First-term battles transformed Obama

Magic that began with ’04 convention speech has given way to frustration

Obama’s speech at the convention in 2004 electrified the audience and set the stage for his presidential run.
Kevin Lamarque/Reuters
Obama’s speech at the convention in 2004 electrified the audience and set the stage for his presidential run.

WASHINGTON — New Hampshire physician Dr. William Siroty was among Democrats captivated at the 2004 national convention by the little-known Illinois state senator, an orator who seemed earnest, yet cool, and called for “politics of hope.’’

“Everybody was standing up and applauding, and going, ‘Who is this guy?’ ’’ recalled Siroty, a delegate at the Boston convention where Barack Obama made his debut.

By the 2008 Democratic National Convention in Denver and his subsequent election as president, Obama had established himself as potentially one of the most transformative politicians in American history, provoking the sort of rapture reserved for religious icons and rock stars.


But now as an incumbent seeking a second term, on the eve of his third convention appearance, the president is politically threatened. The slow economic recovery weighs heavily on his prospects for reelection. His promise to raise American politics to a higher plane is but a faint echo, as Washington and its nasty partisanship remains — stubbornly, defiantly — untransformed.

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Supporters pine for the old magic. “There seemed to have been so much hope, and a lot of that seems to have dissipated,’’ said Siroty. “I was hopeful we were entering a new era, and it seems like things have only gotten worse.’’

Obama promised a new era in politics, a rekindling of idealism, an end to Washington’s toxic battles. For millions, the first African-American president seemed to embody a better America. But the same economic conditions that created anti-Republican sentiment in 2008, helping him beat John McCain, have plagued his own presidency.

He has struggled mightily against an entrenched and uncompromising Republican opposition determined to thwart virtually all of his economic initiatives. In the now-famous words of Senate Minority Leader Mitch McConnell, denying the president a second term was “the single most important thing’’ on the GOP agenda.

After facing accusations from conservatives that he is a “socialist’’ bent on destroying America, he began taking a tougher tone last year and demonstrated his own aptitude for the dark art of negative campaigning.


“Has he changed Washington, or has Washington changed him?’’ said Democratic consultant Jim Manley, who had a ringside seat on the president’s legislative battles as a former top aide to Senate Majority Leader Harry Reid. “Goodness knows how hard he tried. But the fact is that the political process is broken right now.’’

The challenge at this week’s Democratic National Convention in Charlotte, N.C., will be to explain why voters should trust him more than Mitt Romney to improve the nation’s economy, while also putting into context his record of accomplishments, as well as his struggles.

The president’s achievements, when framed in historical context, are large.

He prevented the economy from sliding even deeper into an economic abyss and got it moving in a positive direction with passage in early 2009 of a $787 billion stimulus package. He rescued the US automobile industry with a controversial bailout, saving thousands of manufacturing jobs throughout the Midwest. Fulfilling a central campaign pledge, Obama won the biggest expansion of healthcare coverage since Lyndon Johnson’s Great Society spawned Medicare and Medicaid. He pushed a raft of new Wall Street regulations through Congress.

But his achievements also helped to fuel the growth of the Tea Party, making it even more difficult for GOP leaders in Washington to compromise and helping Republicans win back a House majority in the 2010 mid-term elections.


With Obama now locked in a tight reelection contest, the political world is debating what, if anything, he could have done differently to push the economy toward a speedier recovery and improve his own political fortunes.

In his dealings with the GOP, should he have abandoned efforts to negotiate and been more aggressive in painting former President George W. Bush and congressional Republicans as culprits in the economic meltdown? Could he have been tougher on the big banks and pushed them harder to loosen credit and ease the foreclosure crisis?

On Capitol Hill, as the trajectory of his presidency was being established, should he have taken a firmer hand in crafting the details of the stimulus package? Could he have pushed the Senate to move faster on healthcare — instead of dragging the debate through more than six heated months?

The plan is popularly called Obamacare, but in reality during 2009 and 2010 the president ceded control for drafting the legislation to congressional committees. The move made it appear that he was not leading the charge to enact one of the central promises of his 2008 campaign.

Members of Obama’s team say the president did the best he could, given the grim realities that confronted him once he arrived in the White House.

“No president for the last 100 years has inherited as problematic and politically difficult an economic situation,’’ Lawrence H. Summers, former director of Obama’s National Economic Council, said in an interview.

The only worse moment, said Summers, was at the beginning of Franklin D. Roosevelt’s first term. And at that point in 1933, the economy was bottoming out. When Obama arrived in Washington, the economy was still in freefall and the recession did not end until June 2009. Obama, said Summers, “didn’t have as easy a time riding the upslope.’’

Republican intransigence, Summers asserted, greatly complicated the president’s job.

“The president thought, given the magnitude of the emergency and the clarity of his mandate, that there would be more willingness to cooperate on the part of the Republicans,’’ Summers added.

The economic “upslope’’ from the 2008 economic crisis and recession, of course, has been difficult to discern for millions of Americans. As Romney and the GOP point out at every opportunity, unemployment remains above 8 percent. Real estate prices have yet to recover. Demand for goods and services remains low.

