The 3 a.m. phone call Obama was most likely to receive, as it turned out, didn’t have to do with foreign threats. In fact, it was more of a 3 p.m. call than anything else, word from the world of business and the economy of an impending market crash, or some other catalyst that could deepen the spiral of falling consumer confidence, falling demand, and rising unemployment numbers.
Rhode Island senator Jack Reed had been the first to warn that the economic crisis would suck up Obama’s time. He wasn’t the last to make the case. This meant the president needed an experienced team that could work through most issues by themselves. Regarding foreign policy, Gates represented continuity. Clinton and the team she and Obama installed at the State Department represented competence. Jones was chosen less for his rapport with the president than for his strong résumé, knowledge, and relationships, and his ability to navigate the world of the uniformed service chiefs.
The economic team, by the same token, was designed to show off the capable hands in charge of the recovery. Geithner had credibility on Wall Street; Summers was a known commodity, in both New York and Washington. Even Christina Romer, the outsider in the group whom Obama tapped to chair the Council of Economic Advisers, was a choice made to send a message: the University of California, Berkeley, professor’s academic background was in the Great Depression.
On December 16, 2008, a little over a month before being formally sworn in to office, Barack Obama’s economic team gave him some bad news: his entire first term was about to be swallowed whole by an economic crisis the depth of which they were only beginning to comprehend.
Just as everyone remembers where they were when they heard that John Kennedy had been assassinated or when the Challenger blew up, everyone who was on the incoming president’s transition team, gathered just a few days after the euphoria of Obama’s victory speech in Grant Park, will never forget where they were when given the dismal economic update. They have vivid recollections of the thoughts that flooded into their minds as the numbers—eye-popping, jaw-dropping numbers so huge as to be fantastic—and the scope of the disaster they faced came into view. It was when everyone in the room began to feel the weight of the task at hand. This wasn’t a campaign anymore, this was the real thing. Outside, snow fell. An unseasonably warm weekend had given way to single-digit temperatures. Inside, in the transition team’s conference room, the president-elect sat at the end of a square table. Biden sat at Obama’s side. They faced the team they had selected to oversee the economy: Tim Geithner, Christina Romer, Peter Orszag—a onetime congressional budget guru the president was tapping as his budget chief—Biden’s chief economic advisor Jared Bernstein, and Larry Summers. Axelrod, Gibbs, and Emanuel also were there. The message the economic team had for the president-elect was as blunt as it was succinct.
“Mr. President, this is your ‘holy-shit moment.’ It’s worse than we thought,” said Romer, who would head the Council of Economic Advisers.
The new administration would have to throw its weight behind a stimulus package aimed at rescuing an economy on the verge of spiraling out of control. Whether they would muscle a stimulus package through Congress was not the question; the question was how big that package needed to be. Summers and Romer presented their options and debated the merits of a $600 billion option and an $800 billion option. Romer even mentioned, in passing, that she believed something bigger—north of $1 trillion—would be needed to have a real impact.*1 In truth, the two had been squabbling over whether Romer’s bigger option should have been laid out in their presentation; she had a nagging feeling that the stimulus should have been much higher, perhaps $1.6 trillion. Summers, whose experience in Washington made him a better operator than the politically naïve Romer, talked her out of that position—a short-term win for him, but ultimately, in the minds of some economists, a mistake for the country.
Jared Bernstein called the presentation the economic equivalent of shock and awe. “At one level, you’re sitting there with the first African American president, who’s just run a deeply compelling and resonant campaign about hope, about change. And you’re part of this new team, and the excitement is palpable,” he recalled later. “At the same time, the economy is headed off a cliff. The juxtaposition was really quite wrenching.”
Axelrod’s mind was filled with decidedly noneconomic thoughts: This is going to be politically tough. For the first time, just six weeks after Obama had won a sweepingly historic election, Axelrod considered the possibility that the Democratic majority in Congress would be short-lived, given the tough economic times ahead, and the amount of spending it would take to dig out of the hole was going to be hard to sell politically. Axelrod’s mind was wandering to what he thought could be a horrible place for the president politically, the 2010 midterms.
