by Ron Suskind
Obama nodded to indicate he was ready. Krueger and the other labor specialist among the senior staff, Biden’s chief economist Jared Bernstein, had been working with their staffs for weeks on one of the most wrenching briefings of the Obama presidency: the jobless recovery.
Bernstein started by defining a jobless recovery as a situation where unemployment remains high or even rises after the official National Bureau of Economic Research date that marks the bottom of a recessionary trough. So, what do you guys think? Obama asked them. Both felt that a jobless recovery was highly likely, and said that others in the administration agreed. A fresh internal forecast of the so-called Troika—Treasury, OMB, and Council of Economic Advisers—was predicting a whopping unemployment rate at 9.8 percent in 2010.
It was grim glimpse of the future for the Obama presidency: unemployment in 2010 of nearly 10 percent. Obama was pensive. Economics had never been his strong suit, but he could do the political math. That, at least, would mean a disastrous midterm. Unemployment so high would also be a drain on the budget, with a loss of tax revenues, a rise in unemployment benefits, and the cost of added services. Clearly, he said, that stimulus wasn’t enough. No one needed to answer.
“All right, let’s argue it out,” he said, as Krueger passed out a one-page briefing sheet. He knew, at this point, how Obama liked it. Not a dense analysis or lots of charts, but rather a few top-line ideas he could use to shape a discussion. It was titled “Jobless Recovery? Pro or Con,” with “pro” bullet points: record low number of hours worked; record high number of permanent layoffs; last two recoveries were jobless. For “con,” only one item: “companies are very lean, will find they are too lean and may want to hire.”
“Larry, why don’t you take that side,” Obama said, and three economists hashed it out as Obama listened, throwing in a question or two.
Bernstein emphasized that the number of unemployed workers relative to vacancies had surged and that interest rates implied that aggregate demand would likely be low. Krueger talked about how many key industries—construction and state and local government—might end up shedding more jobs. When demand picked up, hours would rise, but with work hours at a record low, it wouldn’t impact job numbers. He then posited that Americans might put up with European-style work hours after the recession. Maybe they’d even want them.
“No, no,” Obama interjected. “Here people want the longer hours, because they want the money.”
Summers cited Mark Zandi, Moody’s chief economist, who’d been predicting a strong bounce-back. He brought in business cycle data, a few behavioral observations, and a few data points indicating that employers were already too lean.
After a bit, Obama shut it down. “Look, I hope Zandi’s right that we’ll have a quick bounce-back, but we clearly can’t count on that.” He ran through some obvious items: make sure Recovery Act money is doled out quickly with benefits for job creation; figure out ways to spur further infrastructure investment; look for other ways to increase job growth, such as clean energy. “But we should start talking about it, about a jobless recovery, so we’re out in front of this thing.”
Obama got up heavily. “Larry, if your arguments about a quick bounce-back turn out to be right, and I don’t think they will be, I’ll give you a $10 bonus.”
Axelrod tried to get some shtick going: “You’ve offered the bonuses to Larry before. Don’t think you’ve ever paid.”
“Sure would be nice to pay this time,” Obama said, quietly, almost to himself.
Now, with budgets tight, if these projections were accurate, Obama could be facing real trouble. Of course, more Americans would be too.
A few weeks later, the secretive matter of who would replace Ben Bernanke, or whether he’d be replaced at all, was slowly moving toward a conclusion. The selection process had been delegated to Geithner in the late spring. Someone in Summers’s role might otherwise have been involved, but Summers was the leading candidate to replace Bernanke. Larry felt it was knitted into his initial agreement to take the NEC job: barring extraordinary circumstances, he’d be a top choice for Bernanke’s position. Maybe the president had said that, maybe he had just implied it. Maybe it was a case, as Daschle said often happened, of someone reading things into Obama’s attentive acknowledgments that weren’t always there. In any event, Summers was counting on the Bernanke job. It would be the triumphant capstone of his comeback and the high perch from which to complete his long career. Geithner, from the start, handled it deftly. He had the ever-popular Krueger solicit opinions about candidates from far and wide, including from Krugman and Stiglitz, and assembled a list of potential appointees. Summers was not concerned, even though he and Geithner were not getting along all that well. The March “showdown” meeting, and the disputes in its aftermath about the stress tests, had left a residue.
What was more, Geithner’s star was rising in Obama’s estimation, and on this matter he was the key voice Obama turned to in the Oval Office. The president’s question: Whom did Geithner feel he could work with most effectively? Geithner said, according to those familiar with the discussions, that he didn’t have a preference between Summers and Bernanke, though he felt Bernanke had done a very strong job, was a terrific partner, and had a great deal of credibility in the financial markets. Obama felt that last point suggested a kind of continuity that would be important for the recently stabilized markets. Winner: Bernanke.
Summers was outraged and petulant. He started to list demands to Rahm: A round of golf with Obama. He wanted to walk into major events, such as signature speeches or the State of the Union, with the cabinet, a privilege not given even to the senior-most advisory posts. And he wanted a car and driver, like Geithner had. The behavior was, for want of a better term, childish, and the Obama team’s attitude toward Larry began to shift from frustration, and sometimes fear, to eye-rolling incredulity.
