The New New Deal

by Grunwald, Michael

  Really, it was hard to tell whether voters had punished Tedisco for opposing the stimulus or dithering about the stimulus. His waffling helped reframe the race as a choice between an energetic entrepreneur and a finger-in-the-wind politician. Republican operatives thought Tedisco would have won easily if he had started bashing the bill sooner. And he did get some traction late in the race by attacking Murphy over AIG, making the Recovery Act sound like a $787 billion excuse to protect fat Wall Street bonuses.

  But Tedisco believes that if he’d opposed the bill earlier, his margin of defeat would’ve been larger. The more Murphy talked about the Recovery Act, the more voters seemed to like him.

  “It was heads you win, tails I lose,” Tedisco says. “The bill was $1 trillion, it had a multitude of infrastructure projects, and every elected official in every village and town was saying: ‘I have a bridge I want built.’”

  In the Senate cloakroom, after Arlen Specter secured his $10 billion windfall for NIH’s medical research and endorsed the stimulus, one of his Republican colleagues said: Arlen, I’m proud of you.

  “Then why don’t you vote with me?” the grouchy Pennsylvanian asked.

  That will get me a primary, the senator replied.

  “You know I’m getting a primary,” Specter snapped.

  He sure was. The free-market Club for Growth was the scourge of Republican moderates, bankrolling right-wing primary challenges around the country to enforce supply-side orthodoxy in Washington. And club president Pat Toomey, a former banker and Pennsylvania congressman, had himself almost unseated Specter in 2004, despite Specter’s support from Bush and the party establishment. Now the club was denouncing Specter’s stimulus vote as “the ultimate act of treason,” and Toomey wanted a rematch. In the past, Republicans had overlooked Specter’s apostasies, like his support for abortion rights and his refusal to convict Clinton. (In typical Lone Ranger fashion, he also refused to acquit, insisting on voting “Not Proven.”) But now after twenty-nine years as a Republican senator, he had a 29 percent approval rating among Republican voters. They didn’t care what he had done for NIH—only what he had done for BHO.

  Biden and Specter had been Amtrak buddies for nearly three decades; before getting off in Wilmington, Biden had often teased Specter about switching parties. He and Rendell applied more friendly pressure at a public meeting in Philadelphia shortly after the stimulus vote, condemning the abuse Specter was taking from Republicans, suggesting another party’s voters might be more appreciative of his stand for jobs and medical research. “You could make life easier for yourself by taking that registration card of yours and making that little change from R to D,” Rendell suggested.

  When Specter started to protest, Biden interrupted: “Don’t make your decision now!”

  He made his decision in late April. “I now find my political philosophy more in line with Democrats than Republicans,” he announced. “It has become clear to me that the stimulus vote caused a schism which makes our differences irreconcilable.”

  Republican operatives declared good riddance, scoffing that Specter was only defecting to try to save his political skin. They were right. He knew he’d have no chance in a Tea Party–dominated primary. “I won by the skin of my teeth in 2004, and 200,000 moderate Republicans had left the party,” he told me. But his switch was still a huge setback for the GOP. A Republican primary would have put constant pressure on Specter to prove his anti-Obama credentials; instead, facing a Democratic primary, Specter became a reliable vote for Obama. And Specter represented the fifty-ninth Democratic vote in the Senate; once Al Franken was finally seated in July, Obama would have a filibuster-proof majority. Anyway, regardless of the balance of power, Specter’s departure sent a powerful message that the modern Republican Party was no place for middle-of-the-road politicians.

  “There aren’t any Republican moderates left in the Senate,” Specter says. “Even Snowe and Collins can’t vote as moderates. They wouldn’t get reelected.”

  Quite a few Republicans were convinced the GOP would be better off without wobblers like Specter tarnishing its brand. DeMint said he’d rather have thirty Republican senators who believed in limited government than sixty who believed in nothing. “I don’t want us to have power until we have principles,” he told me at a Tea Party rally at the South Carolina capitol. Governor Sanford argued that Chick-fil-A would never let its franchisees cook their chicken however they wanted; why should the Republican Party let its politicians promote big government?

