But these debates were mostly about how to “score” the loan’s risk of default to determine how much money to set aside in reserves, not whether to make the loan in the first place. OMB did nudge the score upward to reflect a 20 percent chance of failure—risky, but nowhere near as risky as the 50 percent rating for a $5.9 billion loan to help Ford build factories for fuel-efficient cars, a loan that’s looking fine.
In any case, there was no evidence of any improper political influence in any of the emails, inside or outside the administration, and officials testified under oath that there wasn’t any. There clearly was logistical pressure in the last two weeks, when the White House wanted to make sure the loan was finalized in time for Biden’s announcement. Steve Spinner, the Chu adviser who had bundled money in Silicon Valley for Obama, said in an email that the White House was “breathing down my neck.” This later became grist for the scandal mill, because Spinner’s wife was a partner in Solyndra’s law firm, and he had recused himself from decisions about the firm’s loan. But the decision to grant Solyndra a loan had been made months earlier, before Spinner joined the department.
It did turn out to be a bad decision. And it was not an entirely unforseeable bad decision. “When I heard they got the first loan, I thought: ‘Oh, no! Noooooooo!’” a department official told me in 2010, a year before Solyndra went bust. But busted loans are a part of project finance. In any case, Rogers says he never felt an iota of White House pressure to approve Solyndra’s application.
“It wasn’t a hard call,” Rogers says. “We were trying to drive change, right?”
The day the February jobs report came out, Obama traveled to Columbus, Ohio, to show what change looked like. It was graduation day at the cash-strapped city’s police academy, and the president shared the stage with twenty-five happy recruits wearing white shirts and caps with black ties and pants. A few weeks earlier, they had all received layoff notices, but thanks to a $1.25 million stimulus grant, they were being sworn in to protect and serve. It wasn’t clear if their jobs had been saved or created, but it was clear they wouldn’t have had their jobs without the Recovery Act.
In his speech, Obama invited stimulus skeptics to visit Ohio and talk to teachers who were still educating kids, nurses who were still caring for the sick, firefighters who were still keeping their towns safe.277
“I ask them to meet the 25 men and women who will soon be protecting the streets of Columbus because we passed this plan,” he said. “I look into their eyes and I see their badges, and I know we did the right thing.”
It was a nice day for the cadets, but their reprieve seemed insignificant compared to the news that 650,000 more jobs had vanished, spiking the unemployment rate to 8.1 percent. Two weeks into the stimulus, the White House forecast that joblessness would peak at 8 percent was already wrong. And while it made no sense to blame Obama for the 1.5 million jobs already lost “on his watch,” his aides knew they’d end up on his political ledger. If Obama had been inaugurated in March, like FDR, Americans might have gotten a better sense that the economy he inherited was not just troubled but mangled.
“For the country’s sake, thank God he didn’t have to wait,” Obama strategist Anita Dunn says. “But politically, it would’ve been nice to have the January and February numbers accrued to the last guy.”
During the Great Depression, America had its holy-shit moment well before FDR took office; during the Great Recession, it happened with Obama already in the chair. It was hard to sell a message of a better tomorrow when today was so much worse than yesterday. The president’s cross-country trip to highlight twenty-five Americans who hadn’t lost their jobs seemed pitiful when 650,000 others had. And it didn’t fit the prevailing bad-news narrative. Axelrod liked to quote Walter Cronkite’s line about the media: “We don’t report the cats that don’t run away.” After her home state of California approved a massive anti-stimulus of spending cuts and tax increases, Romer tried to explain that without the Recovery Act, the cuts would have been much bigger, and the state might have defaulted. “It certainly doesn’t feel like we’ve accomplished anything, but we have,” she said.278 That was true, but as Barney Frank liked to say, no one ever got reelected with a bumper sticker that said: “It would’ve been worse without me.” The same rule applies to: “It certainly doesn’t feel like we’ve accomplished anything, but we have.”
