The Price of Politics (9 page)

“Can you write me another one of those memos?” the president asked. He wanted a private recommendation, which Orszag had provided before. Obama wanted no one else to see it. Independent, out-of-channel communications could be more honest.

Why not, Orszag said. Yes, sir.

He began a fellowship at the Council on Foreign Relations, and from there he went to work. The country was facing an unsustainable
budget deficit over the next 10 years and beyond. It just did not add up. Tax cuts simply were not affordable. Yes, raising taxes in the recession would impact consumer spending—the necessary driver of a recovery. But the United States would not solve its long-term budget problem unless revenue—meaning tax increases—was part of the equation.

In a draft of his memo for the president, Orszag made his case for additional revenue, but noted that “Even with substantial fiscal pressure, Republicans are extremely unlikely to affirmatively vote for revenue increases.”

He proposed what he called “the best alternative among admittedly very unattractive options.” The administration should move to extend the Bush tax cuts for a year without offsetting them, and then demand that the cost of any further extensions be fully offset.

Ideally, only the lower- and middle-class tax cuts should be continued, but Republicans, of course, would want to extend them for the high-income brackets as well. Reaching a deal on extending them all would be worth it, but just for a year or two.

Orszag sent these thoughts in his memo to Obama, back-channeled through the president’s personal secretary, Katie Johnson. He heard nothing back.

By late August, Orszag had branched out. He was preparing for his debut as a columnist on the op-ed page of
The New York Times
, some of the most valuable and high-visibility opinion real estate in journalism. He sent Katie Johnson an email saying that in a week he was planning to write a column on taxes, and he planned to make the same arguments he had made in his private memo to the president. Please, make sure you tell the president about what I am going to do.

I have told the president, thank you, Johnson emailed back.

It was a delicate path, Orszag was aware. He wanted to alert the president, but not give him veto power. Johnson’s response and thank-you was all he needed. He took parts of the Obama memo and cut and pasted them into his column, which ran in the
Times
on September 6.
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It proposed a compromise: “Extend tax cuts for two years and then end them altogether.”

At his press briefing the following afternoon, White House spokesman
Robert Gibbs attempted to distance the administration from Orszag’s column.
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“We certainly didn’t see Peter’s column before it appeared today,” he said, adding, “nobody that I’m aware of saw the column before.”

It’s not true that no one in the White House was notified about the coming column, Orszag wrote in an email to Rahm Emanuel.

Are you saying you told me? Rahm emailed back.

No, I’m saying I told your boss.

The former budget director was slightly surprised that Obama would hoard information, but Orszag often said that it was a mistake to think you’ve got someone figured out.

• • •

Orszag continued his star turn in the op-ed spotlight and a month later drafted a column to appear October 20, 2010, on the sensitive subject of Obamacare.
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He wanted to focus on one of its weaknesses. The health care legislation “does many things right,” he wrote. “But it does almost nothing to reform medical malpractice laws.” The president himself, Orszag said, had urged, at the American Medical Association in June 2009, that there should be “broader use of evidence-based guidelines” for doctors treating a specific illness or condition. Orszag proposed that any doctor who could demonstrate he had followed these guidelines should not be held liable for malpractice.

Orszag later described the plan to others as a sort of Nixon-goes-to-China moment. By proposing its own version of malpractice reform, the Democratic administration could blunt one of the Republicans’ most common attacks: the claim that Democrats were in the pocket of the trial lawyers, who benefited immensely from medical malpractice cases.

Should he alert the White House? he wondered. Better not to surprise them. With some discomfort, because a columnist is supposed to speak for himself, not his former employer, Orszag sent his draft to Valerie Jarrett. It was about three days before the column was scheduled to run. Here’s a draft, he wrote in an email to her. Let me know if you have any comments.

Thanks, Jarrett wrote back. She offered no comments on the draft.

The column ran as scheduled, unchanged from the draft Orszag had provided the White House.

Orszag was in an airport when he got Jarrett’s email. How could you have done this? It’s ridiculous. You’re so disloyal.

You have got to realize the health care bill is wildly unpopular, Orszag replied. Every single speech I give, if I lead with this reflection on its imperfections, the dynamic changes. People will then listen. You can’t hold this law out as perfect. It won’t sell. People think it’s a piece of crap. The weaknesses must be acknowledged. Then it’s credible to say, here’s why it is good and why it is the only thing that will work.

Jarrett’s answer was delivered with Politburo finality: You have burned your bridges.

O
n election night, November 2, 2010, the Republicans seized control of the House, winning an astonishing 63 seats—the largest swing in 62 years.
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Protocol dictated that the president make a congratulatory call to Boehner, the presumptive incoming speaker of the House. The trouble was, nobody in the White House had thought to get a phone number.

Staff began to scramble. Who would know how to reach Boehner?

Finally, someone remembered that Brad Woodhouse, communications director for the Democratic National Committee, was a fishing buddy of somebody who worked for Boehner.

Someone called Woodhouse. Could he help?

Woodhouse called his friend Nick Schaper, new media director for Boehner, and relayed a number back to the White House.

At midnight, the phone rang in the Grand Hyatt in Washington, where Boehner and his staff were celebrating.

Congratulations, John, the president said.

Thank you, he replied. Mr. President, he added, I’ve always been straightforward and honest with you in the past and that’s the way I’ll be with you in the future. I’m looking forward to working together to create jobs and cut spending.