Rahm was having a different thought: how the response to the economic crisis could be used for maximum political gain. Most staffers during Emanuel’s twenty-one-month tenure would see him as a capable manager, someone with the knowledge and ability to run the unwieldy White House. Emanuel’s thesis on governing was evident throughout the first term. He believed that political power, like chips in a poker tournament, could be multiplied only if it was exercised: make a bet, win the bet, and gain more power. Political power unused would eventually be whittled away.
Emanuel’s collection of colloquialisms—“Put points on the board,” “In politics, you’re either pitching or catching”—emphasized the necessity of driving the conversation, lest the conversation drive you. And for a president who had promised the hope of changing the way Washington ran, Obama recognized he needed someone who could drive that conversation. With big Democratic majorities in the House and Senate, who better to install as his chief of staff than someone who had been in House leadership and who had deep, abiding relations with senators who mattered, like Harry Reid and Chuck Schumer?
“I think Obama saw the presidency the way historians probably judge presidents, which is, it’s a function of being able to command the legislature. Pass big bills,” said Podesta. “And he saw Rahm as the guy with the guts and the know-how and the smarts to be able to do that.”
While Emanuel would eventually become frustrated with what he saw as the president’s inability to centralize internal power, thus depleting the chief of staff position of its potential, others would come to believe that Emanuel was running the White House with an iron fist. He clashed with many people at all levels of the staff, and occasionally a story would hit the papers that suggested that the White House was a sexist boys’ club—the clear implication being that it was Rahm who had fostered such an environment. Obama, who did think Emanuel fought too much with his coworkers, bought into some of that criticism. He especially thought Rahm didn’t get along well with senior female members of the staff, Valerie Jarrett first and foremost among them. But the president also didn’t mind the tension, as long as it wasn’t a complete distraction. In Rahm, Obama saw the ultimate means-to-an-end guy he needed, whether he liked him or not, which is why Rahm never would be punished, per se, for any internal staff transgressions. Rahm’s defenders maintained that he yelled just as loudly, and swore just as much, at men as he did at women; he didn’t care, in the end, about the gender of the person on the other end of a “fuck you,” usually reserved for someone who had screwed up. He only cared that they had screwed up.
Emanuel would also regularly end up at odds with Gibbs. Gibbs had led Obama’s press operation since his Senate campaign, after running communications for the Democratic Senatorial Campaign Committee, not to mention serving as John Kerry’s press secretary during his presidential bid in 2004. He was a true believer, someone in Rahm’s eyes who had wholeheartedly partaken of the Kool-Aid that said Obama had come to Washington to change things. His insistence that Obama transform business as usual in the Beltway swamp, which one former coworker described as putting on the white hat, grated on the more pragmatic Emanuel. The two would stand farthest apart on an early test of change versus status quo.
At the moment, however, Emanuel must have been thinking about his own reversed circumstances. In September 2008, when he was a member of the House Democratic leadership, he, Speaker Nancy Pelosi, and majority leader Steny Hoyer had urged President George W. Bush to put forward a $150 billion stimulus package to reverse the economic slide. It was thought of as a huge ask of a Republican president, but the fear that the economy was collapsing was very real, and Bush was actually ready to go along with what was at the time historically a fairly large number. Turns out that number looked like pennies on the dollar, compared to what Rahm was about to ask Congress for just six months later.
After the meeting broke up, Emanuel huddled with the economic team to finalize their plan. Heads nodded, pens scratched over notepads. The transition team would ask Congress for $775 billion in stimulus spending, a number that could make it through the Democratic-controlled Congress. Axelrod drifted out of the room, still wondering just how long Democrats could keep Congress in their control. Passing this thing was going to be a struggle as it was. But passing it with the GOP in control? Now that would be scary—and neither Axelrod nor anyone else in American politics had heard of the Tea Party yet.
The next two months began one of the most frenzied legislative scrambles that anyone with experience in politics can remember. Throughout December and into January, even before they had moved into the White House, staffers furiously calculated programs that cost multiples of any they had ever helped fund before.
