A simple theory of why Obama didn’t come out fighting in 2009

My co-bloggers John Sides and Josh Tucker responded yesterday to a recent newspaper article in which psychologist Drew Westen argues that Barack Obama made a mistake by making conciliatory noises rather than aggressive Wall-Street-blaming in his inauguration speech and after.

Westen argued that had Obama set up a narrative with clearly defined bad guys, he would’ve had more success in policy and public opinion. John and Josh argue that (a) it’s results, not rhetoric, that sway public opinion, and (b) if anything, aggressive rhetoric just makes it harder to achieve the sorts of cross-party alliances that a president needs to have policy successes.

I have a slightly different reaction, in two parts:

1. It’s probably unrealistic to suppose that Obama would have led off his presidency with a speech attacking Wall Street. Obama is probably the last politician you’d expect to attack these guys. First off, in 2008, Obama was the preferred candidate of Wall Street—they were a big source of his campaign contributions and he supported the bailout. At the same time, I think many on Wall Street never really trusted Obama and were on the lookout for signs that he was really a left-wing redistributionist.

Someone on the left wing economically could attack Wall Street every day—he’d have nothing to lose—and a right-wing politician could slam Wall Street as well, they might recognize it as cheap talk. But a president who is paid for by financial types who don’t fully trust him—he’s in the worst possible position to make that rhetorical move.

2. More to the point, I don’t think that in January, 2009, Obama had any feeling he was in trouble. For one thing, he’d spent the previous two years beating the odds and winning the presidency. (Yes, a Democrat was favored in the general election, but Obama was only one of several Democrats running.) As I and others have discussed many times, successful politicians have beaten the odds and so it is natural for them to be overconfident about future success.

But, getting back to the big issues facing the voters, I assume that Obama figured that the economy would bounce back in 4 years. I suspect his model was Reagan in 1981-1984. Who could imagine, back in 2009, that the economy would still be in the dumps in 2011? Paul Krugman, maybe, but he wasn’t making policy. (One big difference was that Reagan faced a Congress full of Republicans who wanted tax cuts and Democrats who wanted economic stimulus, and every step of legislative fighting led in the direction of economic expansion. It didn’t work that way for Obama.)

If you accept the hypothesis that Obama came into office expecting an economic turnaround in four years, then everything makes sense. Why would he attack Wall Street in his inaugural address? No need to piss off the moneymen. Why be partisan? Better to pass moderate legislation with 70 or 80 votes in the Senate rather than fight to the death to get everything on the Democratic party’s wish list. Long-term, the 2006 and 2008 elections gave a lot of people the impression that the Democrats would be in the driver’s seat for awhile, so there seemed to be no rush.

Arguably the best advice for Obama would’ve been the opposite of Westen’s. Maybe he should’ve been more bipartisan from the start and done what it took to get those 70-80 Senate votes on key issues. I don’t know.

The key to Westen’s and similar analyses is that Obama would be doing better now had there been a bigger, more effective stimulus package, and maybe Obama could’ve gotten there by more actively enlisting public opinion in early 2009. This might well be correct, but I don’t think the Obama team had any sense that the economy was in such bad shape that this would be needed. And if they didn’t feel that urgency, I can’t see them turning on their friends on Wall Street.

29 Responses to A simple theory of why Obama didn’t come out fighting in 2009

  1. Luis August 8, 2011 at 1:44 am #

    Given that he couldn’t get 60 votes for reasonable, rational policies, I don’t see what he could possibly have done that would have gotten 70 or 80 votes. As someone else commenting on this piece pointed out, if he’d endorsed puppies he’d immediately have 30-35 senators declaring themselves to be cat people. But that 60 vote hurdle is really the problem, isn’t it? For Westen’s argument to have merit, either (1) fiery rhetoric has to convince Ben Nelson to be something other than a Republican in disguise on economic issues or (2) fiery rhetoric has to convince Harry Reid to force actual filibusters so that 51 votes is enough to pass legislation. Has anyone (Westen or otherwise) actually made a plausible argument to that effect?

  2. pietro August 8, 2011 at 2:00 am #

    #1 is on the mark. Obama will not perform as a pwogressive but as a corporate plutocrat.
    But you’re #2 is bewildering….that obama’s interest in his reelection bid makes him blind and/or complacent to the worsening systemic crisis we’ve been in for years doesnt get him of the hook. Is that what you’re really trying to do? make excuses?

