American history has enjoyed some remarkable instances of exactly the right person appearing at exactly the right time. Franklin Roosevelt comes to mind. George Washington. George S. Patton. George Marshall. Martin Luther King. Abraham Lincoln. There are hundreds of others, in all different disciplines, all arts, all walks of life. Some of these folks have become the equivalent of legends, revered so much and by so many that we’ve forgotten that all they really were is people. They find themselves placed on our currency, our dollar bills, in a mist-cloaked remembrance, places they’d surely never thought they’d end up. But in their time they were real people just like the ones you see daily on the street, on the train, driving their cars, working for a living every day. Just people, not too different from the rest of us.
What set them apart was the way they reacted to circumstances of acute stress and conflict. How they displayed grace under enormous pressure in unusually stressful and critical times where the fate of the entire country was truly at risk, and they were in a position to make a difference. How they coped against disheartening and discouraging odds and overcame them through force of will, ingenuity and perseverance. That is what turns ordinary people into extraordinary national figures, ones we want to preserve in our memories for future generations.
The latter part of 2008 was one of the most acutely stressful times in the country’s history:
It was a room full of people who rarely hold their tongues. But as the Fed chairman, Ben S. Bernanke, laid out the potentially devastating ramifications of the financial crisis before congressional leaders on Thursday night, there was a stunned silence at first.
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When you listened to him describe it you gulped," said Senator Charles E. Schumer, Democrat of New York….“History was sort of hanging over it, like this was a moment.”
When Mr. Schumer described the meeting as “somber,” Mr. Dodd cut in. “Somber doesn’t begin to justify the words,” he said. “We have never heard language like this.”
Your job was probably hanging in the balance. Your employer, your co-workers, contacts, everyone in your LinkedIn account, everyone you know contributing some type of function that did not implicate the actual maintenance of our civil society—and even many that did-- were looking down the maw of an unprecedented and overwhelming economic calamity that would have effectively brought consumer spending—the engine of the US economy— to a standstill. A calamity that would have effectively frozen credit for businesses and paychecks for tens of millions of people, crippling commercial activity for years, as the financial and banking industry that facilitates and sustains the flow of capital in this country and much of the world skidded to a dead halt.
A bullet went right by our heads and the heads of everyone in our families. And like all bullets, for the most part no one saw it coming.
According to a recent analysis by former Federal Reserve Vice Chairman Alan Blinder and Moody’s Analytics’ Chief Economist, the actions of the Obama Administration both in validating the Troubled Asset Relief Program (TARP) and following through with economic policies designed to stimulate the economy dramatically altered the vertiginous economic trajectory this country faced as a result of the Financial Crisis.
In a nutshell, Blinder and Zandi estimate that without the full set of federal responses, the recession would have been more than three times deeper and lasted twice as long; we would have lost twice as many jobs and unemployment would have peaked at 16 percent rather than 10 percent; the budget deficit would have grown to 20 percent of GDP, reaching $2.8 trillion in fiscal 2011; and unemployment today would be 7.6 percent, not 5.1 percent.
(these figures are from late 2015; the unemployment rate now is actually lower)
Andrew Ross Sorkin, the New York Times’ financial columnist, and author of this article in the Times’ Magazine this week, examining the President’s economic legacy, believes unemployment could have reached 25%, a figure which was confirmed by Treasury Secretary Henry Paulsen at the outset of the crisis:
The people in the room making the decisions for the U.S. government... were really worried that a series of bank bankruptcies would lead to a bigger issue.
“General Electric was going bankrupt next,” he said, taking its 287,000 jobs around the world with it. The effects of that bankruptcy would have been worse than many countries going bankrupt, he said.
The effects could have spread to all kinds of companies, he said.
“All of a sudden, the kid flipping burgers is being affected by the guy in pinstripes,” he said.
As noted by Fed Chairman Bernanke, as firms lost access to credit (or feared doing so) they began freezing all new hiring, and began firing people. Investments were delayed or canceled. Bernanke was actually quoted in confidential testimony he gave to the Financial Crisis Inquiry Commission in 2009 as saying that the shocks to the economy caused by the financial meltdown were worse than those experienced in 1929.
What differentiated the result of 2009 from what happened to the country in 1929 was the considered policy response of the both the Federal Reserve and the incoming Obama Administration. Instead of a timid Fed response that actually tightened monetary policy, we had Ben Bernanke dropping interest rates to zero and instituting quantitative easing. Instead of Herbert Hoover’s policies we had Barack Obama.
And instead of the horrendous scenario that loomed in 2008, the US economy has added jobs for 73 consecutive months, the longest period of sustained job growth this country has ever seen. The budget deficit has dropped 75%. Unemployment stands at a paltry 5%. The Dow Jones Industrial average has risen from 7000 to 17000. The country’s total economic growth is now outstripping every other nation’s economy on the planet. This all from a nadir where the economy left to President Obama by George W. Bush had been hemorrhaging 800,000 jobs a month. The financial crisis wiped out entire governments in Europe and may have permanently wrecked the lives of an entire generation there. Its impact here was severe, but we did not experience what Europe did.
It is critical not only for Democrats, but for all Americans, to understand that this didn’t happen by accident. Our country’s recovery from this man-made disaster concocted by the recklesss and heedless financial services industry and the nation’s largest banks owed itself to conscious choices made at the time. While some of those choices (TARP is the most notable) were set into motion before Obama was actually inaugurated, the path forward out of this unprecedented mess was by no means unanimous:
Many within Bush’s own party were supporting an alternative bill that was focused on mortgage-asset insurance and tax cuts. But Obama, convinced that anything short of a major bailout could lead to economic catastrophe, said Democrats should back Paulson’s plan. They did.