There are areas of the resulting stimulus in which Barack Obama’s imprimatur is clear: the Department of Energy’s Advanced Research Projects Agency, which aimed to use stimulus dollars to create the next great innovation in energy research, or what became one of the president’s pet projects he’d campaign on, advanced battery manufacturing; and Race to the Top, a grant program that would reward states that came up with innovative ways of reforming their education systems, which eventually received more than $4 billion in funding—nearly a third of the funding George W. Bush’s No Child Left Behind law added to education and with virtually none of the controversy or attention.2 But in large part, once they found their White House offices, Obama’s transition team, and eventually his legislative staff, allowed their allies on Capitol Hill to write significant portions of the stimulus bill. The theory was that involving Congress early would, in effect, win their buy-in, and once they had bought in, they couldn’t help but vote for the bill.
No matter the politics, no matter the president, when so much money is at stake, it’s almost certain that some will be misspent. With a Republican minority eager to label the stimulus package laden with waste, fraud, and abuse (a favorite expression of penny-pinching politicians everywhere), the administration wanted to be doubly certain that every dollar was accounted for. Obama put Joe Biden in charge of keeping tabs on how the money was spent.
Biden would end up devoting a significant part of his first two years as vice president to conference calls with local elected officials, watching over their shoulders to make sure the money went toward creating jobs or accomplishing other aspects of the bill’s myriad goals. The good news, for such a big bill, was that it didn’t lead to any major spending scandals. Of course, there is still debate about whether the stimulus was as effective as it could have been.
Even as Obama’s economic advisors urged him to spend big to calm the markets and provide stability, his political team was worried about a different demon. Republicans were sure to accuse the administration of exploding the deficit, so Obama’s team had to do all they could to convey the notion that the stimulus bill would be only a short-term fix rather than a permanent expansion of government spending. A split emerged in the economic team; Peter Orszag, in particular, worried about the impact of the federal deficit, both on the markets and on the country’s economy as a whole, while others like Bernstein and Romer believed short-term spending was crucial to long-term stability, regardless of how big the deficit became.
Conscious of the politically negative “optics,” administration officials, from Obama to advisors who spoke to reporters only on condition that their names not be revealed, constantly used a four-word refrain when characterizing the stimulus: the money they spent was supposed to be “timely, temporary, and targeted,” and the administration would pursue only so-called shovel-ready projects, directing money to infrastructure programs and other investments that would lead to immediate job creation.
Of course, as they were bandying about all these massive numbers—a billion here and a billion there, and soon you’re talking about real money—the White House staff had to make sure they could win over the votes necessary to secure passage in Congress. The House wasn’t a problem; with 255 Democrats and just 178 Republicans in office, Speaker Nancy Pelosi would be able to round up the votes to pass the bill.
But there were already signs that the White House would have a difficult time winning over congressional Republicans to pass a bill with bipartisan support. Staff in the White House Office of Intergovernmental Affairs, essentially the president’s state liaisons, were hearing from Republican governors all over the nation desperate for any stimulus money Washington could send their way. The states were facing steep budget cuts, and they needed help from the federal government. But when the office asked the governors to write letters to that effect, to come out publicly in favor of the stimulus, many demurred for obvious political reasons. Only four Republicans serving at the time—Vermont’s Jim Douglas, California’s Arnold Schwarzenegger, Connecticut’s Jodi Rell, and Florida’s Charlie Crist—were willing to say publicly that they backed the bill. None of them were considered pillars of the conservative wing of the GOP.
The White House tried to entice Republican votes by including exactly what the GOP was most inclined to vote for—tax incentives. The final bill included $288 billion, more than a third of the total package, in tax breaks, including a payroll tax credit of $400 per worker, an expansion of the child tax credit, a huge homebuyer tax credit to help spur the struggling housing industry, an expansion of tax credits for home energy use and college tuition costs, and the earned income tax credit. Bernstein, among various advisors, argued that too much of the stimulus was weighted toward tax breaks, which he saw as a terrible way to use the money, since tax break dollars didn’t necessarily get used the way stimulus dollars were supposed to be used. A tax break takes too long to get back into the economy, and what this recession needed, in Bernstein’s view, was fast cash. A family that gets a tax credit in a recession is more likely to save the money or use it to pay down debt than to spend it. Even if they do spend it, given general American consumption patterns, the money is likely to go toward purchasing an import, which means American tax dollars are making their way overseas anyway. These tax breaks just weren’t stimulants for an economy in a tailspin.
