The Man and the Moment
We will need to remind ourselves, despite all our differences, just how much we share. —Barack Obama, The Audacity of Hope

Despite his 11 hour success in winning enactment of health reform, Barack Obama remains at risk of being a failed president. What would failure mean? Economically, not quite a second Great Depression, but very possibly a great stagnation with prolonged suffering for ordinary people—an intensification of trends that were intolerable before the crash began. Politically, it would mean the lost promise of an age of reform anchored in a durable progressive governing coalition. Failure would leave 2008–12 as merely a brief interregnum in a long Republican era, with the far right more dominant and more extreme with each election cycle. Events were not supposed to turn out this way. As the financial crash of 2007 and 2008 deepened, Barack Obamaʼs appearance on the political scene seemed an almost providential rendezvous of man and moment. Wall Street was in shambles. Its excesses had brought the economy to the brink of depression. The great collapse was also the practical failure of an ideology and the ruling elite that embraced it. The claim that the banking system operated most efficiently with the least government interference was suddenly ludicrous. The high priests of that worldview were coming hat-in-hand to the same government for help. The failure of the old order was pervasive. The public officials of both parties who had assured us that financial deregulation would deliver broad prosperity were shown to be catastrophically wrong. The Wall Street moguls who insisted that their own grotesque enrichment was merely a by-product of their vital service to capital markets were revealed as frauds. The free-market economists who had given intellectual cover to the deregulators in government and the scoundrels in the banks were now intellectually bankrupt. For progressives, it was the ultimate teachable moment, and here was a leader with unusual gifts as a teacher. As an outsider, Obama owed few debts to the political establishment. His idealistic call for transformative change roused a fearful electorate to vote its hopes. George W. Bush, meanwhile, was leaving office as the most unpopular incumbent since Richard Nixonʼs resignation in disgrace, adding to the impetus for a clean break. The early signs were encouraging. In a powerful speech on the financial


collapse, in March 2008, Obama declared, “Instead of establishing a twenty-firstcentury regulatory framework, we simply dismantled the old one, aided by a legal but corrupt bargain in which campaign money all too often shaped policy and watered down oversight. In doing so we encouraged a winner-take-all, anythinggoes environment that helped foster devastating dislocations in our economy.” Obama displayed a superb facility for framing boldly progressive ideals as reassuringly patriotic. In his keynote address to the 2004 Democratic National Convention, which instantly established him as a national contender, Obama declared: If thereʼs a child on the south side of Chicago who canʼt read, that matters to me, even if itʼs not my child. If thereʼs a senior citizen somewhere who canʼt pay for her prescription and has to choose between medicine and the rent, that makes my life poorer, even if itʼs not my grandmother. If thereʼs an Arab American family being rounded up without benefit of an attorney or due process, that threatens my civil liberties. Itʼs that fundamental belief—I am my brotherʼs keeper, I am my sisterʼs keeper—that makes this country work. Itʼs what allows us to pursue our individual dreams, yet still come together as a single American family. If Obama heartened liberals, it was also because here was a black man who had lived the American dream, a man whose own life experience was exemplary as husband, father, scholar, and community leader—a genuinely idealistic politician who once again could inspire. When the extended Obama family was introduced at the 2008 Democratic National Convention, this was a family of strivers far more evocative of the American dream than the McCain family. It was an all-American family that just happened to be African American. The possibility that the Obamas could be Americaʼs First Family suggested a degree of racial healing that most of us thought weʼd never see in our lifetimes. In the 2008 elections, the Democrats gained twenty-four seats in the House and eight in the Senate. Soon their Senate margin would grow to sixty, the largest Democratic governing majority in more than three decades. Young people who knew John Kennedy only from history books had their first experience of being deeply moved by a believable new leader. Voters casting ballots for the first time favored Obama by an astonishing 71 percent. Obama carried states that Democrats had long given up for lost, such as Indiana and North Carolina; he won nearly all the important swing states, like Ohio and Florida. His campaign strategy eventually enlisted an army of 3,000 full-time organizers and an unprecedented 1.5 million volunteers, while more than 13 million people signed up for his e-mail list. Obamaʼs inspirational eloquence, his call for transforming change, and his skill at the mechanics of retail politics suggested a president who could mobilize citizens as a necessary counterweight to the concentrated power of financial elites. This was not just posturing. His voting record was one of the most liberal in the Senate. So the stage was set, seemingly, for a great ideological and political reversal, comparable to the Roosevelt revolution of 1933. Obama was poised to create a new majority coalition, built on the premise that rapacious