  “We’re essentially franchisees, and right now nobody has any clue what we’re really about,” he said.289 “You can’t wear the jersey and play for the other team!”

  But it’s hard to put together a center-right coalition when you’ve said good riddance to the center. The popular Governor Huntsman, feeling out of step in a narrow party of angry people, accepted Obama’s offer to be ambassador to China. The genial Governor Crist was just as popular, but when he ran for Senate, a young conservative named Marco Rubio refused to step aside, bashing Crist for supporting the stimulus.290 “That was the moment I realized what was at stake,” Rubio told me. Rubio started the race 40 points behind, but the hard-right activists who dominate Republican primaries adored him. I watched him charm a sun-weathered group of party faithful on the Treasure Coast; they loathed Obama, loathed Crist for aiding, abetting, and even hugging Obama, and devoured every morsel of Rubio’s red meat. “I’m not here to tell you Barack Obama is Fidel Castro,” he said. “But the imperialism of this government is very real!” Crist would soon quit the GOP to run as an independent. Like Specter, he didn’t want to make his case before a Tea Party jury.

  Even some across-the-board conservatives in the Republican establishment started to worry that enforced purity could relegate them to permanent minority status. It might feel righteous to purge the Specters of the party, but it would also help Obama pass his agenda without any Republican votes. Ronald Reagan had preached a big tent, and his former political director, Governor Barbour, wished DeMint and Sanford understood that not all of America was as conservative as South Carolina.

  “Chick-fil-A can get fabulously wealthy with a 20 percent market share,” Barbour said. “In our business, you need 50 percent plus one.”

  It was easy to rail against government spending in theory. But when it came to actual government spending on math teachers and traffic lights, even South Carolina turned out to be less hostile than advertised.

  Republican governors talked a big game about turning down Obama’s freedom-crushing stimulus money. And a few did reject a few million dollars, mostly the strings-attached cash for expanded unemployment insurance that Democrats slipped into the Recovery Act while Republicans were railing about condoms. In the end, though, almost all of the governors accepted almost all the state aid. Rick Perry not only took the cash, he tried to use some of it to renovate his governor’s mansion. (Granted, it had been firebombed.) Sarah Palin did turn down the state energy grants that required governors to pledge to promote green building codes and utility regulations, but after she quit, her Republican successor quickly signed the pledge. When Senator Jon Kyl of Arizona slammed the stimulus on a talk show, Rahm ordered several cabinet secretaries to write letters to his state’s Republican governor, Jan Brewer, asking which stimulus funds she didn’t want. She wanted all of them.

  Sanford was the only governor who really tried to put less money where his mouth was, turning down $700 million in state aid designed to prevent layoffs of teachers and other public employees. He argued that the one-time windfall—and its “maintenance of effort” rules prohibiting education cuts—would prevent South Carolina from making the tough decisions necessary to live within its means. The first rule when you’re in a hole, he said, is stop digging.

  When it came to fiscal conservatism, Sanford was the real deal, “Tea Party before Tea Party was cool.” A former financial analyst and real estate investor, he had distributed bumper stickers during his 1994 run for Congress
that said DEFICIT with a Ghostbusters-style slash through it, and his standard-issue stump speech had been an apocalyptic chronicle of great civilizations undone by debt. Unlike many of his fellow Republican revolutionaries in the Gingrich army, he had kept faith with the conservative principles in the “Contract With America,” voting against popular spending programs, keeping his pledge to serve only three terms. He had dedicated his political career to the proposition that there was no free lunch. He believed in a right-wing Rahm’s Rule; this crisis was an opportunity to make the painful cuts that politicians habitually avoid “when times are good and people are fat, dumb and happy.”

  Sanford only wanted to turn down 8 percent of his state’s stimulus cash, less than 2 percent of his state’s budget. But the backlash was ferocious. Protesters built a tent city called “Sanfordville” in a Columbia park. Business-funded scare ads predicted horrific consequences if Sanford got his way. At a hearing of the state Senate finance committee, I watched legislators line up to denounce Sanford as a heartless Scrooge intent on “budgetary Armageddon,” warning that without the extra cash South Carolina would have to fire teachers and firefighters, shutter programs for autistic and disabled kids, jack up tuition at state colleges, fling open the doors to state prisons, and dismantle the safety net when it was needed most.

