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The Price of Politicsby Bob Woodward
The lavish dinner at the Capital Hilton Hotel in downtown Washington on the evening of Saturday, March 11, 2006, was about the last place you would expect to find him. But there was Barack Obama, age 44, the junior senator from Illinois for only the last 14 months, in formal white-tie with tails and very much at ease in the crowd of 600. His trademark smile, broad and infectious, dominated his face as I met him for the first time.
We were at the annual Gridiron Club dinner—a rite of passage for national political figures such as Obama. The crowd included President George W. Bush and most of the major politicians in Washington. It was one of Senator Obama’s maiden voyages into the unsavory belly of the Washington beast. Bush was to speak for the Republicans, and Obama had been selected to speak for the Democrats.
Founded in 1885, the Gridiron—named because its motto was to “singe but not burn”—had the reputation of being an old-school event of in-jokes, skits and music that seemed more fitted to a bygone era.
“You’re from Wheaton, Illinois,” Obama said to me, referring, unprompted, to the small town where I was raised in the late 1940s and ’50s. Wheaton, 25 miles west of Chicago, is home to Wheaton College, best known for its alumnus evangelist Billy Graham, whose influence permeated the town.
“I’ll bet you didn’t carry Wheaton,” I said confidently, referring to his Senate race 16 months earlier. A bastion of Midwestern conservatism and country-club Republicans, Wheaton was the most Republican town in the country in the 1950s, or at least regarded itself that way.
“I carried DuPage County by 60 percent!” Obama responded, beaming that incandescent smile. Wheaton is the county seat of DuPage.
I said that seemed utterly impossible. That couldn’t be the Wheaton or DuPage I had known.
Obama continued to smile me down. The certainty on his face was deep, giving me pause. Suddenly, I remembered that Obama’s opponent for the Senate seat had been Alan Keyes, the conservative black Republican gadfly. Keyes had substituted at the last minute for the first Republican nominee, who withdrew from the race when divorce and child custody records revealed that he had taken his wife to sex clubs in New York, New Orleans and Paris.
“Well, everyone who runs for office should have Alan Keyes as their opponent,” I said, trying to hold my ground.
Obama smiled some more—almost mirthful, yet unrevealing. The conversation turned to Illinois politics, and Obama ticked off the areas where he had strong support—Chicago, the labor unions—and weak support, downstate and the farm areas. He defined the categories skillfully, expanding on the state’s interest groups and voting blocs. He made it clear he knew where he had work to do.
He sounded like a graceful old-fashioned pol. Though he had carried DuPage by 60 percent, he had won 70 percent of the statewide vote.
His wife, Michelle, stood by his side in a stunning gown. But the focus and the questions from people crowded around were all directed at the dazzling new star.
• • •
When he appeared at the podium several hours later, Obama stood perfectly erect, projecting radiant confidence.
“This is a true story,” he said.1 “A friend sent me a clip about a new study by a psychologist at the University of Scotland who says sex before a public speaking engagement actually enhances your oratorical power. I showed this clip to Michelle, before we arrived here tonight. She looked it over, handed it back and said, ‘Do the best you can!’ ”
The laughter ignited instantly.
“This appearance is really the capstone of an incredible 18 months,” he said, citing the keynote speech at the Democratic National Convention in 2004, cover of Newsweek, a best-selling autobiography, Dreams from My Father, a Grammy award for reading the audiobook. “Really what else is there to do? Well, I guess . . . I could pass a law or something.”
The self-deprecation played well.
Referring to Senator John McCain’s positive treatment by the press up to that point, Obama said, “Some of my colleagues call John a prima donna. Me? I call him a role model. Think of it as affirmative action. Why should the white guys be the only ones who are overhyped?”
The self-awareness played smooth.
Noting the speculation that the 2008 presidential campaign could come down to McCain, a maverick Republican, versus Senator Hillary Clinton, he said, “People don’t realize how much John and Hillary have in common. They’re both very smart. Both very hardworking. And they’re both hated by the Republicans!”
This played bipartisan.
Obama turned toward President Bush, who was on the stage nearby. “The president was so excited about Tom Friedman’s book The World Is Flat. As soon as he saw the title, he said, ‘You see, I was right!’ ”
The joke played confident.
“I want to thank you for all the generous advance coverage you’ve given me in anticipation of a successful career. When I actually do something, we’ll let you know.”
The audience clapped and hooted in delight.
