In the months before Tuesday’s election, President Obama barnstormed the country for Hillary Clinton, urging voters to select her to succeed him – and to reject her Republican opponent, Donald Trump, whom he cast as dangerous and unfit.
Those efforts failed. But there is something Obama could have done years before, which might have helped him deny Trump the White House. It was a policy move, not a political one, and it was one Obama’s economic team rejected.
At the same time his administration was carrying through with a $700 billion bailout of Wall Street financial firms and passing an $800 billion stimulus package for the free-falling economy through Congress, Obama could have taken more aggressive steps to soothe millions of American homeowners who were struggling to pay their mortgages amid the housing crisis.
Many of those Americans were underwater on their mortgages, meaning they owed more than their houses were worth, and struggling to make payments that consumed large shares of their paychecks. The debt piled onto those households was the driving factor holding back the economy’s recovery from the Great Recession, research by the economists Atif Mian and Amir Sufi suggests.
And high levels of mortgage debt, it so happens, appear correlated with high levels of support for Trump.
Obama’s team pushed a relatively small program to relieve mortgage debt. If it had pushed a more expansive effort to pay down mortgages with government money, or forced banks to write off big chunks of what the most distressed borrowers owed, the administration could have sped the country’s economic healing process, Mian and Sufi contend.
Such efforts would have been controversial – the Tea Party movement traces its origins, for example, to a televised rant by CNBC commentator Rick Santelli against bailing out underwater borrowers. Obama’s team, led by Treasury Secretary Timothy Geithner, declined to pursue them for several reasons, most importantly because the advisers concluded they were unlikely to work effectively.
In an otherwise complimentary review of Mian and Sufi's book in 2014, Larry Summers, who directed Obama's National Economic Council in 2009 and 2010, called the economists "naive on policy." He wrote that the view of Obama and his advisers was that "that there was essentially no chance of it getting the requisite 60 votes in the Senate" to allow bankruptcy judges to force banks to write down mortgage debt. He also said the team worried about chilling future mortgage lending or even bringing down the entire banking system.
Summers conceded he wished the administration had been more aggressive in some ways. "We may well have misjudged some risks or missed important opportunities to carry out effective policy," he wrote.
The White House declined to comment.
Other economists were advocating more aggressive measures, including Glenn Hubbard, the Columbia business school dean and a key adviser to John McCain and Mitt Romney's presidential campaign. If those economists were right, a homeowner bailout would likely have helped the economy recover faster and perhaps begin to deliver income gains to the middle-class in Obama’s first term, not his second.
Families in the middle would have had more time to feel the warm breeze of a recovery that was finally delivering for them, and perhaps less anger at Washington for rescuing big banks, but not the homeowners they wrote mortgages for.
They also would have had less mortgage debt, which Gallup researchers Jonathan Rothwell and Pablo Diego-Rosell recently singled out in a sweeping statistical analysis of social and economic factors that appear to drive voters to Trump.
“Trump support rises as mortgage interest payment deductions (an indicator of mortgage debt) increase,” the researchers write, and that could indicate that his supporters are more heavily leveraged in their borrowing.
We’ll never know if a more aggressive Obama housing policy could have helped those borrowers dig out from their debt piles – or if doing so would have made them less likely to support Trump.
But in an election where Trump’s core supporters voiced deep concerns over the economy and their own finances, a more effective policy might have made a difference.