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Struggles of a Passive Centrist

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In September of 2010, I wrote a piece entitled, “Where Obama Went Wrong”.  It began with this statement:  “One could write an 800-page book on this subject.”  Noam Scheiber has just written that book in only 368 pages.  It’s called The Escape Artists and it is scheduled for release at the end of this month.  The book tells the tale of a President in a struggle to create a centrist persona, with no roadmap of his own.  In fact, it was Obama’s decision to follow the advice of Peter Orszag, to the exclusion of the opinions offered by Christina Romer and Larry Summers – which prolonged the unemployment crisis.

The following graph from The Economic Populist website depicts the persistence of unemployment in America:

Noam Scheiber’s new book piqued my interest because, back in July of 2009, I wrote a piece entitled “The Second Stimulus”, which began with this thought:

It’s a subject that many people are talking about, but not many politicians want to discuss.  It appears as though a second economic stimulus package will be necessary to save our sinking economy and get people back to work.  Because of the huge deficits already incurred in responding to the financial meltdown, along with the $787 billion price tag for the first stimulus package and because of the President’s promise to get healthcare reform enacted, there aren’t many in Congress who are willing to touch this subject right now, although some are.

The Escape Artists takes us back to the pivotal year of 2009 – Obama’s first year in the White House.  Noam Scheiber provided us with a taste of his new book by way of an article published in The New Republic entitled, “Obama’s Worst Year”.  Scheiber gave the reader an insider’s look at Obama’s clueless indecision at the fork in the road between deficit hawkishness vs. economic stimulus.  Ultimately Obama decided to maintain the illusion of centrism by following the austerity program suggested by Peter Orszag:

BACK IN THE SUMMER of 2009, David Axelrod, the president’s top political aide, was peppering White House economist Christina Romer with questions in preparation for a talk-show appearance.  With unemployment nearing 10 percent, many commentators on the left were second-guessing the size of the original stimulus, and so Axelrod asked if it had been big enough.  “Abso-fucking-lutely not,” Romer responded.  She said it half-jokingly, but the joke was that she would use the line on television.  She was dead serious about the sentiment.  Axelrod did not seem amused.

For Romer, the crusade was a lonely one.  While she believed the economy needed another boost in order to recover, many in the administration were insisting on cuts.  The chief proponent of this view was budget director Peter Orszag.  Worried that the deficit was undermining the confidence of businessmen, Orszag lobbied to pare down the budget in August, six months ahead of the usual budget schedule.      .   .   .

The debate was not only a question of policy.  It was also about governing style – and, in a sense, about the very nature of the Obama presidency.  Pitching a deficit-reduction plan would be a concession to critics on the right, who argued that the original stimulus and the health care bill amounted to liberal overreach.  It would be premised on the notion that bipartisan compromise on a major issue was still possible.  A play for more stimulus, on the other hand, would be a defiant action, and Obama clearly recognized this.  When Romer later urged him to double-down, he groused, “The American people don’t think it worked, so I can’t do it.”

That’s a fine example of great leadership – isn’t it?  “The American people don’t think it worked, so I can’t do it.”  In 2009, the fierce urgency of the unemployment and economic crises demanded a leader who would not feel intimidated by the sheeple’s erroneous belief that the Economic Recovery Act had not “worked”.  Obama could have educated the American people by directing their attention to a June 3, 2009 essay by Keith Hennessey (former director of the National Economic Council under President George W. Bush) which described the Recovery Act as “effective”.

Noam Scheiber’s New Republic article detailed Obama’s evolution from inexperienced negotiator to President with “newfound boldness”:

FOR TWO AND A HALF YEARS, Obama had been hatching proposals with an eye toward winning over the opposition.  In most cases, all it had gotten him was more extreme demands from Republicans and not even a pretense of bipartisan support.  Now, after the searing experience of the deficit deal, he still wanted reasonable, centrist policies.  But he was done trying to fit them to the ever-shifting conservative zeitgeist.  When he finally turned back to jobs in August, he told his aides not to “self-edit” proposals to improve their chances of passing the Republican House.  “He pushed us to make sure this was not simply a predesigned legislative compromise,” one recalls.

Many readers will be surprised to learn that Larry Summers had aligned himself with Christina Romer by advocating for additional fiscal stimulus during the summer of 2009.  In fact, Ms. Romer herself has already confirmed this.  The Romer-Summers alliance for stimulus was also discussed in Ron Suskind’s book, Confidence Men.

