The Center Holds: Obama and His Enemies

by Jonathan Alter

  On Friday night Boehner sent a letter to his caucus, saying, “A deal was never reached, and was never really close.” The White House was enraged when Boehner claimed that Obama “demanded” the extra $400 billion. In truth, he had introduced it late in their talks, a clumsy gambit that reflected his inexperience as a negotiator. But he had quickly withdrawn the extra $400 billion (onl partner, Russ Schriefer, Sch2y $40 billion a year over ten years, by the way, a relatively small amount in the context of a $4 trillion deal) when Boehner objected. The bottom line was that Obama had in fact moved the goalposts, but then he quickly moved them back. Still, it was highly unusual in any negotiation, business or government, for one side to terminate the talks just because the other side tossed in something from left field. The customary response in such situations was to dismiss the new offer out of hand and resume negotiating. Boehner’s failure to do so reinforced the president’s interpretation that he couldn’t move forward because he didn’t have the support of his caucus. When the leader of the House turned around, there was no one following him.

  Across the country it was Obama, not Boehner, who was blamed for weakness and poor leadership, for not “working his will” with Congress, as the author Bob Woodward put it. He was president, after all. But this analysis might have expected too much of Obama, given the historical context. Charles Peters, the founder of the Washington Monthly, suggested substituting man for president and woman for Congress and asking if it was reasonable to expect a man to “work his will” on a resistant woman. In modern relationships, men and women are coequal branches of government, equally able to cooperate or block the will of the other. Obama wasn’t any weaker or less competent than an unpersuasive spouse. His sin was overconfidence that everything would work out by the time of the deadline, as it had so often in the past.

  Obama and his team would later acknowledge that, as one aide put it, they had “overestimated John Boehner’s political courage.” They knew the risks of trying and failing to cut a historic deal but thought that if the president could pull it off he would fulfill his promise to bring people together and change the arc of American politics. Only much later, after the election, did they breathe a sigh of relief that the Grand Bargain of 2011 was never struck.

  TIM GEITHNER USED various gimmicks to push the moment of truth from spring to summer, but the government simply had to make good on its obligations by August 2. He was angry with the business community, which never believed the politicians wouldn’t figure something out and thus brought no pressure to bear on Republican House members. Even after being briefed extensively about the horrific consequences of default by a Republican, Jay Powell, a former Treasury undersecretary in the first Bush administration, the House firebrands of the right continued to brandish the threat. Their argument was simple and easy to understand: To raise the debt ceiling, the budget must be cut by at least the same amount.

  The White House felt the rhetoric was getting scary. Austan Goolsbee’s heart sank when he heard Senator Pat Toomey of Pennsylvania say that after default, the United States should prioritize the bondholders—in other words, pay China first. Toomey would follow with paying Social Security recipients and the military and leave it at that. After the default. This was insane! Goolsbee estimated that default would send GDP down by 15 percent, a much steeper drop than during the Great Depression. Under Toomey’s approach, after bondholders, Medicare and Medicaid recipients, the beneficiari partner, Russ Schriefer, speech earlyes of unemployment insurance, and the military were paid, there was not a dime left over for any other function of government.

  Toomey and many Tea Party Republicans viewed default as a cleansing mechanism that would lead to an automatic balanced budget and, most important for them, a dramatic shrinkage in the size of government. “It’s reasonable,” said Bruce Bartlett, a Reaganite economist chastened by the facts, “if you think sticking a knife in your eye is a good way to deal with glaucoma.”

  But finding another treatment wasn’t easy. Liberals on cable TV were all of a sudden playing the tough guy. It was all about the psychology of power, they argued. Obama should “call the question”—be like Reagan firing the air traffic controllers or Nixon, pursuing what he called his “madman theory” in bombing North Vietnam in 1969. The madman theory dictated that you don’t mess with the president because you’re never sure what he might be capable of doing.