This was the counterfactual problem that would haunt the Obama presidency, the impossible task of persuading people to be glad their broken arm wasn’t a crushed skull. People rarely ask: Compared to what? This problem came with what Rahm called “the gift bag,” the overseas quagmires, crushing deficits, and economic freefall that Bush bequeathed to his successor. Like the stimulus itself, Obama’s post-stimulus to-do list was heavy on catastrophe mitigation: a long-term budget plan to rein in unsustainable deficits someday; a housing plan to contain the foreclosure epidemic somewhat; “stress tests” to try to stabilize the reeling financial sector; a radical restructuring of the auto industry to try to limit job losses to a few hundred thousand rather than a couple million. It was hard to get credit for disaster prevention, and it didn’t sound much like hope and change, but it beat disaster.
At one point, Axelrod mused to Obama that he wondered what it would be like to govern in good times. The president just laughed.
“Are you kidding?” he said. “In good times, we never would’ve gotten the job.”
— THIRTEEN —
Tea Leaves
The opposition response to a presidential speech is always a tough gig—no pomp and circumstance, no cheering crowd, hostage-video atmospherics—but Louisiana governor Bobby Jindal’s response to President Obama’s first address to Congress was particularly lame.279 Jindal was a rising conservative star, a Rhodes Scholar who was America’s youngest governor, but he sounded like he was reading a bedtime story to a nation of toddlers. The blogosphere instantly dubbed him Kenneth the Page, for the wide-eyed hillbilly dork on the sitcom 30 Rock.
As Jindal became a punch line, so did his nitpicking about the Recovery Act, which seemed tone-deaf after the new president had urged Republicans and Democrats to work in harmony to fix the economy. Jindal seemed especially amazed that the stimulus included “$140 million for something called ‘volcano monitoring,’” as if monitoring volcanos was some kind of exotic fetish. Jindal overstated its funding by 1,000 percent, but he clearly thought the phrase was comedy gold.
“Instead of monitoring volcanoes,” he chirped, “Congress should be monitoring the eruption of spending in Washington!”
If it sounded silly for the governor of post-Katrina Louisiana to suggest that preventing disasters was self-evidently wasteful, it sounded even sillier a month later when Mount Redoubt erupted in Alaska, spewing plumes of ash ten miles above Anchorage. Sure enough, volcano monitoring had helped alert people and planes to stay out of harm’s way—and stimulus-funded GPS systems that will measure ground tremors at Mount Redoubt and other volcanoes should make forecasts even better in the future.
The Kenneth the Page debacle just highlighted the Republican Party’s difficulties navigating the line between skepticism about government and hostility to basic services. Similarly, a swine flu outbreak served as a reminder that Senator Collins had stripped pandemic flu money out of the stimulus, and a terrorist’s failed attempt to blow up a flight to Detroit evoked memories of Republicans ridiculing a Recovery Act provision to upgrade explosives detection at airport checkpoints. Who was supposed to finance volcano monitoring and other disaster prevention efforts if not government? And if those weren’t government responsibilities, were there any government responsibilities?
“We can’t be the antigovernment party,” Senator Snowe told me that spring.280 “That’s not what people want.”
“A Very Narrow Party of Angry People”
Mount Redoubt did feel like a hint from the universe that the Republican Party was blowing itself up.281
Minority parties often look inept
in the penalty box, but the GOP was starting to look like a new Donner party. In the words of one critic, it had become “a very narrow party of angry people,” “gasping for air,” consumed by “gratuitous partisanship”—and that critic was Utah’s Republican governor, Jon Huntsman. Party chairman Michael Steele confessed there’s “absolutely no reason, none, to trust our word or our actions.” McCain’s campaign manager said the party was extinct on the West Coast, nearly extinct in the Northeast, and endangered in the Mountain West and Southwest. It remained strong in the South, but while Texas governor Rick Perry’s speculation about secession resonated with the party’s base of older white conservatives, it was not a national outreach strategy.
“We’re excluding the young, minorities, environmentalists, pro-choice—the list goes on,” Snowe said. “Ideological purity is not the ticket to the promised land.”