    “But, getting back to the big issues facing the voters, I assume that Obama figured that the economy would bounce back in 4 years. I suspect his model was Reagan in 1981-1984. Who could imagine, back in 2009, that the economy would still be in the dumps in 2011? Paul Krugman, maybe, but he wasn’t making policy.” So, you see, thats why Obama and the Summers-Geihtner gang are a failure…

    “The key to Westen’s and similar analyses is that Obama would be doing better now had there been a bigger, more effective stimulus package, and maybe Obama could’ve gotten there by more actively enlisting public opinion in early 2009. This might well be correct, but I don’t think the Obama team had any sense that the economy was in such bad shape that this would be needed. And if they didn’t feel that urgency, I can’t see them turning on their friends on Wall Street.” Have you no shame, man?

  3. eric August 8, 2011 at 3:15 am #

    Well, I have a tendency to think that homophily may have some influence here. Given Obama’s background and the people he chose to be his economic advisors it seems that his natural state was to trust the people he knew. It’s certainly not an uncommon behavior. We all know, however, that we can all get bad advice from people we trust who may seem to know about things in which we aren’t expert. There’s much talk about Obama’s attempts to replicate Lincoln’s “Team of Rivals” (however absurd that construct may actually be, it’s rumored it’s a driving force in his thinking) but I wonder, just exactly who would be considered Obama’s rivals in terms of economic policy? We know quite well, what he was thinking, concerning, say, “entitlements” years before he was even a consideration for nominee. We also know, quite well, the people he trusted to give him advice concerning economic policy by who he picked for specific positions. His pick for Secretary of the Treasury comes to mind on that score.

    He certainly did not attempt to appoint people like Paul Krugman to any substantial position in his administration. Just who, then are his rivals? I submit that Paul Krugman fits that description more than, say, Geithner. I suspect that Obama is not so much a victim of his temperament more than any other president, as he is a victim of his being influenced by obviously bright people who he knows, who just happen to be wrong. The fact that they may claim to be conservative, or not Democrats may say that they are rivals. But that’s not actually the case. I suspect that Obama agrees (right or wrong, in terms of actually effective policy) with people he’s picked to advise him. He doesn’t actually have any rivals on his team, anymore. And he’s actually ignored the people who would actually be, very easily, defined as “rivals” in that he seems to have rejected certain aspects of Keyensian theory.

    I’ll put it this way. It’s been established, by many measures, that Obama actually leans, policy-wise, in a center-right manner, at the very least in specific economic policies, at least that’s what his rhetoric can easily lead us to believe. So then, who would actually be his “rival”? It’s apparent that he actually leans more to the Republicans than the left of his own party on specific issues (say raising the age of Medicare qualification). So, really, he’s more in disagreement with the left flank of his own party than the moderates of his supposed opposition party. He campaigned, in the primary, on a position against the mandate for health insurance. Again, very much more at odds with the base of his own party.

    So where does that leave us, in ascertaining where his preferences lie? And who, really, would be his “rivals”, assuming that including “rivals” in his cabinet would be worthwhile, policy-wise or politically?

    His rivals become a little bit more clear in this observation (and, oddly enough, they aren’t quite as partisan as we might think). It’s clear that he didn’t pick, or listen to, people who disagreed with him on specific economic policies, and this was predicted. Including an Austan Goolsbee on your economic team, from the beginning, should easily point to the priorities and ideas that anybody might have. Ignoring a Krugman should do the same.

    His rivals weren’t Republicans, per se, although I don’t think he quite understood what the Republican party might threaten in any negotiation. He agrees, more than the average Democrat, or even the average American, with specific Republican Party policy initiatives and ideas. A “grand bargain’ makes much more sense when looking at it from this perspective. He considers the left more of a problem than the so-called moderates, in terms of actual policy choice and even, I suspect, political perspectives.

    Probably a terrible mis-calculation on his part. But the same thinking caused enormous damage to the Democrats in 2010 and few people have listened to the cries against that mis-calculation since.

    • Andrew Gelman August 8, 2011 at 3:47 am #

      Eric:

      Yeah, I suspect that’s a lot of it. But to your story I would also add (1) campaign funding and (2) a general expectation that the economy would bounce back in 4 years, Reagan-style.

      The importance of (1) is that, even if Obama had Krugman whispering in his ear, he’d still be wary of alienating his big funders, people who probably were already a bit suspicious of him.

      The importance of (2) is that you can separate economic advice on the left of Obama into two parts: (a) the argument that redistributionist policies are a good idea morally and a short- and long-run stimulus to the economy, and (b) the argument that things were worse than they seemed and if you don’t do a big stimulus in 2009 and maybe make some big structural changes, then the economy might not recover by 2012. Obama would’ve needed people giving him the political argument (b), not just the policy argument (a).

