WASHINGTON -- As policy pursuits go, none has had more consequence for the Obama administration than the stimulus: Not only did the American Recovery Act determine the size and scope of the economic mending, it established the ideological battle lines across which many of the subsequent legislative battles were waged inside the White House.
There has been no shortage of literature to dissect how President Obama handled the stimulus debate. But a new book by Noam Scheiber of The New Republic, "The Escape Artists," sheds new light on the matter.
As Scheiber writes, members of the president's economic team felt that if they were to properly fill the hole caused by the recession, they would need a bill that priced at $1.8 trillion -- $600 billion more than was previously believed to be the high-water mark for the White House.
The $1.8 trillion figure was included in a December 2008 memo authored by Christina Romer (the incoming head of the Council of Economic Advisers) and obtained by Scheiber in the course of researching his book.
"When Romer showed [Larry] Summers her $1.8 trillion figure late in the week before the memo was due, he dismissed it as impractical. So Romer spent the next few days coming up with a reasonable compromise: roughly $1.2 trillion," Scheiber writes.
As has now become the stuff of Obama administration lore, when the final document was ultimately laid out for the president, even the $1.2 trillion figure wasn't included. Summers thought it was still politically impractical. Moreover, if Obama had proposed $1.2 trillion but only obtained $800 billion, it would have been categorized as a failure.
"He had a view that you don't ever want to be seen as losing," a Summers colleague told Scheiber.
"The Escape Artists" is a richly reported look at how continuous efforts on the part of Obama and his top aides to avoid being "seen as losing" resulted in precisely such losses. Culled from interviews with more than 250 people (many of whom were interviewed on multiple occasions) the book is, as its subtitle states, an examination of "how Obama's team fumbled the recovery." It's an indictment that Scheiber, at times, extends to the president's political and communications teams, whom he depicts as continuously operating off of different assumptions and playbooks.
Chief among the examples of the administration's failures is the stimulus itself. When Summers made the final presentation to the president's then-chief of staff Rahm Emanuel, Scheiber writes, "It reflected what he deemed the best course that was politically feasible ... Yet because Emanuel and the president assumed Summers was largely giving them [economic advice], they believed they were closer to the ideal than they actually were."
If that had been the only misstep, things might have gone more smoothly. But the White House also overestimated the support it had on the Hill. Two administration aides told Scheiber that they thought they could pick 8 to 10, or even up to 15, Republican votes in the Senate. They would end up with three, but not before trading away good policy to win that support and the support of moderate Democrats.
The internal disputes that plagued the Obama administration's economic team during its first years in office were, in the end, more consequential than the ineptitude at vote counting. According to the book, the administration spent valuable time engaging and re-engaging in a dispute over how best to prop up the nation's struggling banks, with Summers arguing that the mortgage securities were largely junk and Treasury Secretary Tim Geithner resisting efforts for greater government intervention. It culminated in a March 2009 meeting that Geithner won with an assist from Emanuel.
As it has been previously reported, the president's top advisers were also deeply divided over the decision to pursue health care reform. At a January 2009 meeting, Vice President Biden argued that Obama would be forgiven if he took "a pass on this one" in favor of remaining focused on the economy. Christina Romer agreed. It was Emanuel who gave the president the nudge he needed.
"If you look at what people accomplish in their first year, it's most of what they accomplish. If you want to do this, now is the time," he said.
The most persistent internal division inside the White House, however, was between the deficit hawks and those who believed more stimuli were needed.
The split was noticeable as early as the crafting of the Recovery Act, often with Office of Management and Budget Director Peter Orszag playing the role of Keynsian antagonist. Orszag, writes Scheiber, "worried that the sheer size of the stimulus could undermine the confidence of businessmen and money managers." In the subsequent year, when other advisers argued that an additional dose of stimulus would prop up a staggering economy, he downplayed the potential impact.
At various intervals, Orszag clashed with different members of the president's economic and political team. David Axelrod, the president's chief communications hand, became convinced that Orszag was leaking material to The New York Times. Orszag, in turn, refused to incorporate any of Axelrod's talking points that he didn't personally find credible. Summers fought Orszag's pursuit of a deficit reduction commission, arguing that it would lock the president into uncomfortable reforms. He also pushed back on Orszag's idea of a domestic spending freeze, insisting the cuts would be too close to the bone.
"We're Democrats," Summers harrumphed. "We believe in these things." Besides, both ideas struck him as gimmicks unworthy of a president. To colleagues he complained that "what's really important in life is not to believe your own bullshit."
Orszag, in turn, so distrusted Summers' influence that, as Scheiber writes, he "enacted a special rule for Summers's deputy, Jason Furman: anyone receiving an unsolicited inquiry from Furman was to alert Orszag's chief of staff, Jill Blickstein."
In the end, however, only one economic adviser truly argued that deficit reduction should be put off for another day. And by the time the 2010 elections were over, even Obama's top political advisers were arguing that Christina Romer's position was utterly untenable.
[Top Adviser David] Plouffe urged the president to give [entitlement reform] a shot. "I said he [Obama] should be big on entitlements," Plouffe told one former administration official, by which he meant reining in these budgetary elephants. Sure, this would enrage the party's base. But the political upside with the rest of the country would more than make up for it ... "Plouffe is pretty big on accomplishments trump normal politics," said one White House colleague. "Plouffe's view is that big trumps the little."
The subsequent year and a half are relatively fresh in the public's memory. A near government shutdown became a disastrous debt ceiling showdown, as the cuts and reforms the administration pursued never satisfied Republicans. By the time the fall of 2011 rolled around, many of the president's original economic team was gone, and some of the elevated faces (namely, Gene Sperling) were making the case that it was smart policy and politics to renew focus on a workable stimulus.
By then, however, the image had been set of a scatterbrain White House that had, in all likelihood, whiffed on its best shot at recovery. And while internal staff disputes did play a role, Scheiber ascribes blame ultimately to the president. As he concludes:
[T]he Jobs Act punctuated the chronic confusion about the connection between politics and governing. Too often, the two activities were treated as an either-or proposition in the West Wing. Obama generally believed the way to pass his program was to engage earnestly with the opposition, not take his case public. A president never has more leverage with Congress than when he's riling up voters, but Obama rarely exploited the massive stature of his office as a tool for influencing legislation
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