The New New Deal

by Grunwald, Michael

  Republicans had a field day with Recovery Summer. “How was YOUR summer?” asked one GOP ad. “The Recovery Starts November 2.” Democrats had once crowed that the stimulus would be political gold; now almost half the Republican campaign ads attacked it, while Minnesota’s Jim Oberstar was the only congressional Democrat to tout it. The House Republican committee borrowed Schumer’s wind farm rhetoric to produce absurd scare ads featuring red flags, menacing-sounding gongs, and Asian calligraphy fonts, accusing stimulus-supporting Democrats of outsourcing jobs to China.382 One ad ended with a cartoon image of Cultural Revolution–style upraised fists: “He’s created massive debt here, while he created renewable energy jobs over there. Baron Hill: For Indiana, or China?”

  In Wisconsin, Republican Scott Walker made high-speed rail the centerpiece of his campaign for governor, vowing to send back the state’s $810 million award for a Milwaukee-to-Madison line. It was a perfect wedge issue for 2010: anti-Obama, antigovernment, anti-Madison’s citified professors and bureaucrats. At notrain.com, Walker posted video of Obama celebrating the stimulus, splicing in his own mockery. “Change isn’t easy,” the president said in one clip. “But stopping runaway government spending is,” Walker replied. John Kasich, the Republican candidate in Ohio, also pledged to kill the slow-speed 3-C line, and the Tea Partier Rick Scott, running in Florida, suggested he wasn’t a fan of the Tampa–Orlando bullet train.

  Obama did find time that summer to sign the Dodd-Frank financial reforms, the most comprehensive rewrite of Wall Street regulations since the Depression. That was another big deal, ensuring stricter regulation of derivatives, hedge funds, and insurance companies like AIG, as well as a consumer financial protection agency that could rein in predatory mortgage lenders and credit card companies. Again, Republicans opposed the bill en masse, with only three GOP senators willing to support tougher financial rules after a financial meltdown. And again, the left accused Obama of selling out in his search for sixty votes, failing to crack down hard enough on too-big-to-fail banks or reinstate Depression-era financial laws.

  “The president argues that this has been the biggest moment of progressive reform since the Great Society. And it’s true. But that’s a pretty low bar,” says the liberal activist Bob Borosage. “It’s been a tragically flawed moment. Great for the banks, not so great for the middle class.”

  In a testy interview with the lefty comic Jon Stewart, Obama ridiculed his base’s ingratitude: “We didn’t get 100 percent of what we wanted, we got 90 percent, so let’s focus on the 10 percent we didn’t get.”383 He felt like he had put out a raging fire, and his allies were yelling at him for hosing down their furniture. He mused that maybe his slogan should have been: Yes We Can, But It’s Not Going to Happen Overnight.

  The root of Obama’s political problems was not a deep mystery. “You don’t have to be a savvy political analyst to say that if unemployment is 9.5 percent, the party in power is going to have some problems, regardless of how much progress we’ve made and how much worse it would be if the other side had been in charge,” he said.384 It’s a simplistic explanation, but the economy often is destiny for presidential popularity. That’s why Axelrod had warned Obama in December 2008 that the midterms already looked bleak.

  But voters also had a skewed view of what Obama had done, which suggested a failure to communicate. For example, by a 52–19 margin, the electorate thought he had raised middle-class taxes, when in fact he had cut middle-class taxes.385 After the Recovery Summer, the president told the New York Times he might have been overconfident that good policy would translate into good politics.

  “I think anybody who’s occupied this office has to remember that success is determined by an intersection of policy and politics, and that you can’t be neglecting of marketing and PR and public opinion,” he said.386 I later asked Axelrod whether he thought the White House had failed to make the case for the stimulus before Recovery Summer.

  “Do people fully understand what the Recovery Act is and what it has meant? The answer is no, and I’d be obtuse to say we did everything we possibly could or everything well,” he said. Axelrod has a perpetually beleaguered, hangdog look, and at that moment he seemed even more mopey than usual. “I’ll ponder that for a long time,” he said.

  Recovery Summer felt like one migraine after another.

