by Obama Barack
The day contained just one sad note. During the traditional postinaugural lunch in the Capitol, in between toasts and presentations by our congressional hosts, Teddy Kennedy—who had recently had surgery to remove a cancerous brain tumor—collapsed in a sudden, violent seizure. The room fell silent as emergency medics rushed in. Teddy’s wife, Vicki, followed alongside as they wheeled him away, her face stricken with fear, leaving the rest of us to wonder anxiously about his fate, none of us imagining the political consequences that would eventually flow from that moment.
Michelle and I attended a total of ten inaugural balls that evening. Michelle was a chocolate-brown vision in her flowing white gown, and at our first stop I took her in my arms and spun her around and whispered silly things in her ear as we danced to a sublime rendition of “At Last” sung by Beyoncé. At the Commander in Chief’s Ball, we split up to dance with two charming and understandably nervous young members of our armed forces.
The other eight balls I’d be hard-pressed to remember.
By the time we got back to the White House, it was well past midnight. A party for our family and closest friends was still going strong in the East Room, with the Wynton Marsalis Quintet showing no signs of letting up. Twelve hours in high heels had taken a toll on Michelle’s feet, and since she had to get up an hour earlier than I did to get her hair done for another church service the next morning, I offered to stay and entertain our guests while she headed to bed.
Just a few lights were on by the time I got upstairs. Michelle and the girls were asleep, the sound of night crews clearing dishes and breaking down tables and chairs barely audible from below. I realized I hadn’t been alone all day. For a moment I just stood there, looking up and down the enormous central hall, not yet certain of where each of the many doors led, taking in the crystal chandeliers and a baby grand piano, noticing a Monet on one wall, a Cézanne on another, pulling out some of the books on the shelf, examining small busts and artifacts and portraits of people I didn’t recognize.
My mind went back to the first time I had seen the White House, some thirty years ago, when as a young community organizer I had brought a group of students to Washington to lobby their congressman on a bill to increase student aid. The group of us had stood outside the gate along Pennsylvania Avenue, a few students mugging and taking pictures with disposable cameras. I remember staring up at the windows on the second floor, wondering if at that very moment someone might be looking down at us. I had tried to imagine what they might be thinking. Did they miss the rhythms of ordinary life? Were they lonely? Did they sometimes feel a jolt in their heart and wonder how it was that they had ended up where they were?
I’d have my answer soon enough, I thought. Pulling off my tie, I walked slowly down the hall, turning off what lights remained on.
CHAPTER 11
NO MATTER WHAT YOU MIGHT tell yourself, no matter how much you’ve read or how many briefings you’ve received or how many veterans of previous administrations you’ve recruited, nothing entirely prepares you for those first weeks in the White House. Everything is new, unfamiliar, fraught with import. The vast majority of your senior appointees, including cabinet secretaries, are weeks or sometimes months away from being confirmed. Across the White House complex, staffers can be seen securing the requisite IDs, asking where to park, learning how to operate the phones, figuring out where the bathrooms are, and schlepping boxes into the cramped warren of offices in the West Wing or the more capacious rooms in the nearby Eisenhower Executive Office Building (EEOB), all while trying not to look completely overwhelmed. It’s like moving-in day on a college campus, except a large percentage of the people involved are middle-aged, in suits, and, along with you, charged with running the most powerful nation on earth.
I didn’t have to worry about moving myself in, but my days were a whirlwind. Having witnessed how stumbles out of the gate had hobbled Bill Clinton throughout his first two years in office, Rahm was intent on taking advantage of our postelection honeymoon period to get some things done.
“Trust me,” he said. “The presidency is like a new car. It starts depreciating the minute you drive it off the lot.”
To build early momentum, he had instructed our transition team to identify campaign promises I could fulfill with the stroke of a pen. I signed an executive order banning torture and launched what was supposed to be a year-long process to close the U.S. military detention center in Guantánamo Bay, Cuba. We instituted some of the toughest ethics rules in White House history, including tightening restrictions on lobbyists. A couple of weeks later, we finalized an agreement with congressional leaders to cover four million more kids under the Children’s Health Insurance Program, and shortly after that, we lifted President Bush’s moratorium on federally funded embryonic stem-cell research.
I signed my first bill into law on my ninth day in office: the Lilly Ledbetter Fair Pay Act. The legislation was named after an unassuming Alabaman who, deep into a long career at the Goodyear Tire & Rubber Company, had discovered that she’d routinely been paid less than her male counterparts. As discrimination cases go, it should have been a slam dunk, but in 2007, defying all common sense, the Supreme Court had disallowed the lawsuit. According to Justice Samuel Alito, Title VII of the Civil Rights Act required Ledbetter to have filed her claim within 180 days of when the discrimination first occurred—in other words, six months after she received her first paycheck, and many years before she actually discovered the pay disparity. For over a year, Republicans in the Senate had blocked corrective action (with President Bush promising to veto it if it passed). Now, thanks to quick legislative work by our emboldened Democratic majorities, the bill sat on a small ceremonial desk in the East Room.