  4. Ron E. August 8, 2011 at 8:49 am #

    There’s an even simpler theory than any of that. Being confrontational, partisan, and/or strongly ideological is just not Obama’s personality.

  5. liberal August 8, 2011 at 8:55 am #

    “Who could imagine, back in 2009, that the economy would still be in the dumps in 2011?”

    Huh? The slump following the housing bubble crash was clearly, from the outset, a “balance sheet” recession; and economic history clearly shows that recovery from those takes a very, very long time.

  6. Don Williams August 8, 2011 at 9:29 am #

    1) Re Gelman’s question “Who could imagine, back in 2009, that the economy would still be in the dumps in 2011?”
    ———–
    1) Oh, I don’t know. Maybe those who asked, as I did, why the economy was falling even after George W Bush had borrowed $4 trillion within 8 years and dumped it onto the fire? And what would happen when the spigot was turned off?
    2) What cracks me up is remembering all those Democrats over on Matthew Yglesias’s blog who had mocked the “gold bugs” for several years. How are their IRAs doing?
    3) Who could imagine? How about Nouriel Roubini warning of a “L-shaped Recovery” in March 2009? http://www.forbes.com/2009/03/04/global-recession-insolvent-opinions-columnists-roubini-economy.html
    4) Who could imagine? How about Robert Wiedemer in his 2009 book “Aftershock?”
    5) Why wasn’t Nobel Economist Paul Krugman consulted by Obama? Or
    Nobel Economist Joseph Stiglitz? What award has Larry Summers ever won –other than one for Best Oral Sex Given to Rich People?

  7. Don Williams August 8, 2011 at 9:35 am #

    1) I am also curious by Gelman’s reasoning — which probably reflects Washington DC ethos better than my own. But I am puzzled why any President — with total unfettered power — would place the opinions of wealthy donors above the well-being of 310 MILLION Americans. Why should Obama care if he is reelected?

    2) Or am I missing the point? Is Obama’s REAL worry that he might NOT pick up $100 Million in retirement the way that Bill Clinton has done?

    How did Wild Bill get all that money , by the way? Did he invent a cure for cancer or something?

    • LFC August 8, 2011 at 12:44 pm #

      Clinton made a lot of money on his memoirs, for one thing.

      • Don Williams August 8, 2011 at 12:52 pm #

        Yes, that is one way to transfer money to an underling. If you mark them down enough, Sometimes you can even sell those pallets of books instead of having to send them to the landfill. Anyone ever got an email offering a big discount on the memoir du jour?

  8. GeraldY August 8, 2011 at 10:43 am #

    It seems like many are forgetting how controversial Obama’s support of the allocation of the second $350 billion in TARP funds was. As I recall, that and the ensuing bonus scandals really drove the narrative in 2009. It was that narrative which inhibited the kind of populist message that Westen suggested.

  9. A H August 8, 2011 at 10:56 am #

    This makes sense as an explanation for the first two years of Obama’s presidency, but it doesn’t explain the disastrous year he just went through.

    By the time of the 2010 mid terms Obama should have realized that the Republicans were not going to cooperate with him and that the economic recovery was far from certain, (particularly with the condition of the Eurozone). So what explains his behavior since then? I’ve been at a lose for this past year to understand it.

  10. Ziggy August 8, 2011 at 11:59 am #

    I enjoyed Mr. Weston’s piece yesterday – after all, who doesn’t appreciate a shot of righteous indignation with their morning coffee to get the blood pumping. But, in the end, the viewpoint expressed was just another progressive / populist porn fantasy about woulda coulda shoulda.

    As the President makes his rounds among Wall Street high rollers, he has every justification for looking them in the eye and saying, “mission accomplished.” He should not let the Street’s incessant preemptive whining cloud the fact that he delivered the extend and pretend goods. Not only did he do what was necessary to save their sorry asses – and took a gazillion body blows in the process – but did so in a way that allowed them to profit magnificently.

    For the President’s core constituency, his has been a wildly successful presidency. If I were Mr. Obama, I would be extremely miffed and mystified by anyone who suggested otherwise.

  11. B.D. Jones August 8, 2011 at 12:55 pm #

    Don Williams is completely right, but I would add Rogoff and Reinhart’s 2008 book, an empirical tour de force which showed convincingly that financial crises lead to long and deep recessions and very slow recoveries.

    So…Andrew must explain the Obama complacency on the economy, given the very substantial evidence that the crisis would be long and deep. I believe I recall that Jon Alter reports in his book that he saw a very involved president on most issues, but a deference to Geitner and Summers on economics. Why? Follow the money? Or some other reason? Is this not much more important than rhetoric in all political scientists’ minds?