As for the stimulus program itself, a new book by Mike Grabell of ProPublica entitled, Money Well Spent? provided the most even-handed analysis of what the stimulus did – and did not – accomplish.  Mike Grabell gave us a glimpse of his new book with an article which appeared in The New York Times.  The piece was cross-posted to the ProPublica website.  Keith Hennesssey’s prescient observations about the shortcomings of that program, which he discussed  in June of 2009, were somewhat consistent with those discussed by Mike Grabell, particularly on the subject of “shovel-ready” programs.  Here is what Keith Hennessey said, while supporting his argument with the observations of Congressional Budget Office Director Doug Elmendorf:

In fact, the infrastructure spending in the stimulus law will peak in fiscal year 2011, which goes from October 1, 2010 to September 30, 2011.  That’s too late from a macro perspective.

The Director further points out that the 2009 stimulus law created many new programs.  This slows spend-out, as it takes time to create and ramp up the new programs.

The Administration has made much of working with federal and state bureaucracies to find “shovel-ready” projects to accelerate infrastructure spending.  All of my conversations with budget analysts suggest this claim is tremendously overblown, and Director Elmendorf asks, “Is this practical on a large scale?”

On February 11, 2012, Mike Grabell said this:

But the stimulus ultimately failed to bring about a strong, sustainable recovery.  Money was spread far and wide rather than dedicated to programs with the most bang for the buck.  “Shovel-ready” projects, those that would put people to work right away, took too long to break ground.  Investments in worthwhile long-term projects, on the other hand, were often rushed to meet arbitrary deadlines, and the resulting shoddy outcomes tarnished the projects’ image.

The Economic Recovery Act of 2009 will surely become a central subject of debate during the current Presidential election campaign.  Regardless of what you hear from partisan bloviators, Messrs. Hennessey and Garbell have provided you with reliable guides to the unvarnished truth on this subject.



 

Obama Backpedals To Save His Presidency

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President Obama’s demotion of his Chief of Staff, Bill Daley, has drawn quite a bit of attention – despite efforts by the White House to downplay the significance of that event.  The demotion of Daley is significant because it indicates that Obama is now trying to back away from his original strategy of helping Wall Street at the expense of Main Street.  This move appears to be an attempt by Obama to re-cast himself as a populist, in response to the widespread success of the Occupy Wall Street movement.

In September of 2010, I wrote a piece entitled, “Where Obama Went Wrong”.  Despite the subsequent spin by right-wing pundits, to the effect that voters had been enamored with the Tea Party’s emphasis on smaller government, the true reasons for the mid-term disaster for the Democrats had become obvious:

During the past week, we’ve been bombarded with explanations from across the political spectrum, concerning how President Obama has gone from wildly-popular cult hero to radioactive force on the 2010 campaign trail.  For many Democrats facing re-election bids in November, the presence of Obama at one of their campaign rallies could be reminiscent of the appearance of William Macy’s character from the movie, The Cooler.  Wikipedia’s discussion of the film provided this definition:

In gambling parlance, a “cooler” is an unlucky individual whose presence at the tables results in a streak of bad luck for the other players.

*   *   *

The American people are hurting because their President sold them out immediately after he was elected.  When faced with the choice of bailing out the zombie banks or putting those banks through temporary receivership (the “Swedish approach” – wherein the bank shareholders and bondholders would take financial “haircuts”) Obama chose to bail out the banks at taxpayer expense.  So here we are  . . .  in a Japanese-style “lost decade”.  In case you don’t remember the debate from early 2009 – peruse this February 10, 2009 posting from the Calculated Risk website.  After reading that, try not to cry after looking at this recent piece by Barry Ritholtz of The Big Picture entitled, “We Should Have Gone Swedish  . . .”

Back in December of 2009, Bill Daley – a minion of The Dimon Dog at JPMorgan Chase – wrote an op-ed piece for The Washington Post, which resonated with Wall Street’s tool in the White House.  Daley claimed that Obama and other Democrats were elected to office in 2008 because voters had embraced some pseudo-centrist ideas, which Daley referenced in these terms:

These independents and Republicans supported Democrats based on a message indicating that the party would be a true Big Tent — that we would welcome a diversity of views even on tough issues such as abortion, gun rights and the role of government in the economy.

*   *   *

All that is required for the Democratic Party to recover its political footing is to acknowledge that the agenda of the party’s most liberal supporters has not won the support of a majority of Americans — and, based on that recognition, to steer a more moderate course on the key issues of the day, from health care to the economy to the environment to Afghanistan.

Unfortunately, Obama was pre-disposed to accept this rationale, keeping his policy decisions on a trajectory which has proven as damaging to his own political future as it has been to the future of the American middle class.

