Prosperity was a laudable goal, of course, and supporting culture was a laudable means. But that doesn’t mean the one is necessarily connected to the other. In fact, the creative-class theory was based on a colossal blurring of cause and effect: An art scene isn’t something that springs up before a city becomes affluent; generally speaking, it follows the money. This didn’t stop political officials all over the country from adopting the creative-class strategy, however; in the absence of any concrete development policies, it must have seemed like a quick and affordable way to tackle civic decline. Florida himself would later back away from certain aspects of his original theory, admitting that “we can’t stop the decline of some places, and that we would be foolish to try.”14
I bring all this up not because I want to refute it—it refutes itself—but because its eager adoption by liberal politicians tells us something important about the modern Democratic Party and its attitudes toward equality. In its quest for prosperity, the Party of the People declared itself wholeheartedly in favor of a social theory that forthrightly exalted the rich—the all-powerful creative class. For many cities and states, this was the economic strategy; this was what our leaders came up with to revive the urban wastelands and restore the de-industrialized zones. The Democratic idea was no longer to confront privilege but to flatter privilege, to sing the praises of our tasteful new master class. True, this was all done with an eye toward rebuilding the crumbling cities where the rest of us lived and worked, but the consequences of all this “creative class” bootlicking will take a long time to wear off.
Working by then as a consultant to governments around the country, Florida himself ventured into politics in 2004, when he took to the pages of Washington Monthly to denounce the Republican Party and the science-doubting administration of George W. Bush as enemies of capitalism—or of modern, “creative” capitalism, anyway. The red states the Republicans represented were lands of economic backwardness, according to Florida, while Democratic areas, with their tolerance and love of learning, were zones of thrusting modernity. During the great years of the New Economy, Florida reminisced, these liberal-led places
became hothouses of innovation, the modern-day equivalents of Renaissance city-states, where scientists, artists, designers, engineers, financiers, marketers, and sundry entrepreneurs fed off each other’s knowledge, energy, and capital to make new products, new services, and whole new industries: cutting-edge entertainment in southern California, new financial instruments in New York, computer products in northern California and Austin, satellites and telecommunications in Washington, D.C., software and innovative retail in Seattle, biotechnology in Boston.15
Let us be clear about the political views Florida was expounding here. The problem with, say, George W. Bush’s administration was not that it favored the rich; it was that it favored the wrong rich—the “old-economy” rich. Similarly, the problem with the intense Republican partisanship of those years was that it turned a deaf ear to the voices of the country’s most important and creative industries (such as Wall Street and Silicon Valley), since such places chose Democrats as a matter of course.
Richard Florida wept for unfairly ignored industries, but he expressed little sympathy for the working people whose issues were now ignored by both parties. In fact, he sometimes seemed to regard these people as part of the problem. In the summer of 2008, Florida told a British newspaper that “the creative class anticipates the future, while the working class tends to seek protection from it.” The only lesson we really needed to learn from the working-class experience was how they pulled off their political triumph in the 1930s, which Florida thought the creative class now needed to replicate: “Just as Franklin Delano Roosevelt forged a new majority on the swelling ranks of blue-collar workers, so must the party that hopes to win this presidential election earn the enthusiastic support of today’s ascending economic and political force—the creative class.”16
Florida spoke those words in June of 2008. The collapse of the ultra-creative Lehman Brothers investment bank came a scant three months later, and I would like to be able to say that these dreams of prosperity-through-tastefulness followed—right down the drain with the hedge funds and subprime lenders of the world. After all, one of the greatest deeds of the creative class was … financial innovation—meaning, among other things, the poisoned mortgage-backed securities that brought the global economy so close to death.
But the ideas I have described in this chapter did not suffer the same fate. As with free trade and welfare reform, there seems to be no refutation that can dissuade their supporters. Indeed, with the election of the young and innovative challenger, Barack Obama, they got a second wind. Under his administration they became more vigorous than ever, and with their flourishing our modern Democrats wandered ever further from their egalitarian traditions.
7
How the Crisis Went to Waste
Having spent decades assuring the public that their renunciation of the New Deal was genuine, in 2008 Democrats suddenly decided that the New Deal was back and that Franklin Roosevelt was more relevant than ever.
It took a global financial catastrophe to make them reverse themselves in this way—a recurrence of the Great Depression complete with Wall Street swindles, a burst financial bubble, and weeks of panic as unemployment spiked, assets tumbled, and the economy’s foundations quivered. The confident days of the free-market consensus seemed to be shuddering to a close. The promise of a universally affluent postindustrial era now looked as empty and forlorn as a row of abandoned McMansions on some lonely cul-de-sac in the Nevada desert.
It wasn’t merely Barack Obama’s singular identification with “Hope” and “Change” that made him seem like the reincarnation of Franklin Roosevelt; in contrast to every other candidate, he recognized how political convention had given us economic disaster. In March of 2008, he gave his speech at Cooper Union in New York City appraising the crisis even as it developed; he understood the parallel with the bubble and burst of 1929; he knew how deregulation had contributed to our present predicament; and he blamed Wall Street for giving us an economy in which ordinary people never got a chance to prosper. It was a complete break with the school of Democratic Party thinking I have described in these pages.