  12. TallDave August 8, 2011 at 2:25 pm #

    First off, Reagan had a rebound from an induced recession intended to break the back of inflation — that’s why he saw 9% growth in the recovery. If Obama was expecting that rather than something like the 1993 or 2001 recoveries, then he was wildly over-optimistic.

    Second, spending increased dramatically under Obama, to something like 40% of GDP (all gov’t spending) even as Bernanke ran the printing presses. It’s all very well for Krugman to pretend things would be better if we’d expanded it to 50% instead, but if Obama had done that our bond rating would be nearing junk and he’d be facing impeachment.

  13. Don Williams August 8, 2011 at 2:57 pm #

    1) But the major problem in our economy is aggregate demand. And that is because the people who need to buy things don’t have the money and the people who have the money have their demand for luxury largely sated.

    It is curious that in this recent debate NO ONE in either party pointed out to the voters that the share of national income held by the richest 1 percent has soared from 8 percent in 1978 to 25 percent today. That the median real wage today is hundreds of dollars LESS than what it was 30 years ago.
    2) And the Financial Bailout didn’t take from the rich and give to the poor — kinda the reverse, actually. I argued in Sept 2008 over on Matt Yglesias blog that the government should let Wall Street take its losses and isolate the real economy by setting up a National Bank that would make profits for the taxpayer — investing in REAL businesses that make real products and employ people.

    Instead, Obama and Bush gave $Trillions to banks who stuck the money in the vaults and sat on them –while millions of small businesses collapsed into bankruptcy due to lack of credit, laying off employees who in turn cut back on demand.

    And what kind of Tribune of Little People lends to Bank of America and Citigroup at 1 percent so that BOA and Citi can charge us 25 percent on our credit card balances. Why were a few big banks bailed out while millions of foreclosed homeowners were not?

  14. Don Williams August 8, 2011 at 3:01 pm #

    Why are Goldman Sachs executives dividing up a $16 billion bonus pool — with money gained from a $175 billion taxpayer bailout of Goldman counterparty AIG — while tens of millions of Americans are becoming long term unemployed?

  15. LFC August 8, 2011 at 4:16 pm #

    It is curious that in this recent debate NO ONE in either party pointed out to the voters that the share of national income held by the richest 1 percent has soared from 8 percent in 1978 to 25 percent today.

    I’d be surprised if no member of the Progressive Caucus in the House had mentioned this. In the Senate, I believe Menendez, for one, did bring up the distributional issue in a speech that I happened to hear (in which, btw, he cited Burke and Weber — somewhat odd choices perhaps, but v. appropriately deployed in the context).

  16. mulp August 9, 2011 at 4:47 am #

    Obama is the worst kind of politician. He believes that once elected, the member of Congress or the President represents all the people in promoting the general welfare.

    What a fool!

    Politicians know it is a zero sum gain. For the Republican base to gain, Democrats must suffer, because the idea that we are all Americans is just totally bogus. There are the winners, Republican of course, and the losers, always Democrats.

  17. Nick August 9, 2011 at 1:01 pm #

    “The key to Westen’s and similar analyses is that Obama would be doing better now had there been a bigger, more effective stimulus package, and maybe Obama could’ve gotten there by more actively enlisting public opinion in early 2009. This might well be correct, but I don’t think the Obama team had any sense that the economy was in such bad shape that this would be needed.”

    Christina Romer, chair of Obama’s CEA, initially proposed 1.4 trillion in stimulus. That’s almost double what eventually worked through the pipelines. Members of the Obama economic team certainly anticipated the need for far greater stimulus than was eventually pushed for. So, there indeed did exist a sense of the dire circumstances, even at the time. Most people seem to forget/miss this point.

    • Andrew Gelman August 9, 2011 at 2:10 pm #

      Nick:

      I agree but I’m guessing they were still thinking short-term: consequences for 2010 not 2012.

    • Dick King August 10, 2011 at 12:00 pm #

      So we got into the fix by collectively borrowing way too much money and spending it.

      And the way out is to collectively borrow a month’s GDP and make sure that it gets spent as rapidly as possible.

      Got it.

      -dk

  18. anon August 11, 2011 at 1:05 am #

    Obama’s advisers thought he needed more stimulus because the economy was that bad. He didn’t give it. You can’t seriously suggest that he is not responsible rejecting their advice.

  19. Andrew Gelman August 11, 2011 at 7:57 am #

    Anon:

    People have complex overlapping thoughts. Yes, many of Obama’s advisors wanted a larger stimulus, but I suspect that many of them did not have the same sense of urgency about the economy and the stimulus as they did in 2008 about the financial crash.