  This was not exactly Obama’s style, but Durbin nonetheless thought the president’s “ace in the hole” was the Fourteenth Amendment, which said, “The validity of the public debt of the United States, authorized by law . . . shall not be questioned.” Some lawyers thought “authorized by law” gave the Treasury the authority it needed to keep the government open. Bill Clinton was among them. Back in May Clinton had ruminated at a conference of the Peterson Foundation that a default of a couple of days “might not be calamitous.” Bill Daley called Clinton and told him this was “deeply unhelpful.” The White House, sensitive to Clinton’s long-standing complaints that Obama was politically inept, saw the gaffe as evidence that the former president had no clue how to operate in the new 24/7 media culture.

  The Fourteenth Amendment argument got a full hearing before the former University of Chicago constitutional law professor. Lawyers explained that Section 4 of the Amendment, ratified in 1868, referred to special Civil War obligations and that the Supreme Court would not likely apply them to a modern-day political crisis. That was good enough for the president. When told that he would win the political argument by taking a bold stand, Obama snapped, “We can’t purposely tank the economy to make our point.” Even a miraculously favorable ruling from the Supreme Court would come weeks after a constitutional crisis had been laid atop a debt ceiling crisis, by which time there wouldn’t be much of an economy left to save.

  The end of July, Valerie Jarrett remembered, was the nadir. With friends telling him to ignite a constitutional crisis and enemies cavalier about default, he felt trapped.

  AFTER THE COLLAPSE of the Grand Bargain on July 22, it wasn’t clear there was enough time to avoid a catastrophe. Obama figured the best way to move fast in the thirteen days before the default was to have Biden and McConnell, who had stayed in touch throughout, hammer out a deal to save $2.4 trillion. That was more than enough to cover Boehner’s consistent bottom line, which was that the cuts must always be equal to or greater than any debt ceiling increase. After much back-and-forth among Boehner, Pelosi, Reid, McConnell, and the White House, the parties agreed on $1.2 trillion in ten-year spending caps (basically slowing the growth of spending) and authorized the creation of a supercommittee to find the other $1.2 trillion. If the twelve-me partner, Russ Schriefer, amvmber supercommittee couldn’t agree by November 28, automatic cuts would be “triggered.” Under a quarter-century-old budget mechanism, a process of “sequestration” would then kick in, the details of which became the subject of haggling for most of the next eighteen months.I

  Sequestration was an eye-glazing abstraction in the country, but it quickly became a Washington obsession, the equivalent of arguing over the tailoring of a straitjacket. With $600 billion devoted to automatic cuts to important domestic social programs and other functions, the White House assumed the other $600 billion would be obtained through automatic tax hikes. The whole idea was to make the trigger as uncomfortable as possible to compel more reasonable budget decisions. But continued Republican phobia about tax hikes was such that it couldn’t even be included as a bogeyman. The White House was amazed that the GOP preferred to trigger $600 billion in defense cuts. Republicans figured they would shift those cuts to the domestic side if they won the election. Defense Secretary Leon Panetta and others assured the White House that if Obama won, defense contractors would successfully pressure Republican lawmakers for a deal that protected the Pentagon from the knife. This was a major miscalculation, though that wasn’t clear until early 2013, when Republicans blithely let the defense cuts go into effect.

  For days it looked once mo
re as if Boehner couldn’t deliver his caucus. As tension mounted, Obama again crossed swords with Cantor. This time the issue was what was known as the “second vote” on raising the debt ceiling, which would have taken place right in the middle of the 2012 campaign, when Obama could least afford to look weak once more. Republicans loved the way the summer had gone and wanted one more showdown before the election. Obama, who knew the only way out of a second crisis would be deep entitlement cuts, was adamant on this point: He would veto any agreement that included a short-term deal on the debt ceiling. He dug in hard with his bottom line: No second vote, no more hostage taking. Or, as his staff liked to say, This shit must stop!