private finance had to be contained so that the rest of America could thrive. But history has a way of playing tricks, and this hopeful scenario is not the way Barack Obamaʼs first year unfolded. Instead of making a radical break with Wall Street, he delivered a startling continuity with the ad hoc bank rescues of the Bush administration. As these policies averted a second Great Depression, the economy has bifurcated. Wall Street has recovered and its executives are once again collecting tens of billions in bonuses, but Main Street is not sharing in the prosperity. Indeed, the economic pain of ordinary Americans is far more serious than it was before the crash, when economic unease was already a prime concern. Real unemployment is stubbornly high. Mortgage foreclosures continue to rise. Small businesses are starved for credit. State and local budgets are in free fall. Secure health care remains a distant ideal. By the time Republican Scott Brown won an upset victory for the Massachusetts Senate seat once held by Ted Kennedy, on the very eve of the anniversary of Obamaʼs inauguration, the administration was already in deep trouble. The Massachusetts debacle was an accident waiting to happen. President Obama has been steadily losing the voters who took a chance on him in 2008. As populist anger rises, and the real economic pain of regular Americans contrasts with lavish Wall Street paydays, Obama and the Democrats are becoming targets of the rage rather than instruments of its remediation. One man who voted for Obama, a former steelworker now driving a taxi in Pittsburgh, told me, “Heʼs taking over the auto industry, the mortgages, and health care, and the banks. The deficit is going through the roof. And whatʼs it doing for me?” When I appeared on a talk show the morning after the Massachusetts election, one caller told me that he had worked his heart out for Obama in 2008, “and now Iʼm sitting on my hands.” In a Hart Research poll taken in September 2009, 76 percent of respondents said that the governmentʼs economic policies had helped large banks, while just 24 percent felt that the policies had helped them or their families. By a margin of 54 to 38, January polls showed that a majority of Americans didnʼt support Obamaʼs health reform. Pollster Peter Hart described the prevailing attitude as “total disgust” with Washington. But “Washington” now means a Democratic administration and a Democratic Congress. So the stakes are immense. A rare opportunity for realignment and reform is being missed. A loss of either house of Congress in the 2010 elections would create legislative deadlock, making it that much more difficult for Obama to deliver anything of substance in 2011 and 2012. Obama himself could be a oneterm president. Though conservative dominance of economic policy caused the collapse, the Republican far right rather than the reformist left is increasingly supplying the narrative of economic distress, and could pick up the pieces. During the campaign of 2008, we saw glimmers of a very different Barack Obama and a very different political future. For progressives like me, Obama represented a chance to reclaim a tradition of enriched democracy, affirmative government, and social justice. If Obama does fail, he takes down our hopes with him.

