Seeking real change? Recall this mistake
In 2009, Barack Obama was the most powerful newly elected American president in a generation. Democrats controlled the House and, for about five months in the second half of the year, they enjoyed a filibusterproof, 60-vote majority in the Senate. For the first six months of his presidency, Obama had an approval rating in the 60s.
Democrats also had a once-ina-lifetime political opportunity presented by a careening global crisis. Across the country, people were losing jobs and homes in numbers not seen since World War II. Just as in the 1930s, the Republican Party’s economic policies were widely thought to have caused the crisis, and Obama and his fellow Democrats were swept into office on a throw-the-bums-out wave.
If he’d been in the mood to press the case, Obama might have found widespread public appetite for the sort of aggressive restructuring of the U.S. economy that Franklin D. Roosevelt conjured with the New Deal. One of the inspiring new president’s advisers even hinted that was the plan: “You never want a serious crisis to go to waste,” Rahm Emanuel, Obama’s chief of staff, said days after the 2008 election.
And then Obama took office. And rather than try for a Rooseveltian home run, he bunted: Instead of pushing for an aggressive stimulus to rapidly expand employment and long-term structural changes in how the economy worked, Obama and his team responded to the recession with a set of smaller emergency measures designed to fix the immediate collapse of financial markets. They succeeded: The recession didn’t turn into a depression, markets were stabilized, and the U.S. began a period of long, slow growth.
But they could have done so much more. By the time Obama took office, job losses had accelerated so quickly that his advisers calculated the country would need $1.7 trillion in additional spending to get back to full employment. But Obama’s closest advisers declined to push Congress for anything more than $800 billion, which they projected would reduce unemployment to below 8 percent by the 2010 midterms. They were wrong; the stimulus did reduce job losses, but it was far too small to hit the stated goal.
Obama’s advisers also rejected ideas for large infrastructure projects, and they declined to push for new leadership on Wall Street, let alone much punishment for the recklessness that led to the crisis.
Obama “chose an economic recovery plan that benefited educated, well-off people much more than the middle class,” writes Reed Hundt, a Democrat who is a former chairman of the Federal Communications Commission, in his recent history of Obama’s first two years, “A Crisis Wasted.”
It is true that Obama succeeded in passing a groundbreaking universal health care law. It’s also true that over the course of his presidency, inequality grew, and Obama did little to stop it. While much of the rest of the country struggled to get by, the wealthy got wealthier, and multimillionaires and billionaires achieved greater political and cultural power.
What’s the point of returning to this history now, a decade later? Think of it as a cautionary tale — a story that ought to rank at the top of mind for a Democratic electorate that is now choosing between Obama’s vice president and progressives like Bernie Sanders or Elizabeth Warren, who had pushed Obama, during the recovery, to adopt policies with more egalitarian economic effects.
Not only did Obama’s policy ideas produce lackluster economic results (at least in that they failed to hit their stated goals), they failed politically, too. The sluggish recovery in Obama’s first years led to a huge loss for Democrats in the 2010 midterms. Obama was reelected in 2012, but during his time in office, Democrats saw declining national support — and in 2016, of course, they lost the White House to Donald Trump, an outcome that Warren has tied directly to Obama’s early economic decisions. Why had Obama chosen this elitist path? Another new book, “Goliath: The 100-Year War Between Monopoly Power and Democracy,” by anti-monopoly scholar Matt Stoller, provides a deeply researched answer. It boils down to this: Obama, like Bill Clinton before him, was the product of a Democratic Party that had forgotten its history and legacy. For much of the 20th century, Democrats’ fundamental politics involved fighting against concentrations of economic power in favor of the rights and liberties of ordinary people. “The fight has always been about whether monopolists run our world, or about whether we the people do,” Stoller writes.
But in the 1970s, ’80s and ’90s, as Stoller explains, Democrats altered their vision. They abandoned New Deal and Great Society liberalism in favor of a new dogma that came to be known as neoliberalism — a view of society in which markets and financial instruments, rather than government policy and direct intervention, are seen as the best way to achieve social ends. Obama’s biggest ideas were neoliberal: The Affordable Care Act, his greatest domestic achievement, improved access to health care by altering private health-insurance markets.
The long history of Democratic populism is unknown to most liberals today. Only now, in the age of Sanders and Warren are we beginning to relearn the lessons of the past. For at least three decades, neoliberalism has brought the left economic halfmeasures and political despair.