As the 2010s draw to a close, the end-of-decade retrospectives are rolling in. The New Republic, utterly transformed from its neoliberal warmongering early-2000s self, has a package savaging the Democratic Party's leaders of the period called "The Decade from Hell."
New York's Jonathan Chait, who worked for the old TNR, is annoyed. "Does the Left Have Any Better Ideas Than Obama's?" he asked in a recent piece about the package. They do indeed — but this raises a better question: are liberals like Chait ever going to honestly reckon with the disastrous failures of the Obama presidency?
Let's start with the stimulus bungle in 2009, and Chait's book Audacity: How Barack Obama Defied His Critics and Created a Legacy That Will Prevail (a book which came out in January 2017 and whose title had to be changed at the last minute, alas.) Back then, the economy was in free fall, and the Obama administration badly fumbled its response. Then-economic adviser Larry Summers bullied Christina Romer (another adviser) into cutting the administration's stimulus package proposal far below what she estimated was necessary to restore economic health. Then it turned out the original estimates of the size of the recession were themselves undershoots — the crisis was actually much worse than they thought. Whoops!
This faceplant set the stage for the ensuing pivot to austerity, a decade of economic stagnation, growing backlash politics, trillions in output flushed straight down the toilet, and the election of Donald Trump.
Chait, to his credit, does fault the administration for the lowballed initial bid. Other more hackish administration apologists argue that this was as much as could be gotten, but as The Intercept's Ryan Grim argues in his book We've Got People, the administration did not even try to pressure moderate senators by putting an aggressive stimulus before Congress and blaming them for any economic chaos if it should be voted down — exactly what happened with the initial round of the bank bailout under Bush.
However, Chait does drastically overstate the scale of the stimulus. He repeats Michael Grunwald's line that "even Franklin Roosevelt's New Deal only consumed about 1.5 percent of the economy at its largest point." But even if narrowly true, this is quite misleading, because the New Deal was much bigger and went on longer. As economist Bill Dupor writes, "the cost of the Recovery Act was equal to 5.7 percent of the nation's 2008 output. On the other hand, the cost of the New Deal ... was 40 percent of the nation's 1929 output." At bottom, the New Deal was a drastic reordering of the American economy, which produced thousands of pieces of infrastructure that are still in use, and the Obama stimulus was — by design — a conservative, timid attempt to restore the pre-crisis status quo.
Second, let's consider the foreclosure crisis. The administration's actions here were far, far worse than anything they did on the stimulus — as it actively chose to make foreclosure worse. The mechanisms were extremely complicated, as financial analyst Carolyn Sissoko writes, but basically the administration used a variety of tricky, subtle actions to ensure that it was homeowners and the government who ate the losses of the foreclosure crisis, not the banks.
Under direction of Treasury Secretary Tim Geithner, the government largely nationalized most of the mortgage lending system, allowing the banks to quickly shed millions of toxic waste loans off their books. Then Obama reneged on his promise to change bankruptcy law to allow a homeowner to write down the value of their primary mortgage down to its actual market value (or "cramdown"). Then the administration refused to include principal writedowns (or reductions in the amount owed) for the first two critical years in its Home Assistance Mortgage Program (HAMP) — basically a slush fund from the original bank bailout granting Obama wide authority to help homeowners — and the actual program was such a Kafkaesque nightmare that almost nobody participated.
The reason the administration did these latter things was because cramdown or principal reductions would have created big losses for the banks. As Sissoko writes, "There was a housing bubble. Somebody was going to have to absorb the losses that are created when lending takes place against overpriced assets. Because in the name of financial stability the Fed and Treasury decided that banks weren't going to bear any of the losses on the origination and securitization of bad mortgages, they had to find a way to put the tab to the government and to the public."
The words "home assistance mortgage program" or "HAMP" do not appear in Chait's book. Neither does the "robosigning" scandal, in which the Obama Justice Department arranged for a wrist-slap fine for banks committing industrial-scale mortgage fraud.
Obama's illegal refusal to prosecute Bush-era torturers is not mentioned either in Audacity, nor his illegal justification for their crimes. Neither is his decision to back the CIA to the hilt in its bureaucratic trench fight with the Senate Intelligence Committee over suppressing the Senate torture report — recently dramatized in the film The Report.
Centrists like Chait have long pushed the idea that Obama's style of finance-friendly moderation, which dominated the Democratic Party from the 1970s through 2016, is the best possible political stance. The idea that Obama might have been handed a golden opportunity to restore American institutions and bungled it in a doomed attempt to preserve the status quo is not an attractive one for them. So perhaps easier to just not mention the above parade of gruesome failure when boosting up such a "legacy."