After dinner the buzz was like a chain reaction. Not only could this young Obama tell a joke on himself, with the required self-effacement, but he had remarkable communications skills. An editor at The Washington Post once said that journalists only write two stories: Oh, the horror of it all, and Oh, the wonder of it all. Obama was the wonder of it all that night and he basked in the attention he had captured. Rarely have I seen anyone manage the moment so well. He had frankly and forthrightly trumpeted his lack of accomplishment, and the roomful of egos ate it up. But if he had done nothing much so far, why was he there? Why the buzz? The approbation? What exactly was being measured?
It was the dramatic impact he was having on his audience. The triumph was the effect.
Twenty-five years earlier in 1981, I had attended a Gridiron dinner where the speaker for the Democrats was Senator Daniel Patrick Moynihan, the bookish intellectual who had served in prominent posts in both Republican and Democratic administrations. Moynihan, then 53, made some good jokes, but his theme was serious: what it means to be a Democrat. The soul of the party was to fight for equality and the little guy, he said. The party cared for the underdogs in America, the voiceless, powerless and those who got stepped on. It was a defining speech, and the buzz afterward was that Moynihan was going to be president. He wasn’t, of course. That was then, this was now.
Obama had not once mentioned the party or high purpose. His speech, instead, was about Obama, his inexperience, and, in the full paradox of the moment, what he had not done.
Two and a half years later, he was president-elect of the United States.
Two weeks before their inauguration, President-elect Barack Obama and Vice President-elect Joe Biden headed to Capitol Hill to meet with the Democratic and Republican leaders of the House and Senate. It was 3:15 p.m. on Monday, January 5, 2009, and Obama was fresh from a 12-day Hawaiian vacation.
The leaders gathered in the ornate LBJ Room of the Senate decorated with a painting celebrating the laying of the first transatlantic cable. In it, the allegorical figures of Europe and America joined hands in friendship across the ocean.
As if in that spirit, Obama called on the group to work together across the partisan divide to address the looming economic crisis.
“Action on our part is urgent,” he told them. Unemployment was at 7.2 percent and rising, and the economic situation was threatening to get worse with the financial system in full-blown crisis. He wanted the Congress to quickly pass an economic stimulus package in the range of “$800 billion to $1.3 trillion.”
It would include some tax cuts—sweet music to the Republicans—and some investment, such as spending on roads, buildings and other job-creating projects. In addition, he said, they had to “build in medium- and long-term fiscal discipline” to tame the growing federal deficit.
Looking at the four Republican leaders—the GOP was in the minority in both houses of Congress—Obama reached out.
“I want everyone’s ideas,” he said. “But we can’t get into political games.”
Nancy Pelosi, the California Democrat and speaker of the House, interjected, “I come to Washington to work in a bipartisan manner.”
Both Republicans and Democrats stifled chuckles. Pelosi, a 12-term veteran of Congress and the first female speaker, was notably partisan in her leadership of the 257 House Democrats. She had been born into Democratic politics. Her father was a congressman from Maryland and both her father and brother served as mayor of Baltimore.
“We’re in a unique situation,” said Harry Reid, the soft-spoken but combative Senate majority leader. The son of a miner, Reid had grown up in the tiny town of Searchlight, Nevada, without electricity or indoor plumbing. A former amateur boxer who had faced down organized crime bosses while chair of the Nevada Gaming Commission, Reid avoided declarations about bipartisanship, adding simply, “I want to work.”
The Senate Republican Minority Leader Mitch McConnell spoke next. At 66, a veteran of five terms representing Kentucky in the Senate, McConnell was known for the ruthlessness with which he ruled the Senate Republican minority. He cut straight to his suggestions.
I like the idea of tax cuts, he said. But we should also take a look at the money the federal government pays to the states for programs like Medicaid, the health insurance program for the poor. Beloved by the Democrats, Medicaid cost the federal government more than $250 billion a year. Perhaps, he suggested, we should treat that money as loans instead of outright grants. Having to pay the money back would make the states more judicious in spending it, he said.
Obama seemed receptive. “If it works, we don’t care whose idea it is,” he said evenly.
John Boehner, the leader of the House Republican minority, came next.