The conversation lasted only a few moments.

Thanks for the call, the speaker said.

• • •

The president had to reassess.

In the next Congress, the Republicans would have a majority of 242–193. But it wasn’t just control of the House that had changed. The election had altered the character of the Republican Party in Congress. Dozens of incoming freshman Republicans identified closely with the anti-tax, anti-government-spending Tea Party movement, shifting an already conservative Republican conference further to the right.

In the days immediately following the election, White House staff saw a different president from the man they had worked with the past two years.

Obama had kept his cool through the auto industry bailout and the struggle to pass the Affordable Care Act. But in the immediate aftermath of the election, he chaired meetings in which he allowed staffers to ramble on as he sat there, very quietly, very introspectively. He seemed to be trying to absorb it all and figure it all out. He looked down and withdrawn in a way the staff had never seen him. He’d been rocked by the election. Gut-punched.

The “why?” of what happened was left to the pundits, columnists and analysts—the talking heads. The economy was better but still not in full recovery. Reports showed that GDP growth in the second quarter of the year had fallen to 1.7 percent from 3.7 percent in the previous quarter, and unemployment, though down from its peak, was holding stubbornly at 9.6 percent.

The $787 billion stimulus had helped, but not as much as the administration had implied it would. Obamacare was misunderstood and unpopular, and the same, perhaps, could be said of the president.

One thing was plain. Obama had an immediate operational problem. After largely ignoring the Republicans for nearly two years, he would need to open up.

• • •

For nearly nine months, Alan Simpson had been flying back and forth between Wyoming and Washington to work out of the nondescript office space the fiscal commission had rented on F Street. Tall, and with an artificial knee, he couldn’t cram himself into the coach seats that the commission’s frugal spending rules required. He estimated that he had spent upward of $25,000 of his own money upgrading to first class.

The 18-member commission had met five times between April and September, but Simpson and co-chair Erskine Bowles were frustrated by the lack of agreement among members. The president had set a December 1 deadline for them to vote on a proposal, so on November 10, Simpson and Bowles took the unexpected step of issuing a plan of their own.

The 50-page draft outlined measures to cut $4 trillion from the federal deficit over 10 years through a combination of spending cuts and increased tax revenue. The proposal included $200 billion in cuts equally distributed between Defense and non-Defense spending in its first three years. It offered several options for tax reform. The proposal that received top billing was the so-called zero option, which dramatically simplified the tax code by streamlining income brackets, eliminating all deductions (including the popular exemptions for charitable donations, mortgage interest and employer-sponsored health care), and by taxing income from investments, capital gains and dividends at the same rate as wages. The savings would be used to lower individual rates and reduce the deficit.

The proposal cut payments to doctors under Medicare and increased beneficiaries’ premiums. It left Obama’s Affordable Care Act in place, and actually strengthened the authority of the controversial Independent Payment Advisory Board, which was supposed to control costs by identifying which treatments were effective and which were not. The proposal also advocated the creation of a government-run health insurance plan that would compete with private insurers on the law’s health care exchanges.

All payments from entitlement programs that were indexed to inflation were reduced by changing the way the Consumer Price Index was
calculated. The shift to the more accurate measure, called “Chained CPI,” had been resisted for years because over time it would dramatically reduce the growth of entitlement payments.

Finally, the proposal reformed Social Security by gradually raising the retirement age to 67, making the benefit formula more progressive, and increasing the amount of an individual’s wages subject to the Social Security tax.

There was something in the plan for everyone to hate.

“Simply unacceptable,” outgoing House Speaker Nancy Pelosi said in a statement, citing proposed cuts in entitlement spending.
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Americans for Tax Reform, the conservative lobbying group headed by anti-tax activist Grover Norquist, warned the more than 275 members of Congress who had signed its Taxpayer Protection Pledge that support for the plan would be considered a violation of their oath to never raise taxes.

Simpson and Bowles had exactly three weeks before the scheduled vote. Under the terms of the executive order creating the commission, their proposal needed the support of 14 of the panel’s 18 members for the president to send it to Congress.

They began meeting with commission members individually in an effort to gather enough votes. Among the six senators on the commission, two Democrats and three Republicans were on board. Of the four outside experts, three supported it. But only one of the six House members, South Carolina Democrat John Spratt, who had recently lost his reelection bid, said he would vote for the plan. Counting Simpson and Bowles themselves, that left them with 11—three votes shy of the number needed to require the president to send it to Congress.

• • •

As part of his new effort to engage with House Republicans, Obama called Boehner on November 17.

Happy Birthday! the president said. Boehner was turning 61 that day.

In a second gesture, Obama asked the Senate and House leaders of both parties—eight in all, including Boehner and Cantor—to meet
with him and Biden for a summit meeting at the White House the next day, November 18.

But when you need friends, it’s too late to make them. Boehner hadn’t been consulted about the summit, and with the incoming House Republicans deep in internal battles over realigning committee jurisdictions, he had no interest in hurrying down to the White House the next day. Along with Senate Minority Leader McConnell, Boehner slapped the offer away. They wanted it postponed until after Thanksgiving.

The tables had turned. They had the votes.

• • •

The delayed summit began in the Roosevelt Room of the White House the morning of Tuesday, November 30, 2010. The outgoing Congress had failed to pass a budget—only funding the government through December 3—and because it was illegal for the executive branch to spend money not appropriated by Congress, the country was three days away from possible government shutdown.