But others on the economic team, and within the legislative office, disagreed. They said repeatedly that they needed to include the tax breaks to get the final bill over the finish line; to do so, they needed Republicans who would be attracted to the idea of more than a quarter of a trillion dollars in tax cuts.
On Capitol Hill, House Democratic leaders were on Bernstein’s side. Hoyer in particular was angry with the White House for including the tax breaks; he wanted to see the money go toward longer-term projects so that the effects of the stimulus would last more than a few months. “If we had put that [$288 billion] into infrastructure, and not worried about the 18-month shovel-ready projects, we’d be spending it now, creating jobs now and economic growth now,” he said in a 2012 interview. Ultimately most of Obama’s economic advisors would agree with Hoyer that the stimulus bill spent too much on the front end, without a long-term investment that would keep the government juice flowing. If they had planned better for the longer term, the recovery might have been steadier, rather than petering out over a shorter time frame. But Obama’s goal wasn’t to build the perfect bill; it was to build the best bill that could still pass Congress.
What the White House didn’t know was that a number of senior Republican strategists had already determined to make life difficult for the White House—very, very difficult. If Obama understood pragmatism as short-term compromise for the sake of long-term evolution, Republican leaders understood pragmatism in a very different manner. On the very evening Obama was inaugurated, more than a dozen top Republicans met to talk strategy at the Caucus Room, a high-priced Washington steak house (since closed) owned by former Republican National Committee chairman Haley Barbour and Democratic lobbyist Tommy Boggs. The group included House Republican whip Eric Cantor; his deputy, Kevin McCarthy; House Budget Committee ranking member Paul Ryan; five senators; former House Speaker Newt Gingrich; and Republican pollster Frank Luntz. For four hours they talked strategy aimed at ways to cut down the new president, even before Obama had finished his appearances at the inaugural balls.
One of their conclusions: they had to oppose Obama wherever they could, and they had to be unified. “If you act like you’re the minority, you’re going to stay in the minority,” McCarthy said, according to an account by the journalist Robert Draper. “We’ve gotta challenge them on every single bill and challenge them on every single campaign.”3 What was pragmatic to the men in the room? Actions that helped the Republican Party get back into power. Obama might have won the November battle, beating McCain soundly, but for these Washington Republicans, the ones who survived two straight Democratic landslides (in 2006 and 2008), it was time for the party to reinvent itself. And with an era of big, activist government coming in with the new president, there was no time like the present to begin reshaping the GOP back to its small-government roots. The GOP wouldn’t be credible as a small-government party if it began helping Obama too much, and thus was born their early obstruction strategy.
Eight days later, on January 28, just a week after Obama was inaugurated, the bill came to the floor of the House. Cantor, the Republican whip, did his job and kept the caucus in line; not a single Republican voted for the bill. Cantor had gone the distance in keeping his conference together: Representative Ahn “Joseph” Cao, a Louisiana freshman elected in a fluke over a Democrat who was found to have tens of thousands of dollars in bribes stored in his freezer, had nearly voted for the bill but had been stopped in the Republican cloakroom by Cantor’s staff and browbeaten until he agreed to vote against it.4
The results stunned the White House; even on the day the bill was put before the House, Phil Schiliro, the top liaison between the White House and Capitol Hill, suspected they would receive as many as 15 Republican votes in the House. After all, there were provisions in the bill that were put in specifically at the request of a few of those 15 Republicans Schiliro thought would support the measure. Schiliro had been a creature of the House for decades and saw firsthand members of the minority party always voting for big spending bills, especially if they got a specific provision they asked for. It was standard congressional operating procedure. Or at least it was pre-Obama. There was a sense in the White House that House Republicans had betrayed their duty. The economy was circling the drain, depression loomed, and Republicans were saying the government was spending too much. “It seemed as though we were in crisis and we needed to take action,” said Valerie Jarrett, who had just assumed her first job in Washington as a senior advisor to the president. “Most of what we were proposing had received bipartisan support in the past, and the fact that we were having a really hard time getting enthusiasm on the Republican side for what seemed so obviously necessary to do was frustrating.” Of course, what the Obama White House believed were bipartisan ideas were actually ideas that only a handful of less conservative Republicans had agreed to decades earlier when House Republicans and Bill Clinton regularly did business together. This was a new Republican Party and a new mind-set.