On November 8, Jonathan Chait wrote a piece for New York magazine’s Daily Intel blog, wherein he explained that the demotion of Bill Daley revealed a “course correction” by Obama, in order to a pursue a strategy “in line with the realities of public opinion”.  Jonathan Chait explained how the ideas espoused by Daley in his 2009 Washington Post editorial, had been a blueprint for failure:

Daley, pursuing his theory, heavily courted business leaders.  He made long-term deficit reduction a top priority, and spent hours with Republican leaders, meeting them three-quarters of the way in hopes of securing a deal that would demonstrate his centrism and bipartisanship.  The effort failed completely.

The effort failed because Daley’s analysis – which is also the analysis of David Brooks and Michael Bloomberg – was fatally incorrect.  Americans were not itching for Obama to make peace with corporate America.  Americans are in an angry, populist mood – distrustful of government, but even more distrustful of business.  In the most recent NBC/The Wall Street Journal poll, 60 percent of Americans strongly agreed with the following statement:

The current economic structure of the country is out of balance and favors a very small proportion of the rich over the rest of the country.  America needs to reduce the power of major banks and corporations and demand greater accountability and transparency.  The government should not provide financial aid to corporations and should not provide tax breaks to the rich.

At the website of economist Brad DeLong, a number of comments were posted in response to Jonathan Chait’s essay.  One can only hope that our President has the same, clear understanding of this situation as do the individuals who posted these comments:

Full Employment Hawk said:

.   .   .   The defeat of the Democrats was due to the fact that the Obama administration did too little, not because it did too much.

Daley’s view that it was because the moderately progressive policies of the Obama administration were too far left for the center was totally wrong.  And listening to Daley’s advice to further shift from job creation to deficit reduction was a major blunder that reinforced the blunder of the first two years of dropping the ball on making the economy grow fast enough for the unemployment rate to be coming down significantly by the time of the Fall election.

In reply to the comment posted by Full Employment Hawk, a reader, identified as “urban legend” said this:

Obama should have been making the point over and over and over and over that getting more money into the hands of more Americans — principally right now by creating jobs — is the most pro-business stance you can take.  Continuing to let the 1% dictate everything in their favor is the most anti-business thing you can do.  We are the ones who want demand to rise for the goods and services of American business.  Right-wingers don’t care much about that.  What they do care about is maintaining their theology against all the evidence of its massive failure.

At Politico, Jonathan Chait’s essay provoked the following comment from Ben Smith:

It is entirely possible that no staff shift, and no ideological shift, can save Obama from a bad economy.  You don’t get to run controlled experiments in politics.

But it does seem worth noting that this argument pre-dates Daley: It’s the substance of the 2008 debate between Hillary Clinton and Obama, with Clinton portraying Obama as naive in his dream of bipartisan unity, and the Republicans as an implacable foe.  It’s the Clinton view, the ’90s view, that has prevailed here.

Indeed, it would be nice for all of us if Obama could get a “Mulligan” for his mishandling of the economic crisis.  Unfortunately, this ain’t golf.


Where Obama Went Wrong

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September 27, 2010

One could write an 800-page book on this subject.  During the past week, we’ve been bombarded with explanations from across the political spectrum, concerning how President Obama has gone from wildly-popular cult hero to radioactive force on the 2010 campaign trail.  For many Democrats facing re-election bids in November, the presence of Obama at one of their campaign rallies could be reminiscent of the appearance of William Macy’s character from the movie, The Cooler.  Wikipedia’s discussion of the film provided this definition:

In gambling parlance, a “cooler” is an unlucky individual whose presence at the tables results in a streak of bad luck for the other players.

Barack Obama was elected on a wave of emotion, under the banners of  “Hope” and “Change”.  These days, the emotion consensus has turned against Obama as voters feel more hopeless as a result of Obama’s failure to change anything.  His ardent supporters feel as though they have been duped.  Instead of having been tricked into voting for a “secret Muslim”, they feel they have elected a “secret Republican”.  At the Salon.com website, Glenn Greenwald has documented no less than fifteen examples of Obama’s continuation of the policies of George W. Bush, in breach of his own campaign promises.

One key area of well-deserved outrage against President Obama’s performance concerns the economy.  The disappointment about this issue was widely articulated in December of 2009, as I pointed out here.  At that time, Matt Taibbi had written an essay for Rolling Stone entitled, “Obama’s Big Sellout”, which inspired such commentators as Edward Harrison of Credit Writedowns to write this and this.  Beyond the justified criticism, polling by Pew Research has revealed that 46% of Democrats and 50% of Republicans incorrectly believe that the TARP bank bailout was signed into law by Barack Obama rather than George W. Bush.  President Obama invited this confusion with his nomination of “Turbo” Tim Geithner to the position of Treasury Secretary.  As President of the Federal Reserve of New York, Geithner oversaw the $13 billion gift Goldman Sachs received by way of Maiden Lane III.