  Boehner described the president in a late-night call as “moaning and groaning and whining and demanding” as he delivered his veto threat. Obama denied that account to Bob Woodward but acknowledged, “I was very angry about how he [Boehner] had behaved” and deeply concerned about a default in five days’ time.

  As he complained glumly to aides, Obama tried to think of analogies for what the Republicans were doing. Imagine that in 2007 Nancy Pelosi had told President Bush, “Pull out of Iraq now or we’ll default.” Geithner had his own analogy. “They’re arsonists,” he said one day at the White House. “Incompetent arsonists,” Dan Pfeiffer deadpanned.

  Fortunately for Obama, McConnell was already on record supporting an end to debt ceiling blackmail, at least in the short term, which forced the House’s hand. Obama and Boehner congratulated each other on the phone and on August 1 the Budget Control Act of 2011 passed both houses of Congress. No one in either party was happy with the result. Democratic Congressman Emanuel Cleaver called it a “sugar-coated Satan sandwich.”

  WASHINGTON HAD ESCAPED economic the twentieth century, month Armageddon thanks only to a balky Rube Goldberg contraption that kicked everything down the road. The feeble effort, reflective of deep political dysfunction, led Standard & Poor’s on August 6 to downgrade the U.S. government’s credit rating from AAA, where it had been since the ratings began in 1941, even though the ability of the strongest country in the world to pay its bills was never in question. A credit agency disgraced during the 2008 economic crisis now spread the bad feeling a little farther, a move that was both unwarranted and somehow appropriate.

  The downgrade was sour news for the U.S. economy, already buffeted by ill winds from the European Union. On August 8 the Dow dropped 634 points, with consumer confidence plunging and the job market freezing in place. For business, confusion and uncertainty are far bigger disincentives to investment than marginally higher taxes and slightly more regulation. But most of the gloomy predictions by conservatives turned out to be wrong. The downgrade “hurts people. You know, car loans, home loans, all these things are gonna go up,” Paul Ryan said. This received wisdom—the economic basis for the Ryan Plan and the entire GOP antigovernment agenda—turned out to be false, as the failure to cut spending in the short term had no discernible impact on interest rates, which stayed low.

  After it was over, Obama said he was convinced that Boehner sincerely wanted an agreement but just couldn’t get anyone else in the Republican leadership to come along. Pete Rouse wasn’t so sure. “I personally think we were a little naïve,” he said when the wounds were still fresh. “Boehner never made a serious effort to close the deal.” Rouse was struck by the president’s idealism, even when he had been kicked in the teeth. Obama still believed that, at heart, politics was about people doing what they thought was right for the country. “He believes he can convince anyone with the power of his mind that he’s not a purist and is willing to compromise,” Rouse said later.

  The debt issue was too complicated for most Americans, who cared much more about jobs. But in 2011 it became a surrogate for the deeper and, for Democrats, more dangerous question of whether the government could do anything. Heading into 2012, the answer seemed to be no.

  ON AUGUST 4, 2011, Obama’s fiftieth birthday, the Dow plunged more than 500 points, its steepest decline since before he took office. U.S. and European investors were deeply anxious about the failure of Washington to fix its economic problems.

  Amid the bad economic news, a resilient Obama celebrated his birthday at a celebrity-filled party at the White House. Obama showed no sign of being demoralized by recent events. Valerie Jarrett said he had as much fun as at any time since his wedding. As the evening wore on, the music changed and guests started doing the Slide and the Dougie. “I felt like I died and went to black heaven,” Chris Rock said later. “Think about this fucking moment: A bunch of black people doing the fucking Dougie in the house that slaves made.”

  The first family retreated to Camp David for a much smaller celebration. It was, per the president’s wishes, an all-sports weekend. He and nine male friends competed in every contest available, from basketball to bowling to air hockey. It was mostly a mix of old friends from Hawaii and Chicago and included only two members always said the same thing: was unB of his staff, Jarrett and Reggie Love.