  And those weren’t Democratic legislators.

  “The governor has one of the most radical philosophies I’ve ever seen,” said the seventy-eight-year-old Republican committee chairman, Hugh Leatherman. “I’m a conservative, but I’ve got compassion for the poor, the blind, the mentally ill. Sanford wants chaos. Absolute chaos! He’s destroying this state, and the Republican Party, too.”

  The consensus in the Republican-dominated legislature was that when the feds offer money, you take it. “Most of us are Ronald Reagan Republicans, Strom Thurmond Republicans,” said Senate majority leader Harvey Peeler. “Republicans control everything around here. It would be nice if we could accomplish something.”

  When I sat down with Sanford, the venom didn’t seem to bother him much. Wearing jeans and a denim shirt, he lounged on his office couch like he was home watching a game. “I sleep like a baby,” he said. South Carolina had the nation’s third-highest jobless rate, and he knew the extra money from Obama could avert short-term suffering. But he wasn’t interested in postponing the day of reckoning. If generational theft through deficit spending was the only way to avoid a depression, he said, then we might as well have our depression now. If America wanted to avoid the fate of overleveraged empires like Rome and Spain, it needed to stop relying on fiscal child abuse.

  “I get it: I’m supposed to be proactive,” Sanford said. “But we’re at an incredible tipping point. The principles that made this country great are being eviscerated.” America had too much credit card debt, too much housing debt, too much government debt; the deleveraging had to start now. “I know, more spending is supposed to lead to recovery, and then we’ll be able to pay back all our debts,” Sanford said. “Everything’s going to be beautiful. That’s a hope, not a plan.”

  Sanford wasn’t surprised he was taking flak from fellow Republicans. He thought fiscal conservatism should be to the GOP brand what tasty chicken is to Chick-fil-A, but he had watched his party binge on spending and debt for years. He regularly clashed with the fraudulent Republican franchisees in his legislature, and once brought live piglets to the Capitol to protest their pork. They reminded him of his former Washington colleagues whose anti-spending fervor cooled once they got a chance to do some spending themselves. He was pleased to see Republican congressional leaders rediscovering the old-time religion of No, but it seemed mighty convenient that their passion for limited government only reignited once they lost control of the federal purse strings.

  “They were on the opposite side just a few months ago when they had the keys to power,” Sanford said.

  Ultimately, Sanford didn’t even have the power to turn down the free money. Jim Clyburn, the Democratic whip who represented Columbia, had anticipated a situation like this during Obama’s transition, when Sanford and his fellow Southern Republicans began trashing the stimulus preemptively. Clyburn saw racial politics at work. “Let’s just say they were states’ rights governors,” he told me. So he inserted language into the Recovery Act allowing state legislatures to accept stimulus money that governors refused, and the Republican legislature in South Carolina did just that.

  So economically, Sanford’s stand had little impact. And politically, it seemed to highlight the limited appeal of antigovernment absolutism. Even South Carolina Republicans sounded like ACORN when their own handouts were at risk. I remember thinking that Sanford could be Obama’s opponent in 2012—a handsome, principled, non-rage-aholic spokesman for the Tea Party philosophy—but that the philosophy would never attract 50 percent plus one.

  I didn’t expect that two months after we met, Sanford’s political career would implode. After telling his staff he was going hiking on the Appalachian Trail, he vanished for a few days, prompting a Where’s Waldo?–style frenzy in South Carolina. After his return, he admitted at a weepy press conference that he had gone to visit his mistress in Buenos Aires. His local paper published his love emails about “magnificent gentle kisses” and worse.291

  When we spoke again two years later, Sanford said the ruckus over the stimulus bothered him more than he let on, and hinted it may have influenced his erratic behavior. “There’s a remarkable loneliness when you push against the current,” he said. “It was the loneliest I’ve been in my life. It doesn’t justify my actions. But it was an unbelievably lonely time.”