His adversaries also did their part to make the parallel complete. President George W. Bush basically checked out for the crisis, leaving matters to his Treasury secretary, Hank Paulson. This official, in combination with Fed Chairman Ben Bernanke, proceeded to infuriate the public with a series of massive bank bailouts. Nor was the Republican presidential candidate, Senator John McCain, really up to the shocking turn of events; in his desperation and muddlement he announced that “the fundamentals of our economy are strong” on the very day of the Lehman Brothers collapse.
Obama, by contrast, seemed capable, youthful, vigorous, and intelligent. The volunteers who fuelled his run were so organized and enthusiastic that they appeared, to quote a team of scholars who have studied them, “more like a social movement than an electoral campaign.” As the economic crisis deepened, Obama’s greatness seemed to intensify; 100,000 listeners showed up at a rally for the candidate in St. Louis that October; another 100,000 turned out in Denver. There were an estimated 240,000 people on hand in Chicago on election night when Obama swamped McCain; the largest crowd ever to attend a presidential inauguration showed up to witness his swearing-in on January 20, 2009.1
The Democratic landslide carried away years of crusted ideas about the benevolence of high finance, and it also seemed to herald the end of decades of panicky Democratic capitulations to the right. Obama appealed to many of the fought-over demographic groups, and he did it without the concessions that party orthodoxy said he needed to make. He wasn’t a Southerner; he wasn’t mired in the culture wars; he hadn’t tried to prove he was tough by supporting the Iraq war; he didn’t triangulate and split hairs and cater in some nonverbal way to the white backlash; hell, he wasn’t even white himself. For good m
easure, he snubbed the Democratic Leadership Council when they met in Chicago in 2008.
The connection between the confident new president and the hero of the 1930s was noted again and again by newspaper and magazine journalists. That a period of activist, FDR-style government should of necessity follow the collapse of capitalism seemed to be a truth universally acknowledged; writers on the left were enthusiastic about the prospect while conservatives trembled at the imminent reversal of everything they had achieved over the decades. “Roosevelt-mania” had seized America, declared the Economist magazine; Obama himself was reading books about the Depression, and on an episode of 60 Minutes in November 2008 he said “what you see in FDR that I hope my team can emulate is not always getting it right, but projecting a sense of confidence, and a willingness to try things. And experiment in order to get people working again.”2
Obama’s $800 billion stimulus program, introduced in Congress six days after his inauguration, was said to be so sweeping it constituted nothing less than a “New New Deal,” to quote the title of a book by Time magazine’s Michael Grunwald. Another frequent comparison concerned Roosevelt’s famous “brain trust,” the group of professors and intellectuals the president called together in 1933 to help him plan the nation’s economic recovery; Obama, it was said, needed to do exactly the same. The incompetents of the Bush Administration had run the country into the ground; perhaps what we needed most of all was government by the capable. Brains would find the way out of this crisis.
That was certainly what I myself thought at the time. Another journalist who seemed to feel this way was Jacob Weisberg, whom we last met calling attention to Clinton-era “Clincest” and who now called for a “Brilliant Brain Trust” in Newsweek.3 Obama needed to “pick the smartest people he can find for his cabinet,” to “give greater weight to intellectual acumen and subject-specific knowledge.” The embodiment of such an approach, Weisberg went on to claim, was the economist Larry Summers, formerly the president of Harvard University and “the outstanding international economist of his generation.” Summers had his problems, Weisberg admitted; he could be arrogant and contemptuous toward the less intelligent. “But these are the defects of a superior mind,” Weisberg wrote, the unavoidable price you pay for having such a gifted individual on your team.
The professorial Obama proceeded to fill his administration in precisely this way. According to Newsweek reporter Jonathan Alter—who has written books on both Obama and FDR—some 90 percent of the new administration’s staffers had professional degrees of some kind, and some 25 percent had either graduated from Harvard or taught there. Obama’s team included a Nobel Prize winner, a Pulitzer Prize winner, a MacArthur “genius grant” winner, numerous Rhodes Scholars, and Summers, who presided over his National Economic Council. “It’s merit-based,” Claire McCaskill, senator of Missouri, is reported to have said of the president’s hiring strategy. “It’s getting the best people and best ideas.”4
The process by which “the best people” were chosen is hinted at by an episode Chris Hayes describes in Twilight of the Elites. It was 2009, the president was picking a new Supreme Court justice, and pundits and presidential advisers alike were carefully weighing the qualifications of the well-graduated individuals under consideration. One attribute in particular commanded their attention: Which candidate was the “smartest”? On and on the wise ones reasoned, deducing somehow that one candidate was “smarter” than a second, who was, in turn, smarter than a third, who was, sadly, “not as smart as she seems to think she is.” Of all the controversies before the nation and the many nuances of legal thought, this is what it came down to for the liberal class: smartness. For them, the Supreme Court was like a really selective institution on the far side of some cosmic SAT test.