  If the president was down, he didn’t let on. At one point, Jarrett realized he was comforting her, bucking her up. His friends vented for him. While none wanted to spoil the weekend by getting too angry, they were all quietly furious on his behalf. What was the deal with S&P? The ratings agency even managed to mess up the numbers when announcing the downgrade. You would have thought they would cross their t’s and dot their i’s before announcing something so momentous, and, for the birthday guests, so unpatriotic. John Rogers, a Warren Buffett protégé and prominent fund manager, passed the word that weekend that Buffett thought the whole thing was ridiculous. If you’re a rich country with your own printing press, you can’t default, Buffett said. Rogers felt that the agency would never have downgraded the United States if Bush were president. It was only the enmity toward the president in the business community that let S&P feel free to do so.

  At the end of the summer, the president’s friends all used the same word to describe him: frustrated. Deeply frustrated. There were no histrionics, only a gnawing disappointment that left him pensive. He had simultaneously exasperated his base, lost to Republicans, and failed to sustain the recovery. His friends were disheartened and his enemies emboldened. Over the August recess he assessed his own performance and concluded he had been “timid.” Going forward, he would draw bright lines. “I may win or I may lose this election,” he told staff and friends who talked to him around Labor Day. “But I’m going to win or lose fighting for what I believe in.”

  OBAMA TRIED TO be stoic. David Plouffe thought he was “better suited for politics in Scandinavia than here,” by which he meant that he was a logical and unemotional person in an illogical and emotional capital. He undertook a rigorous assessment of what went wrong in the debt ceiling fiasco and concluded that he had been playing way too much of an inside game. He realized more clearly that he needed the American people behind him to get anything more accomplished. From now on, he would travel widely outside Washington and make sure the public knew that if taxes went up, it was because of Republican intransigence against his “balanced approach.”

  The first forays after the fiasco were not auspicious. At town hall meetings in Iowa, the president was peppered with questions—Why are you focused on the deficit instead of jobs? Why wouldn’t you compromise?—for which he had no good answers. On September 2 the August jobs report showed unemployment stuck at 9.1 percent and disturbing trend lines, with June and July jobs figures adjusted downward and the number of those “marginally attached to the labor force” up. The numbers weren’t nearly as bad as in early 2009, when the economy was losing 750,000 jobs a month. But that was on Bush. This was on Obama.

  Obama looked up and down at the report on his desk five times, squinting at it to make sure he was reading it was right. For the first time since World War II, the economy created no new jobs—neither job loss nor gain. Nothing. “How can this be zero?” the president asked. Plouffe thought it was the perfect metaphor for his predicament a year before
an election.

  His allies in the press were peeling off. At the end of the summer Obama grew perturbed at the

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  The Clown Car

  As bad as things were going for Obama, he had one big advantage: the opposition. Nearly a dozen different Republicans led in party polls at various points during 2011 and 2012, including such implausible candidates as a nasty right-wing congresswoman from Minnesota known for attacking the patriotism of her colleagues; a poorly informed former CEO of a pizza company with no experience in government; a snarling, pornography-fighting former senator from Pennsylvania who lost his seat in 2006 by 18 points; a disgraced speaker of the House whose former colleagues in his own party thought his erratic behavior and serial adultery made him unfit for high office; and a vulgar New York egomaniac with bad hair and a weakness for conspiracy theories. Each won a moment in the media sun that burned the Republican Party.

  Several of the candidates and potential candidates were more entertainers than active politicians. Three of them—Sarah Palin, Mike Huckabee, and Newt Gingrich—had contracts with Fox News that paid them handsomely to say outrageous and thus bankable things on a regular basis. (Gingrich had to give up his gig after entering the race.) The combination of the number of primary debates (twenty-two) and the entertainment value of the GOP’s new reality show spelled trouble for the party from the start.