Monday, November 03, 2008

The Next New Deal

A long and VERY interesting article by John Heilemann (who's consistently written for NY Magazine some of the best stuff I've read in this election cycle) on the promise and perils for Obama during the transition and beyond.  Here's an excerpt about the transition planning (I've bolded and underlined the most interesting point in the article):

Leading that effort is John Podesta, CAP's president and chief executive, whom Obama tapped in the last few months to head up his transition. That Podesta should find himself in this position is ironic, even mildly odd. A former White House chief of staff to Bill Clinton, he was a loyal supporter of his wife during the Democratic primaries; much of the work he is doing now he expected to be doing for her. Around him are a bevy of Clinton alums, now toiling on Obama's behalf: Leon Panetta, Bob Rubin, Gene Sperling, Carol Browner. Odder still, the transition that Podesta is designing is explicitly modeled not on Clinton's but on Ronald Reagan's. Indeed, Clinton's transition is said by some involved to be a kind of anti-model for the Obama endeavor.

Then again, on second thought, maybe it's not so odd—the Clinton transition was famously, fantastically dysfunctional. His pledge to pick a Cabinet that "looks like America" yielded a process riven by identity politics, ravaged by interest-group pressure. Thoughts of reaching across the aisle—Condi Rice was considered for the position of U.N. ambassador—were quickly abandoned. The whole thing was haphazard, disorganized, painfully slow, and politically maladroit. (Zoë Baird, anyone?) There was no real plan for what to do on taking office, just a memo outlining the first two weeks, and even that was ignored. Gays in the military took center stage, along with the signing of a handful of executive orders related to abortion. "There was an overall appearance of chaos," recalls an early Clinton official. "All of us on the team were at times witting, at times unwitting co-conspirators in the undoing of his centrist, New Democrat credentials."

It should come as no surprise that No Drama Obama wants his transition to be nothing like that of Chaotic Clinton's. Already his pre-transition is exhibiting the kind of order and discipline (and lack of leaks) that have been the hallmarks of his campaign. With the help of some 50 old Washington hands, Podesta and his people are drafting a book-length transition blueprint, with agency-by-agency policy agendas, including day-one, day-100, and year-one objectives, too. Résumés are already being collected. Daily conference calls and meetings occur. Of Obama's pre-transition planning—and, in fact, of McCain's as well—Clay Johnson has said, "The amount of work being done before the election, formal and informal, is the most ever."

Obama advisers make no bones about why they see all this as essential: Given the unusually crisis-plagued environment into which Obama will be stepping, he will want to move quickly, especially when it comes to selecting his Cabinet. Almost certain to come first, perhaps within days, will be his economic and national-security teams. And with those choices, they say, he will want to send a message of centrism and bi-partisanship. It's conceivable that Obama will ask Bob Gates to stay on as Defense secretary; Chuck Hagel, too, might find a place high in the administration. But although there has been chatter that Obama might also retain Hank Paulson at the Treasury, the inside betting is on a Larry Summers encore. "They're gonna want somebody who knows the building, knows the economy, has been confirmed before and been advising them on economics," says the former Clinton aide. "I'd be flabbergasted if they chose somebody else."

Once the Cabinet is in place, Obama will turn to congressional relations, and here too the contrast with Clinton is likely to be pronounced. From the get-go, WJC and the Democratic leaders in the House and the Senate were at loggerheads. The old bulls regarded him as an outsider, an interloper, a president elected with just 43 percent of the vote—as someone to be pushed around. They informed him in no uncertain terms that they wouldn't help him pass his promised package of political reforms. They pressured him (along with his wife) to put health-care reform ahead of welfare reform, a fateful blunder.

Not that dealing with a pair of institutions led by Nancy Pelosi and Harry Reid will be any kind of picnic. "They're incredibly weak leaders running a Congress with 12 percent approval ratings," one Democratic think-tank maven says. "They're not people with much of a record of, you know, actually getting things done." Making matters worse, Obama will be hounded constantly by the old-school liberal interest groups, with all their bottled-up desires and demands. The unions, the health-care groups, the teachers, and so on: Everyone will have their hand out.

