The president’s friends (and foes) on what prompted his lurch to the left—and whether it will work.
by Howard Kurtz October 2, 2011 10:00 AM EDT
The populist reincarnation of President Obama (/articles/2011/09/18/ron-suskind-s-confidence-men-shows-a-scared-president-obama.html) since Labor Day—with his stinging attacks on tax-coddled millionaires (/articles/2011/09/20/obama-s-deficit-reduction-tax-math-more-complicated-than-he-s-implied.html) , corporate-jet owners, and oil companies—emerged from a moment of reflection during a summer of discontent.
For months after the Democrats’ “shellacking” last November, Obama resisted bashing corporate America and the GOP as he had done so effectively as the “hope and change” orator in 2008 and as a young president who pushed through Congress an $800 billion stimulus, a universal-health-care law, and sweeping Wall Street reform.
But by the end of June, with the nation teetering near the brink of default and House Majority Leader Eric Cantor (/articles/2011/06/23/eric-cantor-departure-from-biden-budget-sessions-prompted-by-obama-boehner-talks.html) walking away from negotiations over a debt deal, the president summoned his top aides for a frank assessment of how to get back on track.
Senior adviser David Plouffe told Obama it was time to “draw some lines in the sand” by launching an aggressive assault on tax breaks for corporate high fliers and hedge-fund managers.
The president was energized, saying such loopholes were “indefensible” while spending was being slashed and that “this is a public argument we can and should win.” He tested the message with reporters soon afterward.
President Obama holds his American Jobs Act as he speaks in Denver on September 27, 2011., Mandel Ngan / AFP-Getty Images
Thus began a full-throated return to Obama’s populism, which had been muffled by frustrating attempts at bipartisanship and a stop-and-start effort with Republicans and the business community that one adviser says had become a “road wreck.”
At a meeting with his staff to draw up a new jobs bill, Obama warned against playing small ball. “I do not want the first filter to be whether it can get the support of House Republicans,” he told his staff.
Obama’s revised strategy came into full focus in a fiery speech last month in which he laid out a $450 billion plan clearly aimed at generating middle-class jobs while targeting millionaires and big business for tax hikes.
That strategy may do little to break the political paralysis gripping Washington or solve the riddle of joblessness, but it has returned the president to a message and style that fits more comfortably than his long, and often awkward, courtship of corporate America and its Republican allies in Congress.
At first Obama interpreted the midterm election losses as a call from voters to engage the business world and compromise with Republicans. The election results made clear that voters—especially independents—were angry with Obama for failing to deliver the jobs he had promised. The administration responded by looking for new ways to stimulate demand and ease regulatory burdens that business executives claim are keeping them from reinvesting stockpiles of cash and hiring more workers.
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Obama met privately with CEOs at Blair House—across the street from the White House—in December 2010. He was told bluntly but politely that big business wanted fewer regulations, new tax incentives, and the resurrection of long-delayed trade agreements.
Obama soon trekked across the street again to the U.S. Chamber of Commerce to make amends with a pro-business lobby that had been the object of many Democratic attacks. “Maybe we would have gotten off on a better foot if I had brought over a fruitcake when we first moved in,” Obama quipped.
By February, the president was reaching out to Silicon Valley’s entrepreneurs in a private dinner that reaffirmed the disconnect between Obama’s approach and what business titans believed was necessary for a lasting recovery.
At a white-clothed table in the California dining room of venture capitalist John Doerr, Obama dined with a dozen gurus from Silicon Valley’s hottest companies. Flanked by Facebook’s Mark Zuckerberg on his right and Apple’s Steve Jobs on his left, Obama was among friendly faces—Oracle’s Larry Ellison across from him, along with the chieftains of Google, Yahoo, Netflix, and Cisco—eager to offer advice on solving the maddening riddle of joblessness and economic decline.
The guests urged Obama to offer major companies that have kept overseas profits offshore a one-time tax holiday to repatriate their earnings and pay a rate well below the normal 35 percent corporate tax. The payoff, the executives argued, would come in reinvestment in capital projects, R&D, and new hiring, as well as new distributions to stockholders and investors—essentially a stimulus of private money that also would fill the U.S. Treasury with elusive tax dollars. (The firms represented in the room held more than $100 billion offshore, with Apple alone sitting on $47.6 billion.)
The president politely listened, then edged toward an objection.
