The Price of Politics (3 page)

“Have to get it done before Presidents Day recess,” Obama said, referring to a four-day break in the congressional schedule that was to begin in six weeks.

“We understand the gravity,” added Vice President–elect Biden, suggesting that they could work seven days a week on the stimulus package.

Senators McConnell and Dick Durbin, the Democratic whip, joked that they would not work weekends.

What about the thousands of homeowners who owed more on their mortgages than their homes were worth? asked Durbin.

“We will not roll out an aggressive housing plan,” Obama said, and it would not be part of the stimulus bill. The housing problem was massive and baffling, and none of them had solid ideas for fixing it.

Then Virginia Representative Eric Cantor spoke up. Cantor was the minority whip, and the title suited him—thin and taut, he was quick with stinging partisan sound bites and was a fast-rising figure in Republican national politics. He had trained as an attorney and worked in his family’s real estate firm in Richmond for a decade before entering politics in the early 1990s. Now he was the House Republicans’ vote counter and disciplinarian. He made it his business to be closely tied in to all the GOP House members and had especially strong links to the ultraconservative wing of the party.

“Fear is grasping the country,” Cantor said, giving voice to something everyone in the room already knew. People were worried that they might lose their jobs. But there was a parallel concern that affected them all, “A fear of Washington.” It was a familiar Republican talking point.

“We need to do something bold that says we are not wasting their money,” Cantor urged. There was little public confidence in government, so the only solution would be “full transparency.”

After the meeting, Obama approached the Republican House leaders, Boehner and Cantor. “I’m serious about this,” he told them. “Come with your ideas.”

Steven Stombres, Cantor’s chief of staff, left the meeting with conflicting emotions. A former Army Reserve intelligence officer with a shaved head and a military bearing, Stombres was impressed. If this really was a bipartisan “coming together” it was precisely what the country needed at such a critical time, and as a citizen he found it genuinely inspirational. As a Republican, though, he was worried: If Obama followed through on this promise of political togetherness, Republicans would be in bad shape.

“Phew,” Cantor said afterward, “we may be in this minority for a while.”

After the meeting, Senator McConnell told reporters, “I thought the atmosphere for bipartisan cooperation was sincere on all sides.”
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The Republican leader said of Obama, “I think he’s already been listening to the suggestions we’ve made.”

Reid and Pelosi seemed almost giddy. Pelosi announced that it was “a new day in the capital.”
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• • •

Obama’s stimulus package, meant to jump-start the failing economy, had been in the works for weeks. His chief economic advisers had been working on it since the election.

Larry Summers, the incoming head of the National Economic Council, which coordinates all administration economic policy, supported instant additional spending of hundreds of billions of dollars.

A former treasury secretary in Bill Clinton’s administration, the brusque Summers was better known for his brainpower than his people skills. He had hesitated to take the job as Obama’s NEC head, viewing it at first as a step down from his previous job running the Treasury Department. In the end, he had relented under the combination
of pressure from Obama and the urging of friends, including former Federal Reserve Board Chairman Alan Greenspan, who assured him that the job could offer him more influence than he realized.

In Summers’s view, the economic problem was lack of demand: Not enough people were spending money on goods and services. The administration had to stimulate consumer spending. He later described it to others in simple terms: “We didn’t have jobs because we didn’t have demand. And if we didn’t get more demand, we weren’t going to get more jobs. And if we did get more demand, we would get more jobs.”

Worried about the cost of a stimulus package, Obama wondered what else could be done. What about accelerating job training, strengthening employment services, and reforming unemployment insurance?

Demand is the big elephant in the room, Summers insisted.

Obama didn’t like that answer, but finally came to accept it.

• • •

In the weeks before the election, Obama was interviewing candidates for the all-important post of treasury secretary. While in New York, he met with Timothy Geithner, the head of the Federal Reserve Bank of New York, who had been a key figure in stabilizing the U.S. economy after the 2008 financial crisis.

The two had not met before. Geithner, who was 47 but looked a decade younger, launched immediately into a well-rehearsed, five-point argument on why he should not be picked.

One, I promised my kids I wouldn’t move them again. Two, we’re at a moment of national crisis. I’m not a public figure. You need to have a public figure people have seen before in this context, because it matters hugely. Three, there are better-qualified people than me for this. Four, at some point the U.S. will have solved the financial crisis, and you’ll be left with a whole set of other challenges that I’ve not spent my life thinking about. And fifth, he said, I’m up to my neck in this crisis, as you know. And I’m going to carry with me all those decisions. And you may need to have some separation from those decisions. It’s
harder for you if you choose me. Because I’m not going to walk away from them.

It was a brilliant case against himself—precisely the kind of analytical power that appealed to Obama. After the election, he picked Geithner.

• • •

Obama selected Peter Orszag as director of the White House Office of Management and Budget. Just a few weeks past his 40th birthday, Orszag was a summa cum laude graduate of Princeton with a Ph.D. in economics from the London School of Economics. He was tall, gangly and brilliant. Obama had plucked him from his position as head of the powerful and independent Congressional Budget Office, which Orszag had held for nearly two years.

Unlike Summers, Orszag and Geithner did not believe the need to increase demand trumped all other policy priorities. Both recognized the need for a stimulus, but resisted the idea of a package that might last for more than two years. They were facing contradictory policy requirements: spend more quickly, but address the long-term deficit of hundreds of billions of dollars per year.

In one early memo, the team advised Obama that there was no danger of too much stimulus, or spending too much money in the first year. The question was: How do you make it politically salable?

Once he accepted the need for a huge infusion of public spending, Obama began to see it as an opportunity—a chance to invest in projects like high-speed rail, visionary environmentalism and innovation-related projects.

