At one point in A Crisis Wasted, the author compares the inaugural speeches of Franklin Roosevelt and Barack Obama, two Democratic presidents who took office at times of epochal economic crisis.
While Roosevelt bemoaned the “host of unemployed citizens fac[ing] the grim problem of existence” and promised that his “greatest primary task is to put people to work,” Obama declined to stress joblessness or what was then called “public works.” While Roosevelt assailed the “money changers” over “their stubbornness and their own incompetence,” Obama attacked “recriminations and worn-out dogmas” while extolling “risk-takers,” “doers,” and “makers of things.” Roosevelt “unhesitatingly” assumed leadership over what he called the “trained and loyal army” of the American people, and threatened to ask Congress for “broad executive power to wage a war against the emergency,” as if it was a foreign power. Obama took a philosophical tack, claiming the “stale political arguments” of the past were over, deciding that the market’s “power to generate wealth and expand freedom is unmatched” and that the only question about government was “whether it works.”
“In the expression of leadership,” the author concludes, “Roosevelt’s speech resembles Trump’s inaugural address in 2017.”
These aren’t the words of a Trump supporter, or even a Republican. Nor do they come from an advocate of some kind of Red-Brown alliance. The author in question is Reed Hundt, a high-level Democratic Party apparatchik — Al Gore’s longtime advisor (and high school classmate), Bill Clinton’s former FCC commissioner, a McKinsey consultant and a member of both the Clinton and Obama transition teams.
Hundt is, in other words, a card-carrying member of the Democratic establishment. And yet he’s written a book witheringly critical of not just the Obama administration’s handling of the 2008 financial crisis and its aftermath, but of the Democratic establishment’s response to it — an insider’s step-by-step account of all the mistakes, false assumptions, and timidities that, over Obama’s eight years, helped deliver the electorate into the hands of Trump.
These flaws were baked in. As Hundt makes clear, despite Hillary Clinton’s primary loss, the Obama presidency essentially became the second Clinton administration that she and her family’s entourage had been planning for, with Obama surprising John Podesta by tapping him to lead his transition. Podesta staffed top posts with Clintonite neoliberals, ensuring their ideology predominated in the administration. This was compounded by the thinness of Obama’s own bench of personnel, with a bemused Podesta remarking, “He travels light.”
“Because people are policy, he therefore became a Clinton-style neoliberal,” writes Hundt. “He no longer pursued his own tentatively progressive agenda.”
That agenda had at one point been surprisingly robust compared to what came after. Hundt points to a March 2008 speech Obama delivered at New York’s Cooper Union in which he called for helping homeowners refinance their home loans, changing the law to allow mortgage reductions (known as “cramdown”) as well as increased spending for education, broadband, and college tuition reductions, and having the government “put Americans to work” in green jobs and rebuilding infrastructure. That agenda all but disappeared by the end of the year, with Obama’s Clintonite advisors electing to grant only tepid funding to some of these measures.
Treasury Secretary Tim Geithner, chosen precisely for the Wall Street-friendly credentials that would reassure the finance sector, was almost monomaniacally focused on protecting the interests of banks. Office of Management and Budget director Peter Orszag was a deficit hawk who wanted to put fiscal policy on a fast track toward a balanced budget. Larry Summers, chair of the National Economic Council, believed too much debt was the country’s economic problem, opposed infrastructure investment, and habitually dialed back proposals based on what he believed could pass Congress. Rahm Emanuel was, well, Rahm Emanuel.
It was they and others like them who systematically scaled down Obama’s ambitions, narrowing the range of possibilities available to the president, and ensuring the road to recovery would be longer, slower, and ultimately incomplete. Expanding unemployment compensation was ruled out. Long-term infrastructure projects were rejected, unless they were smaller, “shovel-ready” ones that could “get into the economic bloodstream as quickly as possible.” Geithner convinced the team the amount of bailout money was nonnegotiable, but the stimulus total was lopped down again and again to the point of just barely being adequate. They wouldn’t pursue a more ambitious size without “supply-side” measures like tax cuts, and that would make it impossible to balance the budget later on. Besides, a stimulus that was too big “could spook markets or the public.”