  Early in the summer, for example, a controversy erupted over the Recovery Act’s financial incentives for “meaningful users” of health IT. The administration had proposed shockingly stringent rules defining what doctors and hospitals would have to do to qualify as “meaningful users,” and not even tech-savvy health IT pioneers like Kaiser Permanente and the Mayo Clinic thought they could meet the twenty-five rigid criteria. “The goal was to stretch the providers, not break them,” says David Blumenthal, the head of Obama’s health IT office. “There was a pretty clear consensus that we went too far.” Even Blumenthal’s former boss at Partners Health Care was quoted in the Times blasting the White House’s “unrealistic expectations” and “unachievable timelines.”387

  The administration did not want a war with the medical industry at a time when the Tea Party was on a rampage against Obamacare. And while some officials—most vociferously Zeke Emanuel—were pushing for the strictest possible rules to lay the strongest foundation for health reform, Blumenthal thought it was more important to encourage widespread adoption of electronic medicine. So in July, the White House softened the rules. Doctors would only have to e-prescribe 40 percent of the time, instead of 75 percent. They would only have to use one form of “clinical decision support”—like a program that warns about potentially dangerous drug interactions—instead of five. And they could qualify for incentives even if they didn’t meet all twenty-five criteria.

  “You can ask people to run so fast that they collapse in fatigue, but that’s not how you change the system,” Blumenthal says. “We tried to be practical. Now you’re going to see just about every hospital and medical group moving towards meaningful use.”

  Race to the Top also became a political flashpoint, after New Jersey barely missed a grant, in part because its application was docked several points for including incorrect budget information. Republican governor Chris Christie claimed his education officials had tried to submit the correct information during an interview in Washington, but federal reviewers had refused to accept it. “That’s the stuff that drives people nuts about government,” Christie told the press.

  The budget error was not the main problem with New Jersey’s application. The state lost more points because it lacked buy-in from its teachers unions, which was Christie’s fault; his education commissioner, Bret Schundler, had worked out a deal with the unions, but the governor had scuttled it. Still, Christie’s allegations were about as close as the Recovery Act had come to a legitimate scandal.

  Except the allegations were bogus. A videotape of the interview proved that Christie’s aides never tried to correct their error. Christie, forced to find a new scapegoat, fired Schundler.

  “Thank God we taped it,” Education Secretary Arne Duncan says.

  Duncan kept the Race clean, sometimes at the expense of his agenda. The conflict-of-interest rules for the reviewers basically disqualified anyone who had run schools or advocated reform, and the emphasis on “buy-in” gave unions inordinate power over state applications. When pro-reform states like Colorado and Louisiana failed to win grants, Duncan had to resist the temptation to meddle.

  “If you play it straight, things usually work out in the end,” he says.

  FutureGen, the billion-dollar clean-coal project killed by Bush and then revived as a quasi-earmark by Senator Durbin, became yet another political headache.

  The plan called for an “integrated gasification combined cycle” plant in Mattoon, Illinois, which would capture carbon dioxide from the plant’s waste stream and pump it into rock formations underground. But the Energy Department team soon realized that Bush’s aides had been right: FutureGen cost wa
y too much. Chu pored over the blueprints to slice out gold plating, but the project just didn’t pencil out. It had been conceived in 2005 as a model for the world, the first carbon-capture-and-sequestration plant at commercial scale. But it no longer felt like the future. The Recovery Act’s clean-coal grants were financing several plants with similar technology, similar scale, and much lower costs. And its developers said they might need $1 billion more. It was starting to look like NeverGen, and Matt Rogers wanted a Plan B.

  Jim Markowsky, a longtime utility executive who led the department’s fossil energy program, had an idea. Reducing emissions at America’s six hundred existing coal plants was a much more urgent priority than building cleaner new plants, but the stimulus hadn’t done much to address it. What if FutureGen could be reinvented as a retrofit, pioneering an “oxy-combustion” technology that would produce carbon dioxide directly, skipping the expensive carbon-capture process? Chu persuaded Durbin that FutureGen 2.0 could keep the project alive—still in Illinois, although not in Mattoon—and Rahm grudgingly approved the new plan after grilling the Energy team. “That was one of the longest hours of my professional life,” Rogers says. At least it was until Rogers visited Tim Johnson, the Republican congressman representing Mattoon, who screamed that Rogers was corrupt and incompetent, unleashing a bug-eyed tirade that made Rogers think he was mentally ill. After throwing Rogers out of his office, Johnson publicly demanded an investigation, producing more bad stimulus headlines.