A Road Not Yet Taken Dare we still hope that Obama may yet deliver change we can believe in? The quiet desperation of millions of Americans is not being remedied by either party. But for now, the economic unease is increasingly being defined and narrated by the Republican right. The crucial question is whether Obama himself has been so totally captured by the financial elite that his path is now irreversible. It has become a cliché among pundits that the Democratic Party is hamstrung by interest groups. Commentators usually have in mind groups that are actually fairly weak politically—blacks, Hispanics, gays, feminists, schoolteachers, trade unionists. Politicians who propitiate these groups are accused of pandering. The fact that the most powerful interest group of them all, the financial industry, seldom makes the list is testament to its quiet power. Princeton University political scientist Larry Bartels observes, “In the New Deal era, the Democratic Party was about as liberal as it could be without alienating southern racists. In the contemporary era, the Democratic Party is about as liberal as it can be without alienating Wall Street bankers.” That power structure needs to be dislodged before real reform can proceed. In principle, Obama is free to toss out his top aides and bring in a new team. Bill Clinton repeatedly shuffled his advisers. So did Lincoln. But, as we shall see, the threads that link Obamaʼs political aides to his Wall Street– dominated group of top economic advisers will not be easily sundered. The addiction of this administration to flows of Wall Streetʼs political money reinforces the impulse to go easy on the financial industry. Obamaʼs style is to delegate and to proceed with extreme caution. To shift course and lead a different economic team with drastically different views and goals, Obama would have to grow immensely in office. There is, however, an outside chance that the Massachusetts Senate defeat will be remembered as a salutary wake-up call, even as a turning point in Obamaʼs presidency. In the days that followed, a stunned Obama tacked in opposite directions. On health care, he tried to sound conciliatory. His initial public comment, in an interview with ABC News, was that the Democrats should not defy the verdict of the voters of Massachusetts, and that a much more modest health reform might be salvaged with bipartisan support. “I would advise that we try to move quickly around those elements of the package that people agree on,” he said. But judging by the scornful Republican reaction, this was the empty sound of one hand clapping. After a year of pummeling by a Republican Party determined to take no prisoners, Obama, almost pitiably, was still seeking an elusive bipartisan consensus. Yet during that same week, he began sounding far more populist when it came to the banks. He inserted himself for the first time directly into legislative battles, pressing for much tougher regulation, and declaring that if the bankers “want a fight, itʼs a fight Iʼm ready to have.” During his first year, economic populism was treated by the Obama administration as something to be kept in a glass case, for use only in emergencies. It was more rhetorical than real. But the Massachusetts defeat got the presidentʼs attention. It may yet dawn on Obama and his political advisers that he needs to deliver more for Main Street, or at least fight harder against Wall Street even if he loses some battles. And on March 3,

as this book was going to press, Obama belatedly decided to wage a partisan battle for health reform. It remains to be seen how much collateral damage was done by his earlier missteps. It is, of course, too early for a definitive judgment on Barack Obama. History reminds us that Lincoln, in mid-1862, was facing a bleak military and political landscape. His peers considered him a failure. His greatness came later. John Kennedy, judged a year and a half into his term, looked like a pretty disappointing president, too. Often, wisdom ripens with experience—and Obama is nothing if not a learner. Sometimes, however, leaders fail to seize moments pregnant with possibility. Sometimes, to invert a much loved verse of the poet Seamus Heaney, hope and history donʼt rhyme. The British historian A. J. P. Taylor, referring to the revolutionary year 1848, when nationalist revolutions in central Europe seeking self-determination and liberal democracy were all aborted, memorably characterized the events as a turning point of history on which history failed to turn. We will soon learn whether our own era is such a time. In Obamaʼs fateful first year, there was a road not taken, a possible road to radical financial reform, broadened prosperity, and the mobilization of an appreciative citizenry. This book explains how the key decisions unfolded, the stakes, and the alternatives, as we look forward to the second half of Obamaʼs term. There is still time for him to redeem his presidency. But that time is fast running out.

Robert Kuttner, author of the most prescient political book of 2008, Obama's Challenge: America's Economic Crisis and the Power of a Transformative Presidency, is cofounder and coeditor of The American Prospect magazine, as well as a Distinguished Senior Fellow of the think tank Demos. He was a longtime columnist for BusinessWeek, and continues to write columns in the Boston Globe. His previous and widely praised books include The Squandering of America: How the Failure of Our Politics Undermines Our Prosperity; Everything for Sale: The Virtues and Limits of Markets (about which Robert Heilbroner wrote, "I have never seen the market system better described, more intelligently appreciated, or more trenchantly criticized than in Everything for Sale"); The End of LaissezFaire: National Purpose and the Global Economy After the Cold War; and The Economic Illusion: False Choices Between Prosperity and Social Justice. Kuttner"s magazine writing has appeared in The New York Times Magazine and Book Review, The Atlantic, The New Republic, The New Yorker, Dissent, Columbia Journalism Review, and Harvard Business Review. He has contributed major articles to The New England Journal of Medicine as a national policy correspondent. Formerly an assistant to the legendary I.F. Stone, chief investigator for the Senate Banking Committee, Washington Post staff writer, economics editor for The New Republic, and university lecturer, Kuttner's decades-long intellectual and political project has been to revive the politics and economics of harnessing capitalism to serve a broad public interest.

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