But Republican politicians couldn’t afford to ignore the Republican base, which was growing in influence as the party was shrinking in size. So they were catering even more to the base’s biases, trashing the New Deal, denying climate science, doubling down on supply-side economics. Washington Republicans also overcame their initial reluctance to attack a president with approval ratings in the mid-60s, denouncing him as a big-spending radical, a smooth-talking con artist, an affirmative action mediocrity who’d be lost without a TelePrompTer. Boehner accused him of launching “a new American socialist experiment.” To the base, Obama was a threat to American values.
That base now had a name: the Tea Party. Two days after Obama signed the stimulus, a CNBC commentator named Rick Santelli unleashed an antigovernment rant on the floor of the Chicago Mercantile Exchange, attacking Obama’s plan to help homeowners as Cuban-style statism, calling for a Chicago Tea Party.282 The historical reference seemed off; the original Boston Tea Party was a protest against an unelected leader who raised taxes, while Obama was an elected leader who had just cut taxes. But Santelli’s diatribe went viral. At a time of economic pain and anxiety, it tapped into widespread resentment of Obama and big government, deep-seated suspicions that the deserving were being looted to reward society’s moochers.
“The real nerve struck seems to be the pent-up emotions felt by millions of Americans regarding spending TRILLIONS of dollars to fix the housing market, the banks, and the economy,” Santelli wrote later.283 “SPECIFICALLY WHO WILL PAY … WHO WILL BENEFIT … and above all the government’s role in all of this.”
Washington-based conservative groups sprang into action, organizing the first Tea Party rallies in forty cities a week later. A movement was born. And it got a boost with the news that bailed-out AIG executives would get to keep $165 million in bonuses after producing the worst results in capitalist history—in part because of Senator Dodd’s late stimulus addition preventing the feds from rescinding perks retroactively. The rest of the Recovery Act was directed at Main Street, and even Dodd’s provision was mostly about limiting pay at TARP-funded firms. But the bonus furor helped critics caricature the stimulus as another Wall Street bailout. For casual observers of politics, the $700 billion giveaway to banks and $787 billion package of tax cuts and investments for ordinary Americans all started to blur together.
The Tea Parties made for great TV—the mad-as-hell suburbanites in colonial hats; the fiery rhetoric about Marxism and Obama’s birth certificate; the wacky signs depicting the president with the Joker’s makeup or a Hitler mustache. But embracing the spectacle did not seem like great politics for Republican politicians, who would risk looking like extremists and having to play defense every time an overcaffeinated protester said something racist or dumb. Anyway, the organizing principle behind the Tea Party was resistance to spending and debt, and Hoover-style austerity during a vicious recession seemed like self-immolating politics. The Recovery Act’s debt-expanding components—middle-class tax cuts, roads, research, schools—were extremely popular. Taking the other side didn’t sound like a path to regaining swing voters.
Yet Boehner called for a national spending freeze, and Republican governors Jindal, Perry, Barbour, Palin, and Mark Sanford of South Carolina vowed to turn down stimulus dollars headed for their states. Sanford, a former congressman who had been one of the most committed deficit hawks in the Gingrich revolution, bragged to me about the unpopularity of his austerity policies. “Nobody likes Dr. Doom,” he chortled. Like a modern-day Andrew Mellon, he argued that the nation needed to purge the rottenness from its system, even if that meant enduring even deeper pain. For too long, he said, the GOP had been a party of pastry chefs, urging Americans to eat all the dessert they wanted.
“We need to become a party of country doctors, telling people that this medicine won’t taste good at all, but you need it,” Sanford said.
Not all Republicans adopted the politics of castor oil. Governor Schwarzenegger offered to take any money his colleagues didn’t want. Governor Huntsman said the stimulus should’ve been even larger. And scores of Republicans who had opposed and denounced the stimulus took credit for stimulus funds in press releases and public events, or wrote letters seeking stimulus funds for colleges, broadband providers, military bases, and clean-energy projects in their states.284 “All that matters is the politics,” Schwarzenegger told me. “They attack and attack, isn’t this terrible, and then when it’s time for the photo op, they say: Fantastic!”