The emotional battleground of the 2010 elections provided some fun for conservative pundit, Peggy Noonan this week as a result of the highly-publicized moment at the CNBC town hall meeting on September 20.  Velma Hart’s question to the President was emblematic of the plight experienced by many 2008 Obama supporters.  Noonan’s article, “The Enraged vs. The Exhausted” characterized the 2010 elections as a battle between those two emotional factions.  The “Velma Moment” exposed Obama’s political vulnerability as an aloof leader, lacking the ability to emotionally connect with his supporters:

The president looked relieved when she stood.  Perhaps he thought she might lob a sympathetic question that would allow him to hit a reply out of the park.  Instead, and in the nicest possible way, Velma Hart lobbed a hand grenade.

“I’m a mother. I’m a wife.  I’m an American veteran, and I’m one of your middle-class Americans.  And quite frankly I’m exhausted.  I’m exhausted of defending you, defending your administration, defending the mantle of change that I voted for, and deeply disappointed with where we are.”  She said, “The financial recession has taken an enormous toll on my family.”  She said, “My husband and I have joked for years that we thought we were well beyond the hot-dogs-and-beans era of our lives.  But, quite frankly, it is starting to knock on our door and ring true that that might be where we are headed.”

What a testimony.  And this is the president’s base.  He got that look public figures adopt when they know they just took one right in the chops on national TV and cannot show their dismay.  He could have responded with an engagement and conviction equal to the moment.  But this was our president  — calm, detached, even-keeled to the point of insensate.  He offered a recital of his administration’s achievements: tuition assistance, health care.  It seemed so off point.  Like his first two years.

Kirsten Powers of The Daily Beast provided the best analysis of how the “Velma Moment” illustrated Obama’s lack of empathy.  Where Bill Clinton is The Sorcerer, Barack Obama is The Apprentice:

Does Barack Obama suffer from an “empathy deficit?” Ironically, it was Obama who used the phrase in a 2008 speech when he diagnosed the United States as suffering from the disorder.  In a plea for unity, candidate Obama said lack of empathy was “the essential deficit that exists in this country.”  He defined it as “an inability to recognize ourselves in one another; to understand that we are our brother’s keeper; we are our sister’s keeper; that, in the words of Dr. King, we are all tied together in a single garment of destiny.”

*   *   *

And at a 2008 rally in Westerville, Ohio, Obama said, “One of the values that I think men in particular have to pass on is the value of empathy.  Not sympathy, empathy.  And what that means is standing in somebody else’s shoes, being able to look through their eyes.  You know, sometimes we get so caught up in ‘us’ that it’s hard to see that there are other people and that your behavior has an impact on them.”

Yes, President Obama, sometimes that does happen.  Take a look in the mirror.  Nothing brought this problem into relief like the two Obama supporters who confronted the president at a recent town hall meeting expressing total despair over their economic situation and hopelessness about the future.  Rather than expressing empathy, Obama seemed annoyed and proceeded with one of his unhelpful lectures.

*   *   *

One former Emoter-in-Chief, Bill Clinton, told Politico last week, “[Obama’s] being criticized for being too disengaged, for not caring.  So he needs to turn into it.  I may be one of the few people that think it’s not bad that that lady said she was getting tired of defending him.  He needs to hear it.  You need to hear. Embrace people’s anger, including their disappointment at you.  And just ask ‘em to not let the anger cloud their judgment.  Let it concentrate their judgment.  And then make your case.”

Then the kicker:  “[Obama has] got to realize that, in the end, it’s not about him. It’s about the American people, and they’re hurting.”

The American people are hurting because their President sold them out immediately after he was elected.  When faced with the choice of bailing out the zombie banks or putting those banks through temporary receivership (the “Swedish approach” – wherein the bank shareholders and bondholders would take financial “haircuts”) Obama chose to bail out the banks at taxpayer expense.  So here we are  . . .  in a Japanese-style “lost decade”.  In case you don’t remember the debate from early 2009 – peruse this February 10, 2009 posting from the Calculated Risk website.  After reading that, try not to cry after looking at this recent piece by Barry Ritholtz of The Big Picture entitled, “We Should Have Gone Swedish  . . .” :

The result of the Swedish method?  They spent 4% of GDP ($18.3 billion in today’s dollars), to rescue their banks.  That is far less than the $trillions we have spent — somewhere between 15-20% of GDP.

Final cost to the Swedes?  Less than 2% of G.D.P.  (Some officials believe it was closer to zero, depending on how certain rates of return are calculated).

In the US, the final tally is years away from being calculated — and its likely to be many times what Sweden paid in GDP % terms.

It has become apparent that the story of  “Where Obama Went Wrong” began during the first month of his Presidency.  Whoever undertakes the task of writing that book will be busy for a long time.