Tanned from many hours on the golf course, Boehner (pronounced BAY-ner) spoke in a casual Midwestern baritone roughened by years of incessant cigarette smoking. At age 59, he was beginning his 10th term as congressman from his largely suburban district in southwestern Ohio. The second of 12 children, Boehner had grown up working in a bar owned by his grandfather, and was the first person in his family to attend college, working his way through Xavier University in Cincinnati to earn a degree in business administration. The minority leader was a conservative and ardently pro-business, but not an ideologue. A force for moderation, who had forged agreements with Democratic icon Ted Kennedy on education, Boehner understood that the secret to getting anything done in Washington was the ability and willingness to cut deals.
Boehner knew how to tend to personal relationships and, unlike many of his colleagues, was not a workaholic. Informal and on the surface accessible to colleagues and press, he liked to tease fellow congressmen and staff, and enjoyed a glass or two of red wine at the Republican Capitol Hill Club in the evening.
A stimulus package would have to go through the congressional committees to ensure transparency, Boehner said, but he agreed they could not tolerate unnecessary delay. “The economy is in unprecedented turmoil.”
No one needed to spell out the political risks of passing a new stimulus bill, but Obama said he thought there was a lesson to be learned from TARP, the Troubled Asset Relief Program, which had passed in the last months of the Bush presidency. TARP was controversial and dauntingly complex, a $700 billion temporary bailout for the banks—money that was supposed to be paid back. “If the public doesn’t know what the money is for,” the president-elect said, citing TARP, “it’s a big problem.”
He pledged to personally sell the stimulus package to the American people as something that would help everyone. At the moment, Barack Obama, president-elect, was the most famous and possibly the most admired political figure in the world. The Republicans were a dispirited lot. Political writers were speculating that the GOP might devolve into a regional party representing mainly Southern whites as the Democrats ascended to permanent majority status. Obama held all the cards. How would he play his first hand?
“There will be times,” he said cordially, “when we will want to bulldoze each other.”
True, all knew.
“This isn’t one of those times,” he said.
“Time frame?” asked Boehner.
“Have to get it done before Presidents Day recess,” Obama said, referring to a four-day break in the congressional schedule that was to begin in six weeks.
“We understand the gravity,” added Vice President-elect Biden, suggesting that they could work seven days a week on the stimulus package.
Senators McConnell and Dick Durbin, the Democratic whip, joked that they would not work weekends.
What about the thousands of homeowners who owed more on their mortgages than their homes were worth? asked Durbin.
“We will not roll out an aggressive housing plan,” Obama said, and it would not be part of the stimulus bill. The housing problem was massive and baffling, and none of them had solid ideas for fixing it.
Then Virginia Representative Eric Cantor spoke up. Cantor was the minority whip, and the title suited him—thin and taut, he was quick with stinging partisan sound bites and was a fast-rising figure in Republican national politics. He had trained as an attorney and worked in his family’s real estate firm in Richmond for a decade before entering politics in the early 1990s. Now he was the House Republicans’ vote counter and disciplinarian. He made it his business to be closely tied in to all the GOP House members and had especially strong links to the ultraconservative wing of the party.
“Fear is grasping the country,” Cantor said, giving voice to something everyone in the room already knew. People were worried that they might lose their jobs. But there was a parallel concern that affected them all, “A fear of Washington.” It was a familiar Republican talking point.
“We need to do something bold that says we are not wasting their money,” Cantor urged. There was little public confidence in government, so the only solution would be “full transparency.”
After the meeting, Obama approached the Republican House leaders, Boehner and Cantor. “I’m serious about this,” he told them. “Come with your ideas.”
Steven Stombres, Cantor’s chief of staff, left the meeting with conflicting emotions. A former Army Reserve intelligence officer with a shaved head and a military bearing, Stombres was impressed. If this really was a bipartisan “coming together” it was precisely what the country needed at such a critical time, and as a citizen he found it genuinely inspirational. As a Republican, though, he was worried: If Obama followed through on this promise of political togetherness, Republicans would be in bad shape.
“Phew,” Cantor said afterward, “we may be in this minority for a while.”
After the meeting, Senator McConnell told reporters, “I thought the atmosphere for bipartisan cooperation was sincere on all sides.”2 The Republican leader said of Obama, “I think he’s already been listening to the suggestions we’ve made.”
Reid and Pelosi seemed almost giddy. Pelosi announced that it was “a new day in the capital.”3
• • •
Obama’s stimulus package, meant to jump-start the failing economy, had been in the works for weeks. His chief economic advisers had been working on it since the election.
Larry Summers, the incoming head of the National Economic Council, which coordinates all administration economic policy, supported instant additional spending of hundreds of billions of dollars.