As for the demands, Rahm balked. He could manage everything but the car and driver. No one in the West Wing had that. Summers would have none of it. So, for two weeks, as deputy chief of staff Jim Messina raced between the White House and the Baucus committee, he had to search for a car for Larry Summers. When he came up empty-handed, Summers reluctantly accepted two rounds of golf and preferred seating at the State of the Union as consolation.
But the issue of appeasing Summers went well beyond golf.
He was short-tempered in meetings, even more than usual, and began to launch a rearguard assault for even greater clout, using his broad mandate and closeness to the president to envelop various departments in the executive branch. Summers, who as part of his prenuptial agreement in taking the job had been assured that he would manage “all economic policy” information flowing to the president, was redefining that mandate to include environmental/energy issues, tax policy, and health care. He wanted what he called “content control” from all those departments. That meant any documents, briefing materials, or reports from any of those areas came to him for review, and he’d decide how or whether they upstreamed to the president. In addition, he’d control access to Obama for top officials like energy/climate change czar Carol Browner and health care reform chief Nancy-Ann DeParle. Though Melody Barnes—a widely accomplished scholar, longtime chief counsel to Ted Kennedy, and top domestic policy aide from the campaign—sat atop the Domestic Policy Council (the entity designed to oversee and integrate all domestic policy), she as well was no match for Summers, who now had control of virtually the entire domestic shoreline.
Next stop, Orszag. Summers wanted “content control” over OMB. Anything intended for the president from OMB, as well as all budgetary decisions, would have to be reviewed first by him. Orszag would lose direct access to Obama; he’d have to go through Summers.
It didn’t take long for Orszag to show up at Emanuel’s office to tell him this was “outrageous.” As compared with the departments of czars like Browner or DeParle, OMB’s very purpose since its founding under Nixon was to be kind of management team for the presi
dent, distilling actions and options from across the government into their actual costs. Because there was always a limited budget, the OMB directors must keep a president, even with his awesome powers, ever in a conversation with measurable reality. Orszag said he’d be damned if his access was cut off and those choices were served in Summers’s rhetorical brew.
Emanuel was sympathetic, but he asked Orszag to be understanding about how difficult it was to manage Summers.
“Come on, Peter, help me out here,” he said.
Orszag was incredulous. Help you out? You’re the chief of staff!
Emanuel finally stepped in, and Summers backed off, at least for that day. But the ongoing push-and-shove atop the administration, without leadership from either the president or the chief of staff, was leaving lines of authority blurred, roles ill defined, and deepening questions of who—at any given moment—was in charge.
The president did not really have a coherent health care plan to sell. By setting overarching goals and then leaving the specifics of any bill largely to Congress, he had nothing to describe or champion as a better future, as Zeke Emanuel’s C. It was just a jumble of proposals without a clear model of how to pay for reform and make good on his pledge to keep it “budget neutral.”
Several skilled Washington managers—including former Treasury secretary Bob Rubin and former Reagan chief of staff Ken Duberstein, along with Podesta and Daschle—were, by midsummer, starting to offer advice on how to bring a modicum of sound process to the White House. Without that, several of them stressed, an organization of hundreds of political appointees in the White House and across the tops of agencies couldn’t possibly move in unison to assist the president in making sound decisions and carrying forward his dictates. Things get lost. Initiatives languish or vanish. Or, as was already the case on a host of issues, the White House gets OBE’d: “overtaken by events.” The advice focused mostly on the top, the area they were all most familiar with: how to make certain that issues were debated, with options fully explored, and then distilled into a clear set of choices for the president. Once a decision was made, what would be the agreed-upon model of execution—one that pushes forward with constantly checked progress—to advance the leader’s wishes?
They didn’t make much headway. Emanuel, with his day-to-day focus on “getting points on the board,” scrambled for quick results, trying to win each day’s news cycle. As Bob Rubin told one of his many acolytes in the White House during a phone call, “Rahm’s more inclined to want to get a bill passed than really be worried about what’s in the bill.” Only a few people at the very top, such as Summers and Orszag, had begun to ask if the problem wasn’t more fundamental. Maybe the issue wasn’t just with the loosely organized and impulsive Emanuel, sitting atop a White House where roles, and lines of authority, were fuzzy. Maybe the problem was with the president himself, an inquisitive man who, as Axelrod said, “moved fluidly from one thing to another”—a fox, in the old Isaiah Berlin allegory, who moved lightly from one place of opportunity to another, rather than a hedgehog, who focused intently on a goal and pushed it through.
Either way, someone had to do something. So, in June, Tom Daschle teamed up with John Podesta, in essence, to run a policy process outside the White House. They pulled together a few leading experts on health care funding, carefully constructed a plan to tax high-end health insurance, so-called Cadillac plans, and then worked back channels with the various interest groups, including labor, to get it off the launch pad. Soon enough, the White House had a way to pay for nearly half its health insurance reform.