While the White House was slack-jawed over what had happened, House Democrats had seen the vote margin coming. The Republican tactic, Democratic leadership surmised, was the same as it had been in 1993, the last time a young Democratic president had tried to win over reluctant Republicans: they would stand united in opposition to the White House, just as Republicans had done over Bill Clinton’s tax overhaul that year.
The unity of the House GOP was a punch in the gut, but because the Democrats controlled the chamber, the measure passed; at that point, Republicans in the House were in such a deep minority that they couldn’t expect to play a major role in actual policy making. But in the Senate, Republicans held 41 of 100 seats, enough to sustain a filibuster and prevent a bill’s passage. The White House initially believed it could get as many as 70 votes for a stimulus package—all 57 Democrats, both left-leaning independents and almost a dozen Republican votes. Obama had, after all, made a campaign promise—based his entire political life on the promise—to move beyond partisan politics as usual.
There were certainly Republicans willing to vote with Obama in some cases, when it served their political interests—on a January 29, 2009, vote to extend the State Children’s Health Insurance Program, or SCHIP, 9 Republican senators voted with the Democratic majority.5 But this time the White House focused on only 3 Republicans in particular—Pennsylvania’s Arlen Specter and the 2 Republicans from Maine, Olympia Snowe and Susan Collins. Aides to Senate majority leader Harry Reid had told Obama’s legislative strategists that they should be reaching out beyond those 3, to members like George Voinovich of Ohio, Lisa Murkowski of Alaska, and Lamar Alexander of Tennessee. But the White House seemed interested only in building a coalition just over the bare minimum number of senators it would take to pass the bill. Frustrated, Reid’s team could do little to change course. This would be the first disagreement about how to reach out to Senate Republicans, but not the last.
The White House was particularly sensitive to those House Democrats who were concerned that too much Senate GOP outreach would water down the bill unnecessarily. So the White House chose the bare-minimum approach in order to keep the peace with the House leadership. Had the White House made its goal, say, ten Senate Republicans, it would have shrunk the size of the bill, perhaps by a good $200 billion, an unnecessary compromise, or so believed folks in the West Wing.
Biden began reaching out to Snowe, Specter, and Collins as early as December, a month before he and Obama would take office, to gauge what they needed to support the bill, and the White House went to extremes to make sure they won over all three. Both Reid and Pelosi had insisted that the bill come in under $1 trillion, so as to make it politically palatable to their own caucuses. Snowe and Collins wanted the bill’s price tag to be smaller still. Snowe even brought a list of proposed cuts to one meeting with the president—one of several one-on-one sit-downs the two held in the Oval Office—that she had received from the Republican Policy Committee, which was filled with the House Republicans’ most conservative members. Obama took the list, impressing Snowe by seriously considering her proposals. Several of those cuts ended up in the final version of the bill.
The price tag was still shockingly high, at $787 billion, but it won them over: on February 10, all three moderate Republicans voted for the Senate’s version of the bill.6 Three days later, a compromise between members of a conference committee passed the Senate again, by a 60–38 margin; again, all three Republican moderates voted for the bill.7
For a candidate who preached hope and change, Obama was off to an inauspicious start. He had signed a stimulus bill that would give Republicans every excuse they needed to accuse him of exploding the deficit. Far from drawing up a truly bipartisan bill, Obama would claim the veneer of bipartisanship with only Snowe, Collins, and Specter for cover.
Adopting, in some cases co-opting, Washington insiders was part of a larger strategy that drove Obama’s early days. Many of the new president’s top advisors, most notably Rahm Emanuel, had been a part of, or studied, Bill Clinton’s early days in the White House, and they were determined not to repeat his mistakes. Throughout his tenure as chief of staff, Emanuel took pains to consult and involve Congress—the stimulus bill was written in close consultation with Democratic leaders (and even with Republican input); the White House would take pains to include every relevant committee while crafting a health care reform bill; and while Obama himself wasn’t great at reaching out to members of Congress, Rahm kept in close contact with leaders and rank-and-file congressmen alike. Still, it hadn’t helped win more support for the stimulus.