Yet the very feebleness of Reid and Pelosi may work to Obama's advantage; they are much more likely to see their fates as bound up with his than Tom Foley and George Mitchell ever did with Clinton's. Obama's race, in a funny way, may make him less vulnerable to mau-mauing by the left. And the unconventional way he ran for office, the whole bottom-up movement thing, may grant him a degree of independence unique in modern history. "Personally, I think the depth of the Obama realignment is being underestimated," says the Republican media savant Stuart Stevens, who helped elect Bush twice. "They have basically invented their own party that is compatible with the Democratic Party but is bigger than the Democratic Party. Their e-mail list is more powerful than the DNC or RNC. In essence, Obama would be elected as an Independent with Democratic backing—like Bernie Sanders on steroids."

At the same time, whereas Clinton had to deal with a strong Republican adversary in Bob Dole and an ascendant one in Newt Gingrich, Obama will be facing off against an opposition party demolished in number, ideologically inchoate, rudderless and basically leaderless in the House and the Senate. "The Republicans," says the think-tank guy, "may very well be politically and intellectually decimated for ten years after this."

Which brings us back to the Reagan precedent and why Podesta and his team are using it as the preferred exemplar for Obama. The collapse of institutional conservatism that is about to unfold—that is, self-evidently, already unfolding—creates an opportunity not unlike the one that Dutch faced in 1980 to fashion a functional, and not merely theoretical, alternative to New Deal liberalism. How Reagan and his adjutants, notably his budget director, David Stockman, did that was by crafting a detailed package of tax and budget cuts and presenting it almost immediately to the new Congress in February 1981. Thus was born the Reagan revolution, and the rest, as they say, is history. That Obama plans to do something similar is already abundantly clear—the question is just what his revolution might turn out to look like.

And here's Rahm Emanuel on the legislative priorities:

Emanuel doesn't hesitate when I put the question to him. And his answer is one to which attention should be paid for reasons beyond the obvious. Emanuel is more than one of the shrewdest, savviest, toughest Democratic pols of his generation. He is a close friend and confidant of his party's nominee and certain to be a pivotal player in putting meat on the bones of Obama's campaign mantra of change, change, change. Obama's chief strategist, David Axelrod, plays an identical role for Emanuel, whose congressional campaigns he has engineered and whose maneuvers in the House he has often guided from afar. Rarely does a day pass by in which the two men do not speak. The three-way mind-meld is nearly total.

"My view is that we gotta be the party of reform," Emanuel begins when I reach him on his cell phone. "There are four reforms. There's financial-regulatory reform, tax reform, health-care reform, and energy. Regulatory will kinda come down the chute fast. Tax reform will take a little longer, because it's not until 2010 that Bush's tax cuts expire. Energy, you can do some things immediately. And with health care, you've got the children's health insurance as the first piece of a series of things you gotta do."

Emanuel's reform agenda is helpful because it's clarifying—in terms of timing, in terms of priorities, and in terms of suggesting where Obama's plans and the appetites (and political tolerances) of congressional Democrats intersect. In the early phases of the nomination contest, Obama was pilloried, and fairly, for a maddening vagueness on policy, for being long on inspiration but worryingly short on specificity. But over time, Obama has developed a litany of proposals laundry-listy enough to make Hillary Clinton proud—and pricey enough to have deficit hawks screeching at the moon. He's pledged $60 billion in infrastructure spending, $80 billion for middle-class tax cuts, $150 billion for a green energy/jobs program, along with a raft of tax credits for college tuition, child care, clean cars, and, most recently, small businesses.

But as Obama's plans have unspooled over the past year, the economy has gone from pre-recessionary to perhaps pre-depressionary, the financial system began its epic meltdown, and the bailout of the banking system has imposed a gargantuan, unforeseen cost on the federal coffers. What had been expected to be a $450 billion deficit next year is now going to clock in, according to the latest estimates by the Congressional Budget Office, at $750 billion, minimum. (The Committee for a Responsible Federal Budget pegs it at $1 trillion.)

Deficit numbers like that, approaching 7.5 percent of GDP, are enough to put a scare even into someone as unflappable as Obama. In a recent interview with Rolling Stone, he was asked what would be the hardest part of Bush's legacy to undo. "The budget," Obama answered without hesitation. "We are going to be in a massive hole … Digging ourselves out of the fiscal mess we're in is going to be a big, big challenge, and it's going to require some tough decisions that will not always be popular, particularly when there's going to be a lot of pent-up energy among Democrats. If I win, every member of Congress on the Democratic side, and some on the Republican side, is going to have ideas about pressing needs and worthy programs. Trying to set some very hard, clear priorities is going to be tough."

Already Obama is hinting strongly at what his priorities will be. Consistent with what Emanuel told me, Obama now informs Time's Joe Klein that endeavoring to spark "a new energy economy [is] going to be my No. 1 priority when I get into office." At the same time, Obama will surely press immediately for his middle-class tax cut, which happens to be sound economics in recessionary times and also irresistible politically.

