By Alec MacGillis and Scott Wilson
Washington Post Staff Writers
Thursday, March 26, 2009
In attempting to harness public anger over the financial crisis on behalf of his budget, President Obama is confronting the politically uncomfortable fact that the success of his long-term agenda and Wall Street's recovery are intertwined.
That acknowledgment is reflected in the president's shift in tone from his tempestuous town hall appearances in California last week to Tuesday evening's more sober appraisal of who is responsible for the frozen credit markets, insolvent banks and burst real estate bubble.
He condemned Wall Street "Ponzi schemes, even when they're legal, where a relatively few do spectacularly well while the middle class loses ground" during a March 18 town hall event in California's Orange County, which is now closing elementary schools because of falling property tax revenue. Back inside the Beltway, the president said during his prime-time news conference that some of us "can't afford to demonize every investor and entrepreneur who seeks to make a profit."
In the balance as he attempts to walk this line is Obama's long-term agenda, embodied in the budget he was selling on Capitol Hill yesterday and which a House panel passed on a party-line vote late last night. To build public support for his $3.6 trillion package of plans to reform health care, energy and education, Obama is attempting a kind of transference -- persuading Americans that the excesses crystallized by bonuses for the AIG unit at the center of the financial collapse can only be fixed by the systemic overhaul of the economy represented by his budget.
If Obama is successful, it would not only strengthen the case for his budget but also relieve some of the political pressure on Wall Street, which will help determine the success of his first term. But it is not an easy linkage to make, because it means transferring public desire for immediate action -- and even retribution -- to the promise of a longer-term transformation of the country.
"I'm as angry as anybody about those bonuses that went to the very same individuals who brought our financial system to its knees, partly because it's yet another symptom of the culture that brought us to this point," he said Tuesday. "But one of the most important lessons to learn from this crisis is that our economy only works if we recognize that we're all in this together."
Obama's attempt to channel public anger reflects the White House's belief that he is constrained against engaging in too much Wall Street bashing -- or outright punishment -- by his reliance on the financial sector to fulfill Treasury Secretary Timothy F. Geithner's new plan for rescuing the nation's banks. After declaring that his administration would "pursue every legal avenue" to block the AIG bonuses, Obama was by Sunday signaling that he did not approve of legislation sweeping through Congress to slap a 90 percent tax on the payouts.
Adding to that constraint is the fact that Obama's campaign received considerable financial support from Wall Street, and that his advisers include several proteges of Citigroup executive Robert E. Rubin, a former Treasury secretary.
Dean Baker, co-director of the left-leaning Center for Economic and Policy Research, said Obama would have been better off capitalizing more fully on public ire but was being held back by the Rubin proteges.
"He hurts himself enormously by being seen as associated with the bankers," Baker said. "Purely pragmatically, you have an opportunity here where these Wall Street guys are really hated, they've been a really pernicious presence in the economy for a quarter-century, and the idea of jumping on them when they're down makes a lot of sense. This idea that they're going to help things -- well, they're not our buddies. There's a real fundamental conflict there, and he's hoping he can paper it over."
But Obama's preference for talking about "the system and culture" that produced the bonuses instead of chastising executives more directly also reflects his tendency to analyze problems in the abstract instead of personalizing them. Throughout the campaign, he cast the country's ills as part of an overall imbalance, an off-kilter economy and a broken political culture. There was populism in his pitch -- he had started out as a community organizer, after all -- but it was not the sort given to rousing diatribes.
To the extent that Obama has moralized about the financial crisis, his pique has mostly been addressed at broad trends and policy questions instead of named targets. His budget proposal was introduced with a stern tone that implied that his plan, with its tax increases for the wealthy, was the real answer to Wall Street excess. "We arrived at this point as a result of an era of profound irresponsibility," he stated in introducing the plan. Pitching the budget at the White House last week, he cast this decade's prosperity as a "bubble economy" based on "reckless speculation" and Wall Street "shenanigans."
A similar moralizing tone was evident in his defense of his budget Tuesday night. Even as he urged against demonizing the business class, Obama made clear that he thinks affluent Americans have not been doing their fair share as he defended his plan to shrink tax deductions for wealthy taxpayers' charitable contributions and mortgage interest payments.
"If it's really a charitable contribution, I'm assuming that [smaller tax savings] shouldn't be a determining factor as to whether you're giving that $100 to the homeless shelter down the street," he said. "I think it is a realistic way for us to raise some revenue from people who benefited enormously over the last several years. It's not going to cripple them; they'll still be well-to-do. And ultimately, if we're going to tackle the serious problems that we've got, then in some cases those who are more fortunate are going to have to pay a little bit more."
Michael Maslansky, a Republican-leaning pollster, questioned whether Obama could succeed in channeling public anger toward his longer-term goals after having initially helped stir the anger with his vow to retrieve the AIG bonuses. It would have been truer to Obama's approach if he had right away put the episode in the context of his overall agenda, Maslansky said.
"It was a strategic mistake," Maslansky said. "He's supposed to lead, to skate to where the puck is going to be. Going after the bonuses was looking backwards. He should have said right away, 'These bonuses are the last gasp of a dying culture.' He would've been much better off if this AIG thing hadn't become such a big issue. . . . Now the White House says, 'Wow, they really are angry, they have the pitchforks out, and they're trying to kill the people I need [to fix Wall Street].' And the American people are watching and asking, 'Is he a populist, or is he a cool, collected leader?' "
Just how fine that line is was clear as Obama spoke last week in a sweltering convention hall at the fairground in Costa Mesa, Calif. He pushed up his sleeves and loosened his tie before letting rip.
"You're out there earning a living, and we've got to reward people who are working hard, not the bubble-and-burst economy we've experienced in recent years," he said to raucous applause. Then came the link to his budget: "That's only going to happen if we pull together and focus on the big things, focus on the long term. We've got to get past this petty bickering, the constant trivialization of politics, and focus on getting the job done."
Georgetown University historian Michael Kazin said the approach Obama has settled on is the best available: sharing the public's ire, but not inflaming it further, which would not be his style, and instead directing it to his plans.
"It wouldn't be convincing if he came on as a real populist and also probably not necessary," Kazin said. "What he's got to do is depend on his strengths in sort of calmly explaining things to people and telling them, 'I've got this.' "