A former treasury secretary in Bill Clinton’s administration, the brusque Summers was better known for his brainpower than his people skills. He had hesitated to take the job as Obama’s NEC head, viewing it at first as a step down from his previous job running the Treasury Department. In the end, he had relented under the combination of pressure from Obama and the urging of friends, including former Federal Reserve Board Chairman Alan Greenspan, who assured him that the job could offer him more influence than he realized.
In Summers’s view, the economic problem was lack of demand: Not enough people were spending money on goods and services. The administration had to stimulate consumer spending. He later described it to others in simple terms: “We didn’t have jobs because we didn’t have demand. And if we didn’t get more demand, we weren’t going to get more jobs. And if we did get more demand, we would get more jobs.”
Worried about the cost of a stimulus package, Obama wondered what else could be done. What about accelerating job training, strengthening employment services, and reforming unemployment insurance?
Demand is the big elephant in the room, Summers insisted.
Obama didn’t like that answer, but finally came to accept it.
• • •
In the weeks before the election, Obama was interviewing candidates for the all-important post of treasury secretary. While in New York, he met with Timothy Geithner, the head of the Federal Reserve Bank of New York, who had been a key figure in stabilizing the U.S. economy after the 2008 financial crisis.
The two had not met before. Geithner, who was 47 but looked a decade younger, launched immediately into a well-rehearsed, five-point argument on why he should not be picked.
One, I promised my kids I wouldn’t move them again. Two, we’re at a moment of national crisis. I’m not a public figure. You need to have a public figure people have seen before in this context, because it matters hugely. Three, there are better-qualified people than me for this. Four, at some point the U.S. will have solved the financial crisis, and you’ll be left with a whole set of other challenges that I’ve not spent my life thinking about. And fifth, he said, I’m up to my neck in this crisis, as you know. And I’m going to carry with me all those decisions. And you may need to have some separation from those decisions. It’s harder for you if you choose me. Because I’m not going to walk away from them.
It was a brilliant case against himself—precisely the kind of analytical power that appealed to Obama. After the election, he picked Geithner.
• • •
Obama selected Peter Orszag as director of the White House Office of Management and Budget. Just a few weeks past his 40th birthday, Orszag was a summa cum laude graduate of Princeton with a Ph.D. in economics from the London School of Economics. He was tall, gangly and brilliant. Obama had plucked him from his position as head of the powerful and independent Congressional Budget Office, which Orszag had held for nearly two years.
Unlike Summers, Orszag and Geithner did not believe the need to increase demand trumped all other policy priorities. Both recognized the need for a stimulus, but resisted the idea of a package that might last for more than two years. They were facing contradictory policy requirements: spend more quickly, but address the long-term deficit of hundreds of billions of dollars per year.
In one early memo, the team advised Obama that there was no danger of too much stimulus, or spending too much money in the first year. The question was: How do you make it politically salable?
Once he accepted the need for a huge infusion of public spending, Obama began to see it as an opportunity—a chance to invest in projects like high-speed rail, visionary environmentalism and innovation-related projects.
“A lot of that is going to take seven years to happen,” Summers pointed out, splashing cold water on Obama’s big dreams. “Big visionary things just take a long time.”
The Hoover Dam, which had employed thousands of workers during the Great Depression, had taken five years to build, Biden reminded them.
Obama wanted to pull the Band-Aid off fast, as he put it. “Let’s do whatever needs to be done, but let’s not keep at this for five years.” He made it clear he wanted to pivot as soon as possible from rescue to a broad kind of economic renewal. He thought and spoke in terms of FDR, and some in the White House wondered if he had Roosevelt envy.
Comprehensive health care reform, though, remained his priority. The world knew that from his campaign. What the world didn’t know was that his top advisers, led by incoming chief of staff Rahm Emanuel, disagreed, arguing that it would require too much effort. Survival had to come first.
But to Obama, health insurance for everyone as a new entitlement was the major unfulfilled task of the political movement of which he was a part and now led.
It was now or never, he said. So it would be now.
• • •
Later, Cantor approached Emanuel, who had been No. 3 in the House Democratic leadership before joining the incoming administration. Is this bipartisanship stuff for real? he wanted to know.
Wiry and intense, Emanuel was seen as something of a political bodyguard for the relatively inexperienced Obama. A veteran of the Clinton White House before his own election to Congress in 2000, he had a varied background. He had been a serious ballet dancer as a young man, and served as a civilian volunteer with the Israel Defense Forces during the Gulf War in 1991. Above all, he was known for his quick-draw temper, foul mouth, and killer political instincts.