The administration faced what it referred to as a series of five-alarm fires in its earliest days. During the two and a half months between Obama’s election and when he took the oath of office, some presidential advisors sat in on meetings with top economists and wondered just what they had gotten themselves into. The new president would inherit the deepest economic recession in eighty years, guaranteeing that his early agenda would be all but shelved until he could make sure those fires didn’t spread. Franklin Roosevelt’s bold agenda in his first hundred days in office had become something of an artificial measuring stick the media would use to judge every president who followed. Obama had so many crises to deal with in his first hundred days—the economic stimulus, bailing out the American auto industry, a second round of TARP funding—that he would be lucky if he could get to any item on his own agenda within that period. The Obama agenda would eventually begin, and Emanuel suspected he knew what the first item on that agenda would be: health care reform, the same issue that had tripped up Clinton and caused an electoral wipeout for Democrats in the subsequent 1994 midterm elections. This time around, Emanuel hoped to get a better outcome, either a smaller bite of the health care apple or an actual passed bill.
But first, only a week after President Obama signed the American Recovery and Reinvestment Act at an elaborate ceremony in Denver, his two presidential personas—the rational, pragmatic politician and the ideologue whose purity of purpose was determined to change Washington—had their first true clash. On Tuesday, February 24, during his first address to a joint session of Congress (it wasn’t technically a State of the Union but delivered at a similar time and a tradition now for first-year presidents), Obama stood up for a pledge he had made during the Democratic primaries, a pledge to do something he and his top advisors believed would signal an important change in the way Washington did business: he defended his call to eliminate earmarks, the long Washington tradition of congressmen adding special projects to benefit their districts to bills that often have little or nothing to do with those projects.
“I’m proud that we passed the recovery plan free of earmarks, and I want to pass a budget next year that ensures that each dollar we spend reflects only our most important national priorities,” Obama told Congress.8 It was a line that Robert Gibbs and David Axelrod—the two advisors most concerned with keeping Obama’s core image intact—were immensely proud of and one all of the old Washington hands thought screamed naïveté.
The very next afternoon, 229 Democrats and 16 Republicans took Obama’s lecture on earmarks so seriously, they voted for the Omnibus Appropriations Act of 2009, an earmark-laden bill that lumped the annual budgets of all but three executive departments into one single package (it was actually a leftover spending bill that probably would have been signed by President Bush had it been sent to his desk in time). The $410 billion spending measure, on top of the $787 billion in the stimulus package and the billions more that would soon be spent on TARP and the auto company bailouts, was laden with pork. The conservative Heritage Foundation counted 9,287 earmarks stuffed into hidden corners of the bill, accounting for $12.8 billion of its final price tag. The earmarks included more than $1 million to combat Mormon crickets in Utah, $200,000 for a tattoo removal program in California, and $190,000 for a museum dedicated to the memory of Buffalo Bill in Cody, Wyoming—to say nothing of the $75,000 for a Totally Teen Zone in Albany, Georgia.9
Obama was incensed. He had made clear his position against earmarks, had taken his stand in front of an audience of tens of millions of people—not to mention the 435 congressmen and 100 senators who attended his address before the joint session of Congress—and now his own party had delivered a bill so stuffed with pork that his Republican opponents would have a field day. And make no mistake, congressional Democrats purposely waited until Obama got into office to send this bill to his desk, not as some test but because they figured they had a better shot at getting their way than if they risked sending this spending bill to Bush.
Here was the perfect distillation of Obama’s battle with a Washington establishment—in this case, his own party. Democrats on Capitol Hill had tried to talk Obama out of his anti-earmark stance. Democratic leaders on Capitol Hill, including the chairmen of the committees Obama’s health care proposal would have to go through, had a way of doing business they didn’t want to see upset. Earmarks were considered a key vote-organizing tool. Vetoing a bill would anger a number of senior members, some of whom had been on Capitol Hill since Obama was in diapers—members such as Wisconsin’s David Obey, the chairman of the House Appropriations Committee, who had already clashed with the administration over stimulus spending, and Montana’s Max Baucus, the Senate Finance Committee chairman.