The staunch conservative Mike Pence asked LaHood to approve a TIGER grant for a “Cultural Trail” of bike and pedestrian pathways in Muncie, Indiana, while Republican budget hero Paul Ryan urged Labor Secretary Hilda Solis to fund a green jobs training program in Wisconsin. Fire-breathing Tea Party Republicans like Michele Bachmann of Minnesota and Joe “You Lie!” Wilson of South Carolina made multiple requests to multiple agencies. Senate minority leader Mitch McConnell wrote at least five letters pushing transportation projects, House minority whip Eric Cantor lobbied for a high-speed rail line to his home-town of Richmond, and Congressman Pete Sessions made at least nine pitches for Recovery Act funds that would “create jobs [and] stimulate the economy.” Even Boehner said the bill would fund “shovel-ready projects that will create much-needed jobs.”
“Oh, the hypocrisy is unbelievable,” Congressman Rangel told me. “They cuss Obama, cuss the stimulus, and then they come with their scissors to the ribbon cuttings to brag about bringing jobs to the community. I’m sorry, but I wouldn’t be able to do it if I was raising hell on the floor.” Then he stopped and grinned. “Maybe I’d send a staffer.”
The House Democratic campaign committee’s “Hypocrisy Hall of Fame,” featuring 128 “cash-and-trash” Republicans who chased stimulus money after opposing the stimulus, was a bit unfair. Politicians weren’t necessarily hypocritical to say nasty things about the Recovery Act and then seek their fair share of its bounty for their constituents once it passed, although it did take chutzpah for Governor Jindal to pass along stimulus money to a Louisiana community by presenting an oversized check with his own name at the top. In any case, Republican leaders believed that the stimulus would work out for them in the end, that it would force Obama to take ownership of the soaring deficit and collapsing economy he had inherited from Bush.
“We lost that legislative battle, but we won the argument,” Pence told a conservative conference.285 “Welcome to the beginning of the comeback.”
That hypothesis would be tested on March 31 in upstate New York, in a special election for the state’s 20th Congressional District.
Six weeks before the vote, Republican Jim Tedisco, a veteran Albany power broker who was the state assembly’s minority leader, held a 21-point lead over Democrat Scott Murphy, a young entrepreneur who had never run for office. The district had a Republican tilt, and Tedisco, who had represented the area since Murphy was in junior high, had a huge advantage in cash and name recognition. But once the Recovery Act passed, the race instantly became a referendum on the stimulus.
The Democratic businessman quickly endorsed the bill, calling it “far from perfect�
�� but essential for reviving demand. By contrast, the Republican career politician did not endorse the bill. Or oppose the bill. Instead, Tedisco smothered reporters in word salad, refusing to engage in hypotheticals, criticizing the bill’s length, praising its infrastructure, attacking its pork. As one headline observed: “Asked About Stimulus, Tedisco Talks a Lot.”286
Tedisco was torn. Some of his advisers warned that opposing tax cuts for his constituents and road repairs for his district would be electoral suicide. But Washington Republicans suggested they would stop bankrolling his campaign if he sided with Obama.287 “They were saying: ‘You don’t want to go against us,’” recalls Tedisco aide Dan Bazile. “Was it an overt threat? No, more like: Do your part, and we’ll keep helping you raise money.” Pete Sessions, the House Republican campaign chair, acknowledges pressuring Tedisco to toe the party line.
“I told him he had to be against the bill,” Sessions says. “The base hated it.”
Republicans ran ads tying Murphy to the “pork-laden federal stimulus,” while Murphy hammered Tedisco for refusing to stand up for jobs. When Tedisco finally announced he would’ve voted no, unions immediately aired ads of an ostrich with its head in the sand: “Doesn’t Jim Tedisco notice that our economy is in trouble?”
In Washington, there was bipartisan agreement that the results would be a bellwether. “Tedisco’s victory will be a repudiation of the spending spree,” GOP chairman Steele proclaimed.288 But Murphy eked out a 726-vote upset. “He proved you could run on the Recovery Act and win,” says Chris Van Hollen, the House Democratic campaign chair.
The New New Deal Page 30