Welcome to Barack Obama's second Presidential campaign—this time, for his economic policy. Facing criticism from both sides of the political spectrum, President Obama and his aides unrolled a full-court press to persuade Congress, business, and the American public that its economic proposals contain both a big enough fix for the current crisis and the right priorities for long-term growth.
During the week, key aides fanned out across Washington to rally support for Obama's budget, stimulus spending, and financial-rescue plans. Obama takes his message on the road himself on Mar. 18, flying to Santa Ana, Calif., for a "town hall" meeting.
The push seeks to soothe growing concern from several quarters that the Administration is tackling too much, especially at a time when Obama has had to expend considerable political capital on nominees dogged by unpaid taxes and government investigations. Many interpreted the stock market's precipitous slide in the week leading up to Mar. 9 as a condemnation of the Democrats' ambitious Washington agenda.
On Mar. 13, the Chinese, with an estimated $2 trillion invested in U.S.-backed debt, questioned the wisdom of continuing to buy Treasuries in the face of mounting deficits. The same day, Republicans offered a blunter critique. The Administration's budget and stimulus packages is not so much a coherent proposal, Senate Minority Leader Mitch McConnell (R-Ky.) told reporters, but "a 30-year wish list of the liberal [wing]" of the Democratic Party. "I think he's bitten off too much," McConnell said.
But across town, others were raising the opposite fear: that Obama's economic agenda might not go far enough—that his stimulus package was too small, his foreclosure-prevention plan too complex, and his bank rescue misdirected—leaving the U.S. prone to a longer, deeper, and more wrenching recession. "In order for it to be done right, you need stronger medicine," Robert Kuttner, co-founder of The American Prospect, told attendees at a National Community Reinvestment Coalition conference.
Obama's Popularity: Use It or Lose It
Economics aside, Obama's political strategy is becoming clear: Seize the opportunity that the crisis, and his high popularity, offers him, and tackle multiple fronts both to accomplish as much as possible as quickly as possible, and to keep opponents off balance. "Their theory is that popularity is a very perishable commodity, and indeed it is," says Larry Sabato, director of the University of Virginia's Center for Politics. "That is especially true for Presidential popularity in crisis mode—use it or lose it. … It can't be conserved."
But aside from reviving much of the well-oiled campaign machine so familiar from the Presidential race, the push is also giving Americans a glimpse of the Administration's economic thinking, and the likely shape of policy decisions not yet unveiled.
Speaking to a largely sympathetic audience at the liberal Brookings Institution on Mar. 9, White House economic aide Christina Romer set the stage, drawing distinct parallels and contrasts between the current crisis and the Great Depression, which she studied as an economist at University of California at Berkeley. Romer, chair of the White House Council of Economic Advisers, largely hit refrains that became more familiar as the week progressed: Give the "biggest and boldest" fiscal stimulus package in the country's history—at close to 3% of gross domestic product in each of 2009 and 2010,—time to work.
Pulling back on government spending too soon could do serious harm, as Romer says fiscal restraint in the mid-1930s did, prolonging the Depression by two years. And tackling health care, energy policy, and education reform amid the crisis would at once go a long way to solving the chronic fiscal problems that swell the national debt, and also lay a solid groundwork for long-term recovery, but without fostering a cycle of bubble and bust.
Romer also suggested that the Administration may not be counting on the financial sector to recover on pace with the rest of the economy, noting the pattern that held as the Great Depression waned. "It was only after the real recovery was firmly established that the financial recovery really started to take hold," she said. And she hinted that the inflation fears spurred by the Administration's costly plans—nearly $800 billion in stimulus spending, more than $600 billion set aside for health-care reform, the potential for another $750 billion to be spent stabilizing the financial sector—might not be all bad, if they stave off a pernicious deflation that drives prices and business revenues down, and unemployment inexorably up.
Trying to Reassure CEOs
Two days later, speaking to members of the influential Business Roundtable—chief executives from major U.S. corporations—Obama returned to the need to address health care, energy, and education even if it initially strains the federal budget. "I'm not choosing to address these additional challenges just because I feel like it, or because I'm a glutton for punishment," he said in prepared remarks. "I'm doing so because they're fundamental to our economic growth and ensuring that we don't have more crises like this in the future."
He also offered reassuring words to the CEOs on some of his most controversial budget proposals, including a "cap and trade" plan to sell companies the right to emit greenhouse gases, raising federal revenue and allowing those firms to buy and sell the rights, in the hopes of driving down emissions. "We are not going to be able to move this in an effective way without partnership with the business community," Obama told the CEOs. "We're going to work to make sure that it works for you."