In their first meeting at the White House, Steny Hoyer had spoken up in favor of the controversial practice. “I think your earmark stance is going to get you in a pinch with Congress,” the Maryland representative told the president. “I think, first of all, it’s our responsibility, constitutionally, [to allocate government resources], and secondly, why do you want to have that fight with Congress, over essentially nickels [and] dimes?” Hoyer later made the same case to Rahm Emanuel, his old House colleague. Earmarks weren’t even drops in the bucket of the massive federal budget. Taking a stand against them was too trivial for a president of the United States.
Emanuel agreed, but Obama was unconvinced. His gut reaction was to make his first stand in favor of changing the way Washington did business on the omnibus bill. He wanted to veto legislation that more than 90 percent of the House Democratic Caucus and all but three Senate Democrats had voted for. It would have sent a real message, a “new sheriff in town” kind of message. This could have been his airline-traffic-controller moment (as in Reagan’s decision to fire striking air traffic controllers, which did send a message early in his presidency that he was going to be a tougher customer to negotiate with than insiders at the time thought).
But with the fight over health care looming, Obama was choosing what many of his advisors thought was the wrong battle. Emanuel, Jim Messina, Phil Schiliro, and Pete Rouse—the four most senior staffers with significant Capitol Hill experience—all told him not to veto the bill. Messina and Rouse were worried about how much it would anger Senate Democrats and embolden Republicans. Schiliro and Emanuel knew they risked making Pelosi and Hoyer in the House furious. “If you want to lose two months on health care, veto the bill,” Emanuel told Obama. “I can’t veto a bill and get health care started. Those are the trade-offs. That’s what you get paid the big bucks for.” Schiliro, who had the best access to House leadership thinking, was more pessimistic: “You do this and you won’t get anything,” one former advisor recalls him saying.
On the other side, Gibbs and Axelrod wanted Obama to veto the bill. “We ran a campaign on changing the way Washington works, to change the way Washington does business,” Gibbs recalled later. “And our first act was going to be to swallow this big piece of Washington business? I thought it was hugely bad.”
The debate raged for days. The legislative liaison’s office, headed by Schiliro and Rob Nabors—a former staffer for one of the biggest earmarkers in the House, David Obey, chairman of the powerful Appropriations Committee—kept warning the true believers that rocking the boat to such an extreme degree would hurt relationships with the legislators they needed most. The true believers never gave an inch; they felt they were getting steamrolled by the old-timers on Capitol Hill and their former staffers who now worked at the White House.
To this day, some of the true believers think Schiliro and Rahm had the whole thing precooked, that they had preemptively agreed with Democratic leaders on the Hill, in the president’s name, to compromise on the issue without admitting this to the president. In fact, some of these aides believe Rahm cut this deal before the president was even sworn in. Regardless, the old-timers won, and one of Obama’s core principles was jettisoned for the sake of expediency. One of the chief criticisms of Obama’s Washington is the president’s inability to get his way either by force or by compromise. He is also criticized for how he manages Washington: he seems unable either to make the old system work or to create a new system to work better. One of the misconceptions of Obama is that he’s not a good compromiser. That’s not true: he compromises all the time; he just seems to get more downsides from his compromises than upsides. In this case, he broke an early symbolic promise.
On March 11, as he prepared to sign the omnibus legislation, Obama tried to save face, but even the opening of his remarks that day, in the Eisenhower Executive Office Building, began with an implicit admission that things hadn’t gone his way. “I ran for President pledging to change the way business is done in Washington and build a government that works for the people by opening it up to the people. And that means restoring responsibility and transparency and accountability to actions that the government takes,” Obama said. He cited the earmark-free stimulus bill before expressing his solemn disgust at the bill he was about to sign. “Yesterday Congress sent me the final part of last year’s budget; a piece of legislation that rolls nine bills required to keep the government running into one, a piece of legislation that addresses the immediate concerns of the American people by making needed investments in line with our urgent national priorities. That’s what nearly 99 percent of this legislation does—the nearly 99 percent that you probably haven’t heard much about,” Obama said. “What you likely have heard about is that this bill does include earmarks.”