  It’s not certain that FutureGen 2.0 will ever get built. Low-emissions coal plants are tough to justify without a price on carbon; to the marketplace, they’re just high-cost coal plants. A stimulus-funded carbon-capture project in West Virginia has already been scrapped. But whatever happens to FutureGen 2.0, there was nothing corrupt about trying to transform an out-of-control boondoggle into a potential game-changer that could make the U.S. coal industry viable in a carbon-constrained economy, and rewrite the future of coal-dependent nations like China and India.

  “We’ve got a chance to make clean coal competitive by 2020,” Markowsky says. “Without the Recovery Act, we’d have no chance.”

  The Recovery Summer was a political dud, but the Recovery Act was still on track. On September 17, Ed DeSeve opened another cabinet meeting with an upbeat update: The stimulus had met all its deadlines, hit all its jobs targets, and avoided humiliating screwups. “I’ve never seen this many GAO reports with this little news in them,” DeSeve said. “Knock wood!” He noted the latest Republican horror story was that Northwestern University might have used stimulus funds to hire a lifeguard—not exactly Teapot Dome 2. OMB controller Danny Werfel, who oversaw federal finances, said the budget office was baffled by the Recovery Act’s low incidence of fraud.

  “We’re trying to figure out what we’re doing right here, so we can bottle it,” he said.

  Biden burst in a few minutes later, straight from a meeting with the Kuwaiti prime minister, bubbling with hyperbole. “The Recovery Act has been the most successful government program in history!” he announced. “This is a big deal, man!” Even without the expletive, he clearly believed what he was saying.

  Biden did have a larger point beyond self-congratulation: Obama had pledged to spend 70 percent of the stimulus by the end of the fiscal year, which meant a total of $550.9 billion had to be out the door within two weeks. “Not 549.6. Not 550.3. We have to meet the president’s goal, and I’m going to be a royal pain in the neck until we do it,” Biden said, banging his fist on the table. “I’m not screwing around here. I don’t care if you need to work twenty hours a day. Get it done! No ifs, ands, or buts. Get it done!”

  Biden’s staff let me sit in again, and as I watched him gab, it was hard to believe he ever had a speech impediment. But he was clearly worried about the optics of failure: “If we miss the goal by a nickel, the headline is that we missed the goal—and frankly, we don’t have the PR firepower to overcome that.” He was also worried what would happen to unspent stimulus funds after the election. He expected Democrats to hold Congress, but Republicans would clearly gain seats. “If you think we’re pushing rope now, it’s just going to get harder. I still have great relationships with Republican senators, and they tell me: We’re coming for your money, Joe,” he said in a horror-movie singsong. The GOP was already blocking an extension of that New Deal–style subsidized wage initiative, even though it was widely considered a welfare-to-work success story. Even Governor Barbour had praised it as a model program, but it was about to disappear, because congressional Republicans were determined to stamp out anything associated with the stimulus.

  “If we don’t get the money out, it will go away,” Biden said. “And if I’m wrong about the House and Senate, we will enter a know-nothing period in American politics.”

  Biden reminded the cabinet that Obama had inherited a $2 trillion hole in the economy, probably much bigger, yet the folks who dug it were whining that he hadn’t filled it yet. And the public thought the stimulus was a waste. “We’ve already got Democrats starting to buck, because it’s so hard to explain,” Biden said with a sigh.

  Soon he was on another roll, recycling his riff about his mom telling him to be glad his broken arm wasn’t worse, reminding the cabinet that when your neighbor loses his job it’s a recession and when you lose your job it’s a depression, telling another shaggy-dog story about renovating his Senate office. It was all variations on a theme: The Recovery Act was proving that government could work, even though America hated it.