What isn't likely to happen anytime soon is Obama's version of near-universal health care. Even before the financial crisis hit, a number of senior Democratic lawmakers were quietly expressing doubts about trying to fast-track the issue. "I'm not sure we have a consensus for health care, even on our side," one Democratic senator tells me. "Remember back in 1992, when Pat Moynihan told Clinton to do welfare before health care and Clinton didn't listen? That's a lesson Obama should pay heed to—health care is a quagmire."

More problematic for Obama may be the need to abandon his tax hikes on the wealthy. The notion of raising taxes on anyone in the teeth of a precipitous downturn will meet with stiff resistance from many sides. Yet without the revenues provided by such measures, it's difficult to fathom how Obama will pay for even a fraction of his proposals without pushing the deficit from the realm of the merely terrifying to the absolutely crushing.

Some Democrats will say—are already saying—damn the deficit, full speed ahead. They are talking about a new New Deal, about the revival of Keynesian pump-priming. On the other side, however, stand the fiscally conservative House "blue dogs," without whose support Obama will find it nearly impossible to move his agenda through the lower chamber. His outreach to that group—including his embrace of pay-as-you-go rules for budgeting—has been ardent, and if he were to spurn them now, the political consequences could be dire.

Obama plainly sees this conflict coming, this potential replay of the Clinton wars between deficit hawks and public-investment liberals. He has moved adroitly to give himself maximal running room. "I was heartened to see that page-one profile the other day on the role of Paul Volcker in The Wall Street Journal," says a former Clintonista. "Some of these left-right tensions are going to be mitigated by the fact that Obama has built himself such a loud cheering section among the fiscal-responsibility crowd."

Some, but not all. If the economic crisis worsens in the way that so many in the financial sector are now certain that it will, Obama will be faced with choices much more wrenching than he now imagines—choices that are likely to pin him down squarely on an ideological spectrum that he has labored mightily to transcend.


The Next New Deal

The huge opportunities—and huge risks—of a possible Obama administration.

On a bright, brisk, fat-pumpkin morning in mid-October—the kind of morning you would call glorious were the economy not cratering, the financial system not imploding, the Dow not tumbling at this very moment to its lowest depths in more than five years—Barack Obama is on the courthouse steps in Chillicothe, Ohio, calmly and coolly enlisting the past in the service of claiming the future. "The American story has never been about things coming easy," Obama declares. "It's been about rising to the moment when the moment is hard … about rejecting panicked division for purposeful unity; about seeing a mountaintop from the deepest valley. That's why we remember that some of the most famous words ever spoken by an American came from a president who took office in a time of turmoil: 'The only thing we have to fear is fear itself.' "

Obama had been toying with vague FDR allusions for the past three days, but now he's decided to lay his cards on the table and seize the mantle explicitly. With the specter of a full-blown depression looming, the Age of Roosevelt—the campaign he ran in 1932, the challenges he faced upon assuming office, the "bold, persistent experimentation" he called for and the New Deal edifice he erected in response—is much on the minds of the nominee and his inner circle. "A lot of people around Barack are reading books about FDR's first hundred days," says a member of Obama's kitchen cabinet. "It's a sign of the shift that's going on emotionally: from being on this improbable mission to believing, Hey, we're going to win."

Until recently, talk like that would have brought forth invocations of unhatched chickens from countless Democrats. From the moment it became clear last spring that Obama would be the party's standard-bearer, the excitement over what he represented has been twinned with a gnawing dread that his astonishing ride would somehow come to a crashing end a few yards short of the White House. That America would prove unready to elect a black president. That the Republicans would once again work their voodoo on the electorate. Or that Obama would choke in the clutch—that, far from being the next FDR or JFK, he would turn out to be the reincarnation of George McGovern or Mike Dukakis or John Kerry.

But as the outcome of the race has begun to seem more certain with each passing day—with Obama's lead in the polls healthy and showing few signs of diminishing, with John McCain's campaign listing aimlessly and lapsing into rank self-parody, with Sarah Palin devolving into a human punch line—Democrats are slowly, haltingly allowing themselves to believe that victory is truly within their grasp, and hence to contemplate what comes next. Transition. Inauguration. Those first hundred days. Maybe even, perchance, with augmented majorities for the party in both the House and Senate all but in the bag, the dawning of a spanking-new era of Democratic dominion.


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