He went on: “I am signing an imperfect omnibus bill because it’s necessary for the ongoing functions of government, and we have a lot more work to do. We can’t have Congress bogged down at this critical juncture in our economic recovery. But I also view this as a departure point for more far-reaching change.”
Obama next laid out a series of reforms he wanted to see: An earmark should show up on a member of Congress’s website before it is enacted. There should be hearings to justify each earmark. Earmarks aimed at private companies should be open to competitive bidding. He went on at some length. And then he signed a bill that added another 9,287 earmarks to the federal budget. What the president didn’t truly appreciate about this decision was that he was sending an unmistakable message: he could be rolled.
In hindsight, the administration officials closest to Obama admit that signing the bill was the president’s biggest political regret of his first term. “I think he realized that what he wanted to do was tying his hands,” Gibbs said later, reflecting on the decision. “It was a decision to go with the flow as opposed to shak[ing] things up,” added Dan Pfeiffer, who was present for the debate. Pfeiffer no doubt hopes that the Obama presidency doesn’t go down in history as failing to figure out how to shake things up.
The decision not to veto the omnibus bill also highlights another strange relationship the Obama administration struggled with in the first term: Obama had worked closely with Harry Reid during his brief tenure in the Senate; in fact, Reid had quietly rooted for Obama in his fight against Hillary Clinton. But Obama had never been as close to Nancy Pelosi, the House Democratic leader. As a result, the White House had made a calculated decision early on to focus on the Senate. After all, with a huge majority in the House, they expected Pelosi would be able to win over the 218 votes she needed for passage of a bill anytime she wanted. Reid, on the other hand, would struggle to get 60 votes to overcome a filibuster, given that he had to enlist several conservative Democrats and, with Ted Kennedy ailing from brain cancer and absent for most votes, at least two of the moderate Republicans, from Maine or Pennsylvania.
The Senate calendar, too, was a massive obstacle to Obama’s agenda; Reid had far less control over what happened on his floor than did Pelosi on hers. The Senate spent a significant chunk of the first three weeks of the 111th Congress debating a bill to allow guns in national parks, rather than the stimulus bill. If Pelosi and Hoyer, who as majority leader technically controlled the floor schedule, wanted a vote on the stimulus, they could simply call a vote on it.
Within a Democratic Party still fractured between the Clintons and Obama, Pelosi held a unique position. She had been active in party politics since childhood, as the daughter of legendary Baltimore mayor Tommy D’Alesandro. She had run for the top position at the Democratic National Committee (and lost to Paul Kirk of Massachusetts, who would replace Ted Kennedy when the legendary senator passed away). Whether a prominent party fund-raiser was an Obama backer or a Clinton backer, he or she was sure to be a Pelosi confidant; one could argue that few have done more to raise money for the Democratic Party since the 1980s than Nancy Pelosi.
But Obama had few ties to Pelosi. Not a single person in the White House could be considered a true Pelosi acolyte; Schiliro, a former chief of staff to California congressman Henry Waxman, a Pelosi ally, and Nabors, as David Obey’s former top aide, each had conduits to the Speaker’s office, but those conduits were one-way streets headed up Pennsylvania Avenue. They could easily understand or find out what Pelosi was thinking, but they couldn’t necessarily get their message to her.
Pelosi suffered, in some respects, in contrast to Reid. When asked whether they could cobble together the votes necessary to pass a bill, Pelosi would tick off the coalitions she would have to put together and what it would cost to build those coalitions; Reid would simply give a yes or no answer. That approach, on a personal level, appealed to Obama much more than Pelosi’s did. Fairly or not, Obama sometimes believed Pelosi was using her explanations to gain leverage.
For her part, Pelosi minced no words when it came to achieving the president’s agenda. After eight years of George W. Bush, she was thrilled that a Democrat had taken back the White House. And she believed she never wanted, or asked, much of Obama, though it was clear she felt disrespected. As time went on during 2009, Obama’s decision to focus on the Senate became more evident especially at the staff level; Pelosi felt that disrespect increasing—and, unsurprisingly, she hated it. They took her for granted, something former Obama aides now realize. And as the debate over health care reform loomed, Pelosi’s growing dissatisfaction, her feeling that the White House was overlooking her House of Representatives domain, would prove costly.