Meanwhile, more deals were quietly being negotiated with providers. On July 8 the hospitals secretly cut their deal with the team of Baucus, Messina, and now, DeParle, just as Tauzin had for the pharmaceutical companies the month before. They’d accept $155 billion in payment reductions over the coming ten years, provided that the bill had no “public option,” which would have reimbursed hospitals at a lower rate than private insurers.
Axelrod and his political team never pulled together much of a plan to go over the heads of official Washington and speak directly to the American people. Not that this had not been suggested for months, since Tom Daschle, at the Health Care Summit, told Obama that if he didn’t step forward to frame this debate, someone else would do it for him.
It just took a few months—until summer—for that to happen.
The Tea Party movement, fueled by Fox News, rose out of the heartland and spread. Talk of “death panels,” another brilliant bit of rhetorical mischief from the Republican Party, dominated the airwaves. Obama and his surrogates spent much of July trying to wash the smell of death panels off their skin like someone who’d been in a bad run-in with a skunk.
In early August, as news of Tauzin’s deal with PhRMA finally leaked out, the Obama team met in the Oval Office. If Obama was on the defensive, he’d lose all the swing votes, Daschle foretold. He was, and the votes were in flight. Even some solid Democratic supporters of health care reform were on the move. Nancy Pelosi felt she had to step in, to set some sort of anchor to keep the debates fixed and focused. Obama had said during the campaign that he was for a basic government-run health insurance plan for those who didn’t have private insurance, that a “public option” would be a way “to keep health insurers honest.” He hadn’t offered much support for the idea since. Emanuel said, internally, that it was a nonstarter and was not a central plank for the internal plans coursing through the White House policy shops. What’s more, the core of the deal cut with the hospitals, not yet revealed, had killed the public option.
Pelosi, meanwhile, saw how the public option terrified the insurers—an existential issue that brought them to the bargaining table, and kept them there. She didn’t want to give that up, despite opposition from the American Medical Association and other providers. She said that the public option was nonnegotiable—the only way, she felt, for the government to reshape the marketplace.
On balance, it was an utterly incoherent process, where the White House seemed to be of many minds, or none at all, with the House and Senate in open collision, and proposals to significantly reduce health care costs off the table. For opponents of health care reform, the tough decision was whether this should be called ObamaCare or PelosiCare. Both terms seemed to work in stirring up fear and passion. The joyous anger on the right was palpable.
Dr. Jack Wennberg, founder, provocateur, and contrarian of the Dartmouth Atlas Project, prides himself on being precise, punctual, and not easily pleased. Of Norwegian stock, from parents who settled in upstate New York, Wennberg liked to hike (usually alone), read reams of medical data, and be on time.
And today, on a crisp, blue August sundown in the mountains near Hanover, New Hampshire, he was running late.
The event was a Friday evening party at an elementary school near Hanover being thrown by the family of his successor, Dr. Jim Weinstein. Just about everyone he knew would be there. That would include the roughly two hundred people, most from both Dartmouth’s Atlas Project—the data-fed analytical engine for revolutionary disruptions in American medical care—and Dartmouth-Hitchcock Medical Center, the huge, modern institute that seemed to have been dropped by some extraterrestrial transport into a notch of hillside just outside of town.
Though it had only been two years since he’d passed the torch to Weinstein, it had nonetheless been a period of transition. When the change was made official in 2007, many of those in the Dartmouth community quipped “it’s about time”—Jack, after all, was seventy-three—while appreciating how unimaginable it was that anyone could replace Wennberg.
When he first attempted to publish papers in the late 1960s about the enormous disparities in both the frequency and cost of various procedures—with no discernible difference in outcomes—he was shooed away from established medical journals. When the journal Science did publish his work, the problem shifted: he was attacked. Nearly forty years later, he still was still being attacked, but now mostly out of fru
stration. Once Wennberg started the Center for Evaluative Clinical Services in 1988, he began attracting doctors and researchers of every stripe to Hanover as, specialty by specialty, they began to identify wide or stunning variations in medical practice and then “compare outcomes under controlled circumstances.” The center began to publish the Dartmouth Atlas, documenting these variations in the way medical resources were used all over the country. One striking example was a thirty-three-fold difference between regions in the frequency of mastectomies and lumpectomies.
When Wennberg and CECS dug into the data on “elective” surgeries they came upon a vast, related line of research: how patients make, or more often don’t make, their own decisions—even with elective procedures. Hence the Foundation for Informed Medical Decision Making, an organization that spearheaded the concept, now widely accepted if not often fully implemented, of “shared decision-making”—where patients are helped to actively assess the risks and rewards of procedures, rather than nodding along with a doctor’s recommendation.
Each of these ideas, each step forward, was met with skepticism and often open hostility from the medical establishment. As Wennberg tirelessly stresses, the last thirty years has seen the growth of “investor medicine,” where Wall Street looked with favor and enthusiasm on hospitals, pharmaceutical companies, and medical device makers. “It’s become more about money and less about care,” Wennberg said. “For a hospital to do something that may be good for patients but bad for its profits, it risks having its bonds downgraded or having its investors up in arms.”