Obama was well aware at the time that he would take the heat from those within his own Party for signing on to a deal that made it look like he was in bed with the banks. But that was what was necessary to halt the disastrous free-fall in the economy. No one --at least no one with any economic legitimacy—believes TARP, by buying back 700 billion in bad or toxic assets, didn’t succeed in doing that.
The next step was more problematic—how to bring the economy back from the brink of disaster. That required a major stimulus that had to be spearheaded by the Administration. And this is where the Republicans (and some Democrats) did everything they could to wreck whatever progress was being made:
In truth, of course, the political headwinds against stimulus were extraordinary. Republicans dismissed it as an irresponsible shopping spree that would leave the country in even greater debt. Representative John A. Boehner of Ohio, the minority leader in the House, physically threw the bill on the ground, arguing that it was “nothing more than spending, spending and more spending.” But Democrats, led by the “deficit hawk” wing of the party, also fought against anything too ambitious, and Obama, still in the first month of his presidency, was left in the position of negotiating with his own party, such that he was just barely able to get the $800 billion on a straight party-line vote.
Fortunately for all of us the President was able to inject even further stimulus into the sluggish economy in spite of unanimous Republican opposition. That stimulus acted to shore up the economy until the business cycle recovered some sense of normality. The Affordable Care Act, which affects a health care industry comprising a huge percentage of our GDP, is also living up to its expectations as an economic success.
One can only speculate on what our economic growth would be like today if the Republican Party had opted to work with this President for the benefit of the American people. But that didn’t happen. As a result, while this President’s policies undoubtedly saved the country from economic collapse, and the recovery has been unprecedented, further measures needed to secure the future for ordinary, middle class Americans have been stymied in areas where cooperation by Republicans could have made a huge difference. Part of the problem, as Sorkin’s article points out, has been the unceasing advance of technology. Part of the problem is globalization, “inversions” and US manufacturers sending their factories overseas. This reflects a business ethic that developed long before Obama came to office, one in which a corporate CEO has no affinity or connection to the population where his company is located, be it in another state or another nation:
“When you’re talking about inversions,” Obama said, referring to the practice whereby American companies effectively move overseas, “or you’re talking about C.E.O. perks or the gap between what the assembly-line worker is making compared to what the C.E.O. is making, all those things used to be constrained by the fact that you live in the city, you’re going to church in that city, your kids might be going to the same school as the guy who is working on the assembly line because public schools actually were invested in,” Obama said. “And all those constraining factors have been greatly reduced or, in some cases, eliminated entirely. And that contributes to the trends toward inequality. That contributes to, I think, a divergence between how the people who run these companies and economic elites think about their responsibilities and the policies that they promote with political leaders. And that’s had, I think, a damaging effect on the economy overall.”
He might have noted that the New Gilded Age lifestyle and social and political mileu of many corporate heads is wholly divorced from the reality of those workers providing the labor that churns up their corporate profits, an often-overlooked factor perpetuating income inequality. Or that one of the reasons for continued wage stagnation is that these same companies know fully well that their work force remains grateful enough to have a job in the first place. And that if they try to unionize, these companies have bought enough Republican governors and state legislatures to stop them.
As Barney Frank points out in Sorkin’s thorough article, “You get no credit for disaster averted or damage minimized.” Well, this President should. It’s absolutely clear that had a Republican Administration persisted the in 2009 the response to the crisis would have begun and ended with the bank bailout—there would have been no stimulus, and therefore no recovery. The Blinder study clearly attributes the recovery to the combination of the Fed’s action and the Obama federal policies: “The policy response is more than the sum of the parts.” The only part of “stimulus” the Republicans were willing to consider was massive tax cuts for the wealthy and businesses, which in reality create little to no economic stimulus. That has been their position ever since taking power in the Congress. If a Republican President had succeeded Bush there is no doubt we would still be trying to crawl out of an impossibly deep, miserable hole, the same type of hole they’ve spent the last six years fighting to push us back in.
This President gets all that, even as the Republicans gear up for an election campaign premised on drumming up outrage in their base for his non-existent “failures:”
“If you look at the platforms, the economic platforms of the current Republican candidates for president, they don’t simply defy logic and any known economic theories, they are fantasy,” Obama said. “Slashing taxes particularly for those at the very top, dismantling regulatory regimes that protect our air and our environment and then projecting that this is going to lead to 5 percent or 7 percent growth, and claiming that they’ll do all this while balancing the budget. Nobody would even, with the most rudimentary knowledge of economics, think that any of those things are plausible.”He continued: “If we can’t puncture some of the mythology around austerity, politics or tax cuts or the mythology that’s been built up around the Reagan revolution, where somehow people genuinely think that he slashed government and slashed the deficit and that the recovery was because of all these massive tax cuts, as opposed to a shift in interest-rate policy — if we can’t describe that effectively, then we’re doomed to keep on making more and more mistakes.”
It takes more than just good manners to calmly put up with an opposition party that has not only been proved completely wrongheaded in all of its positions, a party which doesn’t bother to re-examine its mistakes but chooses instead to heap disrespect and abuse on the one man who saved this country from a calamity. It takes an extraordinary and unique person to maintain his cool dignity and continue to lead under those conditions.
Which is why Barack Obama was exactly the right person to lead this country, at exactly the right time.