  “You know, my mother always used to say: Joey, virtue is its own reward,” the vice president said. “I’d think: Like hell it is!”

  That fall, Obama hit the road with a modest new jobs plan that his bickering economic and political advisers had managed to agree on.388 It featured a $50 billion boost for transportation projects—“roads, rails, and runways”—along with several tax cuts. The package looked, walked, and quacked a lot like stimulus, although no one in the White House dared call it that in public. Democrats didn’t use the S-word anymore.

  Republicans did. Eric Cantor dismissed the plan as “yet another government stimulus,” while the Republican National Committee dubbed it “stimulus déjà vu.” In 2009, Republicans had blasted the Recovery Act as thin on infrastructure, holding a news conference in front of a giant road sign covered in red tape to demand more shovel-ready projects. But in 2010, their party line was that government was incapable of creating jobs, except through tax cuts. Of course, they opposed Obama’s tax cuts, too; at this point, they would have marched in lockstep against apple pie if Obama were serving it.

  Then again, the Obama plan wasn’t designed to attract Republican support. It was a campaign document designed to highlight Republican extremism, to remind voters that the president wanted to do stuff and his opponents didn’t, to frame the midterms as a referendum on anti-government absolutism. In fact, the White House did not include the stimulus idea that had the most Republican support, a temporary Social Security payroll tax reduction, because if Obama had made it his own it would have lost its Republican support. “We decided to keep it in our back pocket,” Jason Furman recalls.

  House Republicans would soon unveil their own campaign document, the “Pledge to America,” a vow to make the Bush tax cuts permanent, slash more taxes for “job creators,” repeal Obamacare, cut unspecified spending, and cancel unspent stimulus funds. They were casting the election as a referendum on Obama. The president was casting the election as a choice between the future against the past, the sensible team that was getting the car out of the ditch against the radical team that drove the car into the ditch, fixers against whiners.

  “We got our mops and our brooms out, we’re cleaning stuff out, and they’re sitting around saying: ‘Hold the broom better.389 That’s not how you mop,’” Obama said at a fund-raiser. “Don’t tell me how to mop. Pick up a mop!”

  He had a point. The Pledge to America really was a throwback to the Bush era. And Republicans really were
standing on the sidelines and refusing to help mop up the mess; McConnell publicly declared that his top priority was making Obama a one-term president. But America didn’t like the way the Democrats were mopping, and few of them were willing to defend their mopping on the merits.

  Election day, as Obama put it, was a “shellacking.”390 House Republicans gained a whopping sixty-three seats, achieving their goal of taking back Speaker Pelosi’s gavel, allowing Cantor and his whip team to uncork that wine they had saved for their return to the majority. Senate Republicans also picked up six seats, but Tea Partiers lost winnable races in Delaware, Connecticut, Colorado, and Nevada, so Reid kept his job and his majority.

  “The Republicans had Obama to thank for the House, and the Democrats had the Tea Party to thank for the Senate,” says ex-senator Bennett, an early Tea Party victim.

  Still, plenty of Tea Party Republicans were headed to Washington, including newly elected senators Marco Rubio in Florida, Rand Paul in Kentucky, and Pat Toomey in Pennsylvania. And Democrats of every stripe were heading home: Blue Dogs like Baron Hill and Blanche Lincoln, old bulls like Jim Oberstar, and young reformers like Scott Murphy, the businessman who rode the stimulus to victory in upstate New York, and Tom Perriello, a Virginia freshman who was targeted by the first GOP stimulus ad the day Obama signed the bill. Veterans like Obey, Byron Dorgan, and Chris Dodd retired rather than face the head-winds, while Arlen Specter lost his first Democratic primary. Governor Strickland, a big Recovery Act booster, was ousted by John Kasich in Ohio, one of twenty-nine Republicans to take over governor’s offices. Scott Walker and Rick Scott won in Wisconsin and Florida, too, putting the future of high-speed rail in doubt. The only Republican incumbent to lose was Anh Cao, whose black Democratic district predictably returned to a black Democrat.