“We want to work with you,” Emanuel said. “We’re serious.”
Cantor, the only Jewish Republican in Congress, and Emanuel, also Jewish, had a history of working together on Israel.
“There are some things we’re going to disagree on,” Emanuel explained, “but I think there’s a lot we can work on together.”
Cantor considered the incoming administration’s offer to work with Republicans sincere, but finding common ground on how to jump-start the economy would be tricky.
Obama and his economic advisers were economic Keynesians—they believed that government spending could create jobs and grow the economy. It was a philosophy Cantor and many young House Republicans rejected. Instead, Cantor believed that entrepreneurs—small-businessmen and risk takers—were the engine that would drive the economy. Cantor realized that his 10 years in the family real estate business made him the only former small-businessman in the group that Obama had met with.
The 45-year-old Cantor, a workaholic even by Washington standards, quickly set up what he called the House Republican Economic Recovery Working Group, made up of 33 conservative members of Congress, to map out an alternative to a traditional stimulus package.
The group insisted on what Cantor called “three ironclad criteria”: Proposals had to be limited in scope and spending; they had to result in real, long-lasting jobs; and small businesses had to be put first. They solicited input from former eBay CEO Meg Whitman, former Massachusetts Governor Mitt Romney, and anti-tax leader Grover Norquist of Americans for Tax Reform.
• • •
Three days after his inauguration, Obama summoned the congressional leadership to the White House Cabinet Room to discuss the stimulus package.
Protocol dictated that the president control the agenda and discussion, but Cantor spoke up immediately.
“Mr. President, with your permission I’d like to hand something out.”
Obama nodded, and Cantor passed out copies of a one-page document entitled “House Republican Economic Recovery Plan.” It listed five unambiguously conservative proposals:4
• Immediate reduction in the two lowest individual income tax rates. Because all taxpayers pay some of their income at these initial rates, taxes would go down on more than 100 million tax returns, saving families between $500 and $3,200 in taxes each year.
• A tax deduction of 20 percent on the income of all small businesses.
• No tax increases to pay for stimulus spending.
• Make unemployment benefits tax-free.
• A homebuyer’s credit of $7,500 for those who make a down payment of at least 5 percent of their home’s value.
Obama glanced at his copy, looked at Cantor, and said amiably, “Eric, there’s nothing too crazy in here.”
But Orszag, the budget director, noticed that Cantor’s proposals were all tax cuts.
And Cantor’s document declared that, furthermore, “any stimulus spending should be paid for by reducing other government spending.”
Absurd, thought Orszag. The whole point of the stimulus was to inject extra money into the economy. The requirement that all stimulus spending be offset by cuts elsewhere would defeat the purpose. Meeting Cantor’s goal would be impossible, Orszag concluded instantly. But no one asked him, so he didn’t say anything.
Obama said his plan would include tax cuts, but not only tax cuts. He seemed inclined to compromise.
“Mr. President,” Cantor offered, “I understand that we have a difference in philosophy on tax policy.” But a massive stimulus package would be too much like “old Washington,” he said.
“I can go it alone,” the president said, “but I want to come together. Look at the polls. The polls are pretty good for me right now.”
Cantor chuckled and nodded. The polls certainly looked good for Obama now. To Cantor, that meant there would be no easier time to compromise and to disappoint some on the left. As he listened, Obama’s tone seemed to change.
“Elections have consequences,” the president said. “And Eric, I won.”
On the table, some copies of the one-page document called “House Republican Economic Recovery Plan” lay where Cantor had put them.
“So on that, I think I trump you,” Obama said.
• • •
In his short tenure as a senator, Obama had dealt with South Carolina Senator Lindsey Graham several times. Now, in his early days as president, he had Graham, a moderate conservative Republican, to the White House to talk.
“Barack,” Graham said, dispensing with the formal “Mr. President” when they were alone in the Oval Office, “can you believe this has happened to you?”
“No,” the new president replied. “I mean, this is kind of one of these things you think about, but it really doesn’t happen to you.”
“The power of this office is amazing,” Graham said. “Your worst critic is going to be like a schoolboy coming into this office. Just the power of it. They may shit on you when the meeting’s over, out in front, but people are going to listen to you unlike any other setting in any other time in your life. Don’t ever let that be lost upon you.”
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