Lilly and I had become friends during the campaign. I knew her family, knew her struggles. She stood next to me that day as I put my signature on the bill, using a different pen for each letter of my name. (The pens would serve as keepsakes for Lilly and the bill’s sponsors—a nice tradition, though it made my signature look like it had been written by a ten-year-old.) I thought not just about Lilly but also about my mother, and Toot, and all the other working women across the country who had ever been passed over for promotions or been paid less than they were worth. The legislation I was signing wouldn’t reverse centuries of discrimination. But it was something, a step forward.
This is why I ran, I told myself. This is what the office can do.
We would roll out other comparable initiatives in those first few months, some attracting modest press attention, others noticed only by those directly affected. In normal times, this would have been enough, a series of small wins as our bigger legislative proposals—on healthcare, immigration reform, and climate change—began to work their way through Congress.
But these were not normal times. For the public and the press, for me and my team, only one issue truly mattered: What were we going to do to halt the economy’s collapse?
* * *
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AS DIRE AS the situation had seemed before the election, it wasn’t until a mid-December meeting in Chicago with my new economic team, just over a month before I was sworn in, that I had begun to appreciate the scope of what we were dealing with. Christy Romer, whose cheery demeanor and sensible style brought to mind a 1950s TV-sitcom mom, opened her presentation with a line she’d heard Axelrod use in an earlier meeting.
“Mr. President-Elect,” she said, “this is your holy-shit moment.”
The chuckles quickly subsided as Christy took us through a series of charts. With over half of America’s twenty-five largest financial institutions having either failed, merged, or restructured to avoid bankruptcy during the previous year, what had begun as a crisis on Wall Street had now thoroughly infected the broader economy. The stock market had lost 40 percent of its value. There were foreclosure filings on 2.3 million homes. Household wealth had dropped 16 percent, which, as Tim would later point ou
t, was more than five times the percentage loss that occurred in the aftermath of the 1929 market crash. All this on top of an economy that was already suffering from persistently high levels of poverty, a decline in the share of working-age men who were actually working, a fall in productivity growth, and lagging median wages.
And we had yet to reach the bottom. As people had felt poorer, they’d stopped spending, just as mounting losses had caused banks to stop lending, imperiling more businesses and more jobs. A number of major retailers already had gone belly-up. GM and Chrysler were headed in the same direction. News stations now carried daily reports of mass layoffs at blue-chip companies like Boeing and Pfizer. According to Christy, all arrows pointed in the direction of the deepest recession since the 1930s, with job losses—estimated at 533,000 in November alone—likely to get worse.
“How much worse?” I asked.
“We’re not sure,” Larry chimed in, “but probably in the millions.” He explained that unemployment was typically a “lagging indicator,” meaning the full scale of job losses during recessions didn’t show up right away, and usually continued well after an economy started growing again. Moreover, economies typically recovered much more slowly from recessions triggered by financial crises than from those caused by fluctuations in the business cycle. In the absence of quick and aggressive intervention by the federal government, Larry calculated, the chances of a second Great Depression were “about one in three.”
“Jesus,” Joe Biden muttered. I looked out the window of the downtown conference room. A heavy snow swirled soundlessly through a gray sky. Images of tent cities and people lined up at soup kitchens materialized in my head.
“All right, then,” I said, turning back to the team. “Since it’s too late to ask for a recount, what can we do to lower those odds?”
We spent the next three hours mapping out a strategy. Job one was reversing the cycle of contracting demand. In an ordinary recession, monetary policy would be an option: By lowering interest rates, the Federal Reserve could help make the purchase of everything from homes to cars to appliances significantly cheaper. But while Chairman Ben Bernanke was committed to trying out a range of unorthodox strategies to douse the financial panic, Tim explained, the Fed had used up most of its bullets over the course of the previous year: With interest rates already close to zero, neither businesses nor consumers, already badly overleveraged, showed any inclination to take on more debt.
Our conversation therefore focused on fiscal stimulus, or, in layperson’s terms, having the government spend more money. Though I hadn’t majored in economics, I was familiar enough with John Maynard Keynes, one of the giants of modern economics and a theoretician of the causes of the Great Depression. Keynes’s basic insight had been simple: From the perspective of the individual family or firm, it was prudent to tighten one’s belt during a severe recession. The problem was that thrift could be stifling; when everyone tightened their belts at the same time, economic conditions couldn’t improve.
Keynes’s answer to the dilemma was just as simple: A government needed to step in as the “spender of last resort.” The idea was to pump money into the economy until the gears started to turn again, until families grew confident enough to trade in old cars for new ones and innovative companies saw enough demand to start making new products again. Once the economy was kick-started, the government could then turn off the spigot and recoup its money through the resulting boost in tax revenue. In large part, this was the principle behind FDR’s New Deal, which took shape after he took office in 1933, at the height of the Great Depression. Whether it was young men in the Civilian Conservation Corps put to work building trails in America’s national parks, or farmers receiving government payments for surplus milk, or theater troupes performing as part of the Works Progress Administration, the New Deal’s programs helped unemployed Americans get desperately needed paychecks and companies sustain themselves with government orders for steel or lumber, all of which helped bolster private enterprise and stabilize the faltering economy.