Putting “the best people” in charge takes us to the essential battleground of American politics, as some people see it. This is what so many believe the war between Ds and Rs comes down to: intellect versus ignorance; science versus faith; Harvard versus wherever it was that Sarah Palin went to collidge. Summers himself was a forceful exponent of this point of view, saying in the first months of the new administration, “We’ve gone from a moment when we’ve never had a less social-science-oriented group”—meaning the philistine government of George W. Bush—“to a moment when we’ve never had a more social-science-oriented group. So … we’ll see what happens.”5
SAME-DOT-GOV
It has now been seven years since the Day Change Came, and we can indeed see what happened. On the most urgent issue facing the nation—what to do about the banks—the intelligence quotient of the president’s team turned out to matter almost not at all. The erudite Obama administration used its mandate to continue the policies of the crude and tasteless Bush administration essentially unchanged, at least for the first few years. The bank bailouts proceeded as before. Tim Geithner, who had helped to run the Bush administration’s bailouts from his seat at the New York branch of the Federal Reserve, now ran the Obama administration’s bailouts from his seat at the Treasury Department. Ben Bernanke was re-upped at the Federal Reserve Board in Washington. Summers himself went on TV to defend the Policy of Same at its very worst juncture, the time in 2009 when bonuses went out to the executives of the failed insurance company/hedge fund AIG.6
For the new administration, as for the old, an obliging consideration toward banker confidence took precedence over everything else. For fear of frightening the men of lower Manhattan, the Obama team dared undertake none of the serious measures the times obviously called for. No big Wall Street institutions were put into receivership or cut down to size. No important Wall Street bankers were terminated in the manner of the unfortunate chairman of General Motors.
As a result, the situation continued as follows: The Wall Street banks, being “too big to fail,” enjoyed a more-or-less explicit government guarantee against bankruptcy, but in order to enjoy that protection they were not required to stop doing the risky things that had got them in so much trouble in the first place. It was the perfect outcome for them, with the taxpayers of an entire nation essentially staking them to endless turns at the roulette wheel.* Writing of this awful period, Elizabeth Warren (who worked then as a bailout oversight official) concluded that “the president chose his team, and when there was only so much time and so much money to go around, the president’s team chose Wall Street.”7
The classic and most direct solution to an epidemic of corrupt bank management and fraudulent bank lending is to use the authority that comes with rescuing failed banks to close those banks down or to fire those banks’ top managers. This was evidently never seriously considered by Obama’s team of geniuses.
Another landmark Thirties policy option—requiring banks to separate their investment operations from their commercial banking services—was ultimately taken up by Democrats, and a version of it was even written into the Dodd-Frank bank reform measure. Whether and how it will actually be enforced is unknown as of this writing, since the law’s provisions and loopholes are still being written and hollowed out by lawyers and regulators. We do know this: the too-big-to-fail banks are bigger than they were before the crisis, having swallowed up other banks as part of the rescue scheme. We also know that people who work in securities still make far more than those who toil in other industries—the average salary for people in that line of work in New York City was $404,000 in 2014—and their bonuses have almost returned to the levels achieved in the days before the crash.
On the second-most-urgent issue facing the nation—what to do about the recession and the unemployed—the administration’s “New New Deal” program of deficit spending proved to be insufficient for what the ailing nation required. In an uncanny replay of the episode with which the Clinton administration had started, Obama’s economic brain trust instructed him not to frighten markets by spending too much and expanding the federal deficit too greatly.8 It was exactly the wrong advice for the moment, as less orthodox economists like Paul Krugman spen
t those years insisting.
But Obama’s stimulus package did get through Congress, and it was larger in nominal dollars than any stimulus had ever been before. Unfortunately, the biggest single part of it was wasted on tax cuts designed to lure Republican votes. Another chunk was wasted on coaxing state governments to embrace charter schools and to open their education systems to consultants and entrepreneurs. The Big Stimulus also contained many good things: subsidies for clean-energy projects, a push to update medical record-keeping, billions for high-speed rail projects, and support for a long list of state and local construction schemes—the famous “shovel ready” projects about which everyone was talking in 2009. If you can name just one of them today without going to Wikipedia, you have my respect.9
What the sprawling stimulus measure did not include was the obvious thing, the most effective thing, the thing Americans of all ages remember that Franklin Roosevelt did—direct federal job-creation in the WPA manner. Obama was careful to avoid such things, because they would have expanded the federal workforce. Instead, his New New Deal merely sent money to others; on its own it built no tunnels in national parks, constructed no Art Deco county courthouses, painted no murals on post office walls, published no guidebooks to the states. As a result, it missed out on another achievement of the Roosevelt era: the creation of spectacular and unmistakable monuments to activist government.10
Unemployment did eventually come down, of course, as the economy healed from the bursting of the housing bubble. But the process was slow, it somehow didn’t bring rising wages, and eventually the president came to believe that it couldn’t be otherwise. According to the journalist Ron Suskind, President Obama convinced himself in late 2009 that there wasn’t much he could do about the problem anyway; that, thanks to productivity growth, a high-unemployment economy was “the way it was supposed to be,” in Suskind’s words.11 It was on the basis of this fatalistic illusion, Suskind continues, that Obama instructed his team not to push for another round of stimulus spending.
Listen, Liberal: Or, What Ever Happened to the Party of the People? Page 13