“He starts to say, ‘Here are a few of the concerns I’ve heard. It didn’t create many jobs last time,’?” says one person familiar with the event, who spoke only on condition of anonymity because the event was closed to the press. (Congress and the Bush administration tried a similar tax incentive in 2005.) “It wasn’t a hard sell and it wasn’t a pushback. It was a gentle discussion of each side’s talking points.”
The tone was far different from Obama’s more bombastic approach toward business in 2009. “The one time I saw him visibly angry, it was over the bank bonuses during all the bailouts,” says former White House economist Jared Bernstein. “It really rankled him.”
Bringing on former JPMorgan Chase executive Bill Daley as chief of staff last January didn’t hurt his relations with business. But one challenge remained: Obama’s Chicago confidant Valerie Jarrett had been acting as a liaison to the business community from the beginning—with few positive results. “She tells us whatever she thinks you want to hear and then there is no follow-up,” claims one business executive with frequent contact with Jarrett. “There is lots of happy talk ... but then nothing comes of it.”
AOL founder Steve Case counters that Jarrett has been “very responsive” to executives, often emailing back within minutes, but concedes progress has been slow. “The first two years the business community felt the White House team didn’t really engage in business and not enough people on the team had the kind of experience we really needed. We thought they were tone deaf,” he says.
Even some of Obama’s staunchest supporters acknowledge a perceived gap between promise and performance. They see a president who underestimated the challenge of the economic recovery and whose background as a law professor lacking real-life business experience left him unprepared to improvise on policy in a productive way.
It fell to top environmental adviser Carol Browner, for instance, to tell the president-elect early on why he couldn’t spend much more than $3 billion building a high-tech electrical grid. Browner knew all the obstacles, that local laws would have to be circumvented and permits obtained. You can’t just build power wires where you want, she explained to a frustrated Obama.
Andy Stern, who as the longtime head of the powerful SEIU union in 2008 relentlessly fought for Obama’s candidacy, sees a president who until recently tried to solve economic problems with abstract ideas rather than pragmatic solutions.
“The administration has suffered from the large macroeconomic theories of Larry Summers and Tim Geithner that look more at formula and financing than day-to-day job creation,” says Stern, an advocate of the repatriation holiday. “They thought they had done what they needed to do, and they were wrong.”
Democrats in Congress add to the indictment, charging that the president failed to sell his successes more aggressively, letting the opposition define them. “I think you need to talk about how poorly they do on message,” says House Minority Leader Nancy Pelosi of the president and his advisers. “They can’t see around corners; they anticipate nothing.”
In response to such criticism, former White House economic adviser Austan Goolsbee says the president is contending with adversaries who are willing to go to extraordinary lengths to ensure his failure. “Some of his opponents didn’t seem to care whether what they were advocating seemed to do grievous harm to the economy if they could get some political win out of it,” Goolsbee says.
Other defenders note that Obama inherited a financial disaster after the Wall Street meltdown. “A lot of things were done right, and we avoided an economic calamity,” says Peter Orszag, Obama’s former budget director. “One of the mistakes was to put much too little weight on the hard slog that typically follows financial slumps.”
But officials concede the administration’s frequent mantra—things could’ve been worse—isn’t exactly bumper-sticker material. “When people see really dark clouds, no matter how good a line in a speech is, you’re not going to convince them the sky is blue,” Plouffe says.
Press Secretary Jay Carney also downplays the importance of spin, saying that the president wields “the biggest megaphone there is in politics, but it doesn’t have the reach it once had” in a media world flooded with information and quickly consumed by the next crisis.
White House officials insist Obama’s agenda hasn’t changed. But he is done playing nice with the Republicans as he rallies the troops for 2012. Plouffe contends the corporate community backs Obama on some issues, and “there are a lot of business leaders who are Republicans who don’t identify with this brand of Tea Party Republicanism.”
Campaign adviser David Axelrod says Republicans have done “diabolically well” at creating “a dysfunctional political system” and blaming it on Obama. Still, the return to a harder line against big business and the wealthy could have repercussions as Democrats try to raise the money they need to win next year.
Washington sports-team owner Ted Leonsis, an Obama donor in 2008, says he now cringes at the latest “class warfare” language: “Someone needs to talk our president down off of this rhetoric about good vs. evil,” he says.
The larger question is whether the fired-up president can persuade a country that is losing patience with him and ease the only number that may matter on Election Day: 14 million unemployed.
With reporting by Daniel Stone, John Solomon, Eleanor Clift, and Lois Romano.
©2011 The Newsweek/Daily Beast Company LLC
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