As ambitious as it was at the time, New Deal spending actually proved too modest to fully counteract the Great Depression, especially after FDR succumbed to 1936 election-year pressures and pulled back too early on what was then seen by many elite opinion makers as government profligacy. It would take the ultimate stimulus of World War II, when the entire nation mobilized to build an Arsenal of Democracy, to finally break the Depression once and for all. But the New Deal had kept things from getting worse, and Keynesian theory had come to be widely accepted among economists, including politically conservative ones (although Republican-leaning economists typically preferred stimulus in the form of tax cuts rather than government programs).
So we needed a stimulus package. To deliver the necessary impact, how big did it need to be? Before the election, we’d proposed what was then considered an ambitious program of $175 billion. Immediately after the election, examining the worsening data, we had raised the number to $500 billion. The team now recommended something even bigger. Christy mentioned a trillion dollars, causing Rahm to sputter like a cartoon character spitting out a bad meal.
“There’s no fucking way,” Rahm said. Given the public’s anger over the hundreds of billions of dollars already spent on the bank bailout, he said, any number that began “with a t” would be a nonstarter with lots of Democrats, not to mention Republicans. I turned to Joe, who nodded in assent.
“What can we get passed?” I asked.
“Seven, maybe eight hundred billion, tops,” Rahm said. “And that’s a stretch.”
There was also the question of how stimulus dollars would be used. According to Keynes, it didn’t matter much what the government spent the money on, so long as it generated economic activity. But since the levels of spending we were talking about would likely preclude funding for other priorities well into the future, I pushed the team to think about high-profile, high-yield projects—modern versions of the Interstate Highway System or the Tennessee Valley Authority that would not only give the economy an immediate boost but could transform America’s longer-term economic landscape. What about a national smart grid that would make the delivery of electricity more secure and efficient? Or a new, highly integrated air traffic control system that would enhance safety and reduce fuel costs and carbon emissions?
Folks around the table were not encouraging. “We’ve already started asking federal agencies to identify high-impact projects,” Larry said, “but I have to be honest, Mr. President-Elect. Those kinds of projects are extremely complicated. They take time to develop…and unfortunately time is not on our side.” The most important thing was to get the money into people’s pockets as quickly as possible, and that aim was best served by providing food stamps and extended unemployment insurance, as well as middle-class tax cuts and aid to states to help them avoid having to lay off teachers, firefighters, and police officers. Studies had shown that spending on infrastructure provided the biggest bang for the buck—but, Larry suggested, even there we should focus on more prosaic undertakings like road repair and patching up aging sewer systems, projects that local governments could use to put people to work right away.
“It’s going to be hard to get the public excited about food stamps and repaving roads,” Axe said. “Not real sexy.”
“Neither’s a depression,” Tim tartly replied.
Tim was the one person among us who’d already spent a stomach-churning year on the front lines of the crisis. I could hardly blame him for refusing to be swept up in any starry-eyed plans. His biggest concern was that mass unemployment and bankruptcies were further weakening the financial system, creating what he described as “an adverse feedback loop.” As Larry took the lead on the stimulus package, Tim and his team would in the meantime try to come up with a plan to unlock the credit markets and stabilize the financial system once and for all. Tim admitted that he wasn’t yet sure exactly what would work—or
whether the remaining $350 billion in TARP money would be enough to cover it.
And that wasn’t the end of our to-do list. A talented team—including Shaun Donovan, the former head of New York City’s Department of Housing Preservation and Development and my nominee for housing and urban development secretary, as well as Austan Goolsbee, my longtime economic advisor and a University of Chicago professor, whom I would appoint to the Council of Economic Advisers—had already begun work on plans to shore up the housing market and reduce the flood of foreclosures. We recruited prominent finance whiz Steve Rattner and Ron Bloom, a former investment banker who represented unions in corporate restructurings, to generate strategies to save the auto industry. And my soon-to-be budget director, Peter Orszag, was given the unenviable task of coming up with a plan to pay for the stimulus in the short term while putting the federal budget on a more sustainable path for the long term—this at a time when high levels of emergency spending and lower tax revenues had already driven the federal deficit to more than $1 trillion for the first time in history.
In exchange for Peter’s troubles, we wrapped up the meeting by bringing in a cake to celebrate his fortieth birthday. As people gathered around the table to watch him blow out the candles, Goolsbee—whose tweedy name always seemed incongruous with his Jimmy Olsen looks, ebullient humor, and Waco, Texas, twang—appeared beside me.
“That’s definitely the worst briefing any incoming president has gotten since FDR in 1932!” he said. He sounded like a boy impressed by the sight of a particularly grisly wound.
“Goolsbee,” I said, “that’s not even my worst briefing this week.”
* * *
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I WAS ONLY half-joking; outside of economic briefings, I was spending much of my transition time in windowless rooms, getting the classified details on Iraq, Afghanistan, and multiple terrorist threats. Still, I remember leaving the meeting on the economy more energized than despondent. Some of my confidence was a matter of postelection adrenaline, I suppose—the untested, maybe delusional belief that I was up for the task at hand. I also felt good about the team I’d assembled; if anyone could come up with the answers we needed, I figured this group could.