Sometimes the opposition to robust measures was nakedly ideological. Geithner and Summers opposed cramdown, or allowing bankruptcy judges to reduce the size of a mortgage, on the basis of property rights, worrying that ignoring the sanctity of contracts would undermine confidence in the lending system. When Fannie Mae CEO Herb Allison proposed using eminent domain to condemn and take over fraudulent loans at a fraction of their face value and lowering their interest rates — an idea supported by academics and already successfully trialled with General Motors and Chrysler — the Obama team demurred, afraid to let the government meddle in the private sector in such a major way. As Allison recounts, the thinking was: “We don’t want to appear as though we’re socialists.” This isn’t the only time you’ll read that sentence in Hundt’s book.
It’s ironic that Obama’s defenders point to Republican obstructionism to explain away his administration’s inadequacies, when Hundt makes clear that the primary source of obstructionism was coming from inside the house. Obama’s outsourcing of his administration’s transition process to Clintonites, combined with his lack of commitment to a progressive political vision, hemmed him in and undermined the economic recovery, particularly since his advisors underestimated the scale of the crisis. David Axelrod candidly admits being shocked to hear a second Great Depression was a possibility, believing the first had been simply “something that is part of history” and not “something that could reoccur.”
Hundt doesn’t let Obama off the hook for his response to Republican obstructionism either. He acknowledges the president had limited options due to an obstinate GOP and a host of conservative Democrats. But he faults the cool, calm, collected Obama for not using the bully pulpit more aggressively to sell the public and Congress on his agenda. He chides him for failing to tie the stimulus to any grander overarching program or vision, like fighting climate change or rebuilding infrastructure. When “Blue Dog” Democrat Evan Bayh torpedoed Dick Durbin’s cramdown legislation, he faced no opposition. “Obama did not intervene,” notes Hundt.
What we might consider Obama’s most admirable personal qualities — his preternatural calm, his even temper — ended up being his greatest weaknesses in the field of politics.
In the end, Hundt argues, Obama did just enough, and just in the nick of time, to secure reelection. But the recovery he presided over was lopsided and brittle enough to engender a voter backlash that Trump seized on. It wasn’t so much that Trump won the votes of disillusioned Obama voters (though he did win some of those in strategically crucial places) but rather that Obama’s voters couldn’t muster the enthusiasm to turn out again, a point confirmed by on-the-ground reporting.
Meanwhile, Hundt takes care to show us what a more robust response to the crisis could have looked like. China’s fiscal stimulus, undertaken while Obama officials were afraid of seeming too socialist, amounted to nearly $600 billion, or 15 percent of the country’s economic output over two years. Had Obama tried to match this, his stimulus would have totalled $2 trillion, a number that was never even up for discussion. It’s doubtful Obama would have ever gotten something on this scale though Congress; but the point is, he never tried.
A Dent in the Dam
Hundt’s book is being published at a fitting time, when Democratic-aligned pundits and, arguably, a large part of the Democratic electorate, yearn for a return to the “normalcy” of the Obama years. For rank-and-file voters exhausted by Trump and not always deeply engaged in the day-to-day tussle of politics, this isn’t so surprising. But for liberal pundits, whose job is to follow politics closely and make sense of it for the public, this is inexcusable. Hundt’s book shows why the current tendency of some sectors of the chattering class to pine for Obama’s return to the White House is so misguided.
The Obama administration that came into power in 2009 was ill-equipped, temperamentally and ideologically, to carry out a break with the disastrous road of the previous decades. And while a few, including Summers, have reconsidered some of their original assumptions, there’s little sign that Obama or most of the Clintonites who staffed his presidency have done the same. Indeed, while Obama is reported to have privately lashed out at Hillary Clinton’s hapless campaign after her 2016 loss, he refused to acknowledge his own role in what happened, believing that he had left office with a “strong record and healthy economy” and there was “no way Americans would turn on him.”
But Hundt’s book is heartening because it shows that doubts are emerging about the fairy-tales the Democratic establishment has been telling itself. While Hundt’s arguments are hardly radical, it’s hard to imagine a top Democratic insider railing against the “neoliberals” of the Obama administration before Hillary Clinton’s 2016 defeat. We can’t know when the dam will finally burst, but another dent is always welcome.