“A lot of that is going to take seven years to happen,” Summers pointed out, splashing cold water on Obama’s big dreams. “Big visionary things just take a long time.”

The Hoover Dam, which had employed thousands of workers during the Great Depression, had taken five years to build, Biden reminded them.

Obama wanted to pull the Band-Aid off fast, as he put it. “Let’s do whatever needs to be done, but let’s not keep at this for five years.”
He made it clear he wanted to pivot as soon as possible from rescue to a broad kind of economic renewal. He thought and spoke in terms of FDR, and some in the White House wondered if he had Roosevelt envy.

Comprehensive health care reform, though, remained his priority. The world knew that from his campaign. What the world didn’t know was that his top advisers, led by incoming chief of staff Rahm Emanuel, disagreed, arguing that it would require too much effort. Survival had to come first.

But to Obama, health insurance for everyone as a new entitlement was the major unfulfilled task of the political movement of which he was a part and now led.

It was now or never, he said. So it would be now.

• • •

Later, Cantor approached Emanuel, who had been No. 3 in the House Democratic leadership before joining the incoming administration. Is this bipartisanship stuff for real? he wanted to know.

Wiry and intense, Emanuel was seen as something of a political bodyguard for the relatively inexperienced Obama. A veteran of the Clinton White House before his own election to Congress in 2000, he had a varied background. He had been a serious ballet dancer as a young man, and served as a civilian volunteer with the Israel Defense Forces during the Gulf War in 1991. Above all, he was known for his quick-draw temper, foul mouth, and killer political instincts.

“We want to work with you,” Emanuel said. “We’re serious.”

Cantor, the only Jewish Republican in Congress, and Emanuel, also Jewish, had a history of working together on Israel.

“There are some things we’re going to disagree on,” Emanuel explained, “but I think there’s a lot we can work on together.”

Cantor considered the incoming administration’s offer to work with Republicans sincere, but finding common ground on how to jump-start the economy would be tricky.

Obama and his economic advisers were economic Keynesians—they believed that government spending could create jobs and grow
the economy. It was a philosophy Cantor and many young House Republicans rejected. Instead, Cantor believed that entrepreneurs—small-businessmen and risk takers—were the engine that would drive the economy. Cantor realized that his 10 years in the family real estate business made him the only former small-businessman in the group that Obama had met with.

The 45-year-old Cantor, a workaholic even by Washington standards, quickly set up what he called the House Republican Economic Recovery Working Group, made up of 33 conservative members of Congress, to map out an alternative to a traditional stimulus package.

The group insisted on what Cantor called “three ironclad criteria”: Proposals had to be limited in scope and spending; they had to result in real, long-lasting jobs; and small businesses had to be put first. They solicited input from former eBay CEO Meg Whitman, former Massachusetts Governor Mitt Romney, and anti-tax leader Grover Norquist of Americans for Tax Reform.

• • •

Three days after his inauguration, Obama summoned the congressional leadership to the White House Cabinet Room to discuss the stimulus package.

Protocol dictated that the president control the agenda and discussion, but Cantor spoke up immediately.

“Mr. President, with your permission I’d like to hand something out.”

Obama nodded, and Cantor passed out copies of a one-page document entitled “House Republican Economic Recovery Plan.” It listed five unambiguously conservative proposals:
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• Immediate reduction in the two lowest individual income tax rates. Because all taxpayers pay some of their income at these initial rates, taxes would go down on more than 100 million tax returns, saving families between $500 and $3,200 in taxes each year.

• A tax deduction of 20 percent on the income of all small businesses.

• No tax increases to pay for stimulus spending.

• Make unemployment benefits tax-free.

• A homebuyer’s credit of $7,500 for those who make a down payment of at least 5 percent of their home’s value.

Obama glanced at his copy, looked at Cantor, and said amiably, “Eric, there’s nothing too crazy in here.”

But Orszag, the budget director, noticed that Cantor’s proposals were all tax cuts.

And Cantor’s document declared that, furthermore, “any stimulus spending should be paid for by reducing other government spending.”

Absurd, thought Orszag. The whole point of the stimulus was to inject extra money into the economy. The requirement that all stimulus spending be offset by cuts elsewhere would defeat the purpose. Meeting Cantor’s goal would be impossible, Orszag concluded instantly. But no one asked him, so he didn’t say anything.

Obama said his plan would include tax cuts, but not only tax cuts. He seemed inclined to compromise.

“Mr. President,” Cantor offered, “I understand that we have a difference in philosophy on tax policy.” But a massive stimulus package would be too much like “old Washington,” he said.

“I can go it alone,” the president said, “but I want to come together. Look at the polls. The polls are pretty good for me right now.”

Cantor chuckled and nodded. The polls certainly looked good for Obama now. To Cantor, that meant there would be no easier time to compromise and to disappoint some on the left. As he listened, Obama’s tone seemed to change.

“Elections have consequences,” the president said. “And Eric, I won.”

On the table, some copies of the one-page document called “House Republican Economic Recovery Plan” lay where Cantor had put them.

“So on that, I think I trump you,” Obama said.

• • •

In his short tenure as a senator, Obama had dealt with South Carolina Senator Lindsey Graham several times. Now, in his early days as president, he had Graham, a moderate conservative Republican, to the White House to talk.

“Barack,” Graham said, dispensing with the formal “Mr. President” when they were alone in the Oval Office, “can you believe this has happened to you?”

“No,” the new president replied. “I mean, this is kind of one of these things you think about, but it really doesn’t happen to you.”

“The power of this office is amazing,” Graham said. “Your worst critic is going to be like a schoolboy coming into this office. Just the power of it. They may shit on you when the meeting’s over, out in front, but people are going to listen to you unlike any other setting in any other time in your life. Don’t ever let that be lost upon you.”