  Muddling the Message

  Obama’s first hundred days were a whirlwind of activity.

  “I think even our critics would agree that at the very least, we’ve been busy,” he said April 14 at Georgetown University.292

  The Recovery Act was the centerpiece of his crusade for change, but he also loosened Bush’s restrictions on stem cell research; began winding down Iraq and ramping up Afghanistan; kept his promises to boost fuel efficiency rules for vehicles and energy efficiency standards for appliances; banned torture; imposed strict White House ethics rules; passed S-CHIP and Lilly Ledbetter; fired the General Motors CEO, setting the stage for his overhaul of the auto industry; approved the plan to help homeowners that got Santelli so irate; and conducted “stress tests” that would stabilize the financial industry without nationalizing banks. And in case anyone thought he was ready to take up smallball, he passed a budget blueprint signaling his desire to enact universal health care and cap-and-trade in his first year.

  So yes, he’d been busy. This was serious stuff, a barrage of government activism at a time when many Americans had lost faith in the institution. Not every move worked out. His executive order closing Guantánamo did not, in fact, close Guantánamo. His plan to prevent foreclosures was much less aggressive than advocates had hoped or Santelli had feared. But beyond the Tea Party fringe that considered Obama an anti-American usurper, most Americans still thought he was trying to make the best of a tough situation.

  “The obsession with race, the slurs about celebrity politics, the doubts about preparedness all seem dated now,” Politico concluded in its hundred-day overview.293 “This is a presidency at light-speed that looks and feels remarkably mature.”

  The challenge would be converting all that light-speed activity into a coherent message. At Georgetown, Obama made his most comprehensive case for his economic program, expanding his inaugural theme of “The New Foundation.” He borrowed his central image from the Sermon on the Mount, comparing the old economy’s reliance on maxed-out credit cards and sketchy subprime mortgages to the proverbial house built on sand. He vowed to create a sturdy post-bubble economy built on a rock, “a new foundation that will move us from an era of borrow-and-spend to one where we save and invest.” The New Foundation consisted of his four pillars of prosperity from the campaign—economic reform, health reform, energy reform, and e
ducation reform—plus long-term deficit reduction. And deficit reduction would depend mainly on health reform, since the skyrocketing cost of care was the reason Medicaid and Medicare were driving long-term shortfalls.294 The Recovery Act, Obama said, began that foundation—through Race to the Top and a dramatic expansion of early childhood education, to prepare kids to compete in a global economy; unprecedented spending on renewables and efficiency, to create clean energy and green jobs; and the largest investments ever in preventive care and electronic health records, to save money and lives.

  His presidency, in other words, would be about revamping the economy for the long term. Anita Dunn, who took over the rudderless White House communications team shortly before the speech, thought this made more sense as an overarching theme than jobs-jobs-jobs. Why pretend long-term investments like health IT and high-speed rail were about short-term jobs when they weren’t?

  “The New Foundation should’ve been the message of the first two years,” Dunn says. “I actually thought about setting up a website and trying to brand it.”

  The phrase appeared in fifteen Obama speeches over the next month, and the New York Times ran a story suggesting it was being groomed as Obama’s unofficial slogan, his answer to the New Deal. But it soon faded away, overshadowed by the furor over autos, the war over health care, and the Tea Party jihad against spending. At a dinner Obama hosted for presidential historians, Doris Kearns Goodwin said it sounded like a woman’s girdle.295 “It wasn’t translating in that chaotic environment,” says Dan Pfeiffer, Dunn’s deputy. “We weren’t as disciplined as we should have been about repeating it.”

  Instead, the main White House message was: Jobs.

  Which were disappearing fast.

  March and April were as ghastly as February: over 1.2 million more jobs lost, with unemployment shooting up to 8.9 percent. Analysts were happier about May: only 345,000 jobs lost, although unemployment soared to 9.4 percent. Yes, the economy was still shrinking and jobs were still vanishing—but not as quickly. And jobs are always a lagging economic indicator. Consumer confidence was creeping back.