The Republican who re-elected Obama
Bush appointee kept recovery on course
In 2008, President Obama owed his election, at least in part, to three people: Michael Jackson, Michael Jordan and Oprah Winfrey. They made it easier for whites to judge Obama on his merits and not by the color of his skin because these black cultural icons had come before him into every home in America.
It was harder for whites to hold Obama’s race against him when their sisters grooved to Michael Jackson, their brothers wanted to be like Mike and their mothers shared afternoons with Oprah Winfrey. These black celebrities prepared the ground for a black presidential candidate to ask whites for their vote.
Things have changed for Obama over the past four years. In 2012, Obama owed his re-election to just one man. He is white, grew up in the South and is a registered Republican. His name is Ben Bernanke, chairman of the Federal Reserve.
OBAMA STIMULUS STALLS
Obama’s initial effort to use fiscal policy to revive the economy failed. The $787 billion stimulus bill was too small to have more than modest effects. Its positive outcomes were undermined by state and local governments that cut spending and raised taxes to cope with their own budget crises. Then Republicans took over the House of Representatives, taking much of Obama’s spending power. But Bernanke was there to keep pushing the economy.
First, the Fed held down shortterm interest rates that apply, for example, to credit card debt and automobile loans. Wanting to do more, the Fed purchased about $2 trillion in government bonds, mortgagebased assets and other securities in three rounds of what is called quantitative easing. This pumped new money into the economy in order to reduce long-term interest rates, which apply to housing loans and other markets. Both put more money in consumers’ pockets.
Next, Bernanke signaled markets that they should anticipate low interest rates for as long as it took to reduce unemployment. Finally, he transformed the Fed into the lender of last resort. To avert financial panic, the Fed extended loans to banks and insurance companies that were about to collapse but were deemed too big and too interconnected to fail; offered loans to companies in exchange for stock; and guaranteed money market funds that underwrite short-term loans to businesses.
‘SOCIALIST’ GOP APPOINTEE
After learning that the Fed had committed to investment in the real estate, insurance, banking, automobile and other industries, Sen. Jim Bunning, R-Ky., complained, “I thought I woke up in France. But, no, it turned out it was socialism here in the United States.”
Bernanke’s treatment did not fully restore economic health, but problems eased. And when one compares how the U.S. economy has fared with others that suffered the same symptoms, the results are even more impressive. The U.S. avoided the staggering unemployment that afflicts Spain and Italy, and the dispiriting lack of growth that grips Britain and France. Its banks are in better shape than those in Germany and Japan. Despite having the smallest fiscal stimuli of any Western country, the U.S. economy boasts higher growth than almost all its rivals.
It is hard to imagine the electorate re-electing Obama without Bernanke’s aggressive use of monetary policy to spur spending and reduce unemployment. It is the reason why Obama was able to avoid the fate of otherWestern political leaders.
The financial crisis was like Superstorm Sandy, leveling governments and deposing the political executives voters held accountable. Obama was a rare survivor; his counterparts in Greece, Ireland, Spain, Portugal, the Netherlands and Denmark all went down with the ship.
In a sense, George W. Bush left Obama two gifts. In his first run at the presidency, Obama could run as an alternative to Bush’s failed policies. In his second campaign, he could take credit for Bush-appointee Bernanke’s solutions.