late? House Democratic strategists would be disappointed that the president did not constantly pummel the Republicans over the coming weeks. This going-back-into-a-ditch point, they believed, could not be repeated often enough. Yet Obama tended to push this theme mostly at fund-raising events.
At the White House, Obamaās aides believed the president was indeed accommodating congressional Democratic desires.
āThe back-versus-forward message was hatched around a table with Nancy Pelosi, her leadership team, and Axe,ā recalled a senior White House official. āIt was not the message we would have chosen. We would have preferred a message closer to our 2008 message of reforming Washington. But this is what the House and Senate felt made sense, and we wanted to do what they wanted.ā
Even so, the presidentās speech at the St. Regis included little on what he and the Democrats would do in the months ahead to improve the economic fortunes of the millions of Americans still facing or fearing rough circumstances.
āAt that time in general,ā a senior House Democrat later commented, āthere was a question whether Obama was making it totally clear to the public that he was focused on jobs and the economy.ā One DCCC strategist put it bluntly: āWe had no economic narrative.ā
The absence of a compelling and convincing economic message would be a central problem in the months ahead. A vibrant recovery had yet to arriveāand Obama and the Democrats were in charge. A but-for-us-things-could-have-been-worse platform would be difficult to campaign on, however true that might be. Obama needed to persuade voters that he was engaged in concrete actions to revive the economy and create jobs.
Obama did have ideasāsuch as a proposed $30 billion small business lending program he had promoted at a Buffalo manufacturing plant hours before flying to New York City for that fund-raiser. But the White House did not have an aggressive create-jobs-now blueprint to tout. The administration had even engaged in a fierce debate about whether to concoct such a plan.
THE WEEK BEFORE OBAMAāS SPEECH, AT A PRIVATE MEETING with liberal advocates in Washington, Larry Summers, the director of the presidentās National Economic Council, was asked why Obama was not speaking more boldly and clearly about job creation.
Summers, the former Harvard University president who had served as Treasury secretary during the Clinton years, was seen as imperious by many inside and outside the White House, and progressive policy advocates in town considered him and Treasury secretary Timothy Geithner a centrist, proāWall Street cell in the administration that was blocking more populist economic measures and messages.
Summers had been a cheerleader for financial deregulation in the Clinton years; Geithner had been president of the New York Federal Reserve Bank and a key player in the bailout bonanza that saved the titans of Wall Street who had behaved irresponsibly on his watch. When Obama placed his all-important economic policies in the hands of these two men, it sent a signal that he was receptive to the needs of Big Finance, even while he vowed reform.
Still, Summers and Geithner were not always the pro-corporate obstructionists their critics envisioned. At times, they were stymied by the administrationās politicos.
Summers informed the liberal advocates that the White House did not have much in the works regarding new and extensive job-creating initiatives. He and other policy people in the administration believed the government still needed to goose the economy, but he blamed āthe political folksā in the White House for shifting toward deficit reduction. Summersās audience drew the conclusion that Obama and his strategists were concerned about polls showing that many votersāespecially independentsāhad absorbed Republican talking points: Obama had spent too much money, the stimulus had not worked, and the government needed to go on a starvation diet.
A few days later, Peter Orszag, the head of the Office of Management and Budget and a fierce deficit hawk, privately told a few of these policy advocates that the White House was definitely pivoting toward deficit reduction. He said that the White House had calculated that any new stimulus proposed by the president would die in the Senate.
According to Orszag, the plan was for the president to act and look serious on the deficit in the near term to accrue political credibility that could later be redeemed to win job-boosting government spendingāmaybe a modest $100 to $200 billionāin 2011 and 2012, in time for Obamaās reelection. (Months earlier, during his first State of the Union address, Obama had talked more about his steps to reduce spendingāfreezing certain government spending, creating a deficit-reduction commissionāthan about creating jobs.)
Orszagās message was unambiguous: forget about more spending to create jobs this year. The Obama White House was tapped out.
THROUGHOUT THE PAST MONTHS, OBAMAāS WHITE HOUSE HAD been conflicted over what to do about the sickly economy. The previous fall, much of the presidentās economic team had concluded that the recession was worse than they had anticipated.
Yet its members couldnāt agree on how to respond. Larry Summers; Christina Romer, the academic who chaired the presidentās Council of Economic Advisers; and Jared Bernstein, the labor-friendly advocate who was Bidenās chief economic aide, were each keen on more stimulusānot another $800 billion, but several hundred billions of dollars.
Orszag, an establishment-oriented economist who had once headed the Congressional Budget Office, was more concerned with the looming deficit. Geithner, who had worked for Summers at Treasury during the Clinton administration, believed that the economy could use another $400 to $500 billion shot in the arm, but he preferred that such a boost be tied to a deficit-reduction strategy. Geithner, though, was often hard to read.
āHe holds his cards close,ā a past colleague said. āYouāre never quite sure what heās saying to the president or what he believes.ā
āThere was discombobulation,ā a former senior administration official later complained. āNo coherence within the economic team.ā
It didnāt help that Summers and Orszag disliked each other. Or that Geithner believed Summers often blocked policy ideas that did not originate with Larry Summers. Moreover, others in the White Houseāchief of staff Rahm Emanuel, David Axelrod, and the legislative shop led by Phil Schiliroāhad concluded that it would be politically near impossible to do anything big.
āWe kept fighting the same fights in front of the president,ā Romer recalled. āHe was frustrated about where the economy was, where the politics were, and he was frustrated by the economic team.ā
When Obama met with his economic aides, Romer would constantly assert that more stimulus was necessary. (She, too, worried about deficits, but didnāt want to clamp down until the economy was in a better place.) At one meeting, when Romer was making her now-routine argument for more stimulus, Obama interrupted her: āI canāt get it done. Donāt you understand that?ā
The original stimulus had become a political albatrossārendering the economic teamās internal debates almost moot. Moreover, the ever-uphill push for health care reform was consuming most of the available oxygen. Obama had contended that his health care overhaul was essential to improving the jobs pictureāand he had strong policy arguments for that case. Yet when the legislation was passed, it was not regarded as a jobs initiative.
āThe bill was hard to comprehend,ā a top administration official later said. āThe process was hard to follow. Voters saw him fiddling, while jobs were not being created.ā
ON APRIL 20, 2010, AN EXPLOSION OCCURRED ON THE BP-licensed Deepwater Horizon drilling rig in the Gulf of Mexico, and the president and his aides were overwhelmed by the worst environmental disaster in decades.
The BP oil spill added to the already present sense of crisis. A Greek financial crunch was roiling markets and confidence around the world. Stock prices were falling. The forecasts from earlier in the year predicting the US economy would rebound were not holding up. And as the oil gushed into the sea, the president could do nothing to stop it. He asked Defense secretary Robert Gates and Admiral Michael Mullen, the chairman of the Joint Chiefs of Staff, if the US government had any technology that cou...