Republicans blame Obama’s fiscal positions, including his efforts to increase taxes on the wealthy and — as he sought to build public support for the Dodd-Frank bank regulations overhaul — his populist rhetoric targeting “fat cat bankers on Wall Street.’’

“The private sector is scared to death of him. They are sitting there hoarding cash they could use to buy equipment and hire people until they find out if he is going to be there for another four years,’’ said former New Hampshire Governor John Sununu, an adviser to Mitt Romney. “The biggest impediment to recovery is the president himself.’’

Given the depths of the economic crisis Obama inherited, many have questioned whether, as a political matter, he should have blamed Republicans and Wall Street for the nation’s economic woes more aggressively once he arrived in office.

“Why did it become Obama’s crisis, rather than it being remembered as the crisis of Bush, the Republicans, and the fat-cat bankers?’’ said Graham Wilson, chairman of political science at Boston University.

Obama’s cool personality, Wilson said, combined with a political imperative to avoid being perceived as an angry black man, may have prevented him from taking a more strident tone. Moreover, Obama had staked his campaign on a promise to seek bipartisan solutions in Washington.

“It locked him out from the obvious and perhaps essential strategy of making sure the crisis was associated in the popular mind with his political opponents,’’ Wilson said. “I don’t think there was ever any real chance he would get cooperation from the Republicans.’’

Massachusetts Representative Barney Frank, the Democrat who is a close ally of Obama’s, cites another key factor for the new president’s reluctance to pin blame on Wall Street and the previous administration: jitters about the health of big banks.

“They were afraid of talking us into worse troubles,’’ said Frank. “He made a mistake by soft-pedaling. He held back from fully blaming Bush and talking about how bad things were.’’

Stimulus remains a target

On a bone-chilling day in January 2009 — in the depths of the financial crisis and four days before his inauguration — Obama still was talking up bipartisan cooperation. He visited a small manufacturing company called Cardinal Fastener in Bedford Heights, Ohio, that made steel bolts to assemble windmills.

Obama told the assembled machinists, as well as representatives of the nation’s biggest wind-power companies, that he was working with “leaders of both parties’’ to jump-start the economy with an unprecedented and “bipartisan’’ package of public investment.

“We’ve started this year in the midst of a crisis unlike any we’ve seen in our lifetime,’’ he said. There was no finger-pointing, no blame.

Obama didn’t state a cost, but back in Washington the number floated for the stimulus was $850 billion — an unprecedented amount but still lower than the $1 trillion or more that many economists believed was needed. Yet Obama and his transition team had already decided their plan needed to be smaller than $1 trillion to win support in Congress, particularly in the Senate, where Republican and moderate Democrat votes would be required for passage.

Obama pledged that clean-energy incentives contained in just one section of the stimulus would create 500,000 new jobs building wind turbines and solar panels. Almost two years later, the White House reported that the stimulus had created fewer than half the promised half a million jobs in green energy. The economy hurt Cardinal Fastener, as well. The company laid off nearly all of its approximately 50 employees in a 2011 bankruptcy.

“I got a call on a Friday and was told not to report to work, that the bank had shut us down, and that our paychecks were no good as well,’’ said Brandon Delafosse, a Cardinal factory supervisor who had proudly introduced Obama to the media during the 2009 visit.

Cardinal Fastener has since reemerged with a new owner and is steadily creeping back to its 2010 peak of 65 jobs. The company said it went bankrupt because it could not get bank credit for working capital, not because of a lack of demand for windmill parts.

Delafosse, who now works at another company, does not blame Obama for losing his job in 2011. “It was not his footprint, the way things were,’’ he said. “He came into a bad situation.’’

The government has estimated the stimulus created between 1.4 million and 3.5 million jobs. But, by design, the torrent of government spending began to subside halfway through Obama’s term, and the robust turnaround could not be sustained.

The stimulus remains a target of criticism. Even some Democrats say it was too small, poorly designed, or both. Critics say Obama left much of its design to Democrats in Congress, who filled it with pet projects and union-friendly initiatives such as healthcare and education spending. The Democrats filled it with clean energy incentives, which produced a big embarrassment for Obama when Solyndra — a California solar-panel manufacturer that received a $527 million government loan — went bankrupt in 2011.

The stimulus has proved a target-rich environment for Republicans who contend it was a mistake that did not live up to its stimulative promise, while driving the country deeper into debt.

“The stimulus was a case of political patronage, corporate welfare, and cronyism at their worst,’’ vice presidential nominee Paul Ryan, the chairman of the House Budget Committee, declared in his acceptance speech at the Republican National Convention last week.

Despite Obama’s hopeful declaration in Ohio that the package would be bipartisan, Ryan and every other Republican in the House voted against it. It squeaked through the Senate with the support of just three moderate GOP senators who sat in Majority Leader Reid’s conference room while Reid shuttled in proposals to woo them.

To win their support, as well as support of some moderate Democrats, Obama and Reid were forced to include billions in income tax breaks and tax incentives for businesses — which combined made up more than a third of the total package — while whittling its total size down to $787 billion.

Even with the tax breaks sought by Republicans, former Senator Judd Gregg of New Hampshire wound up voting against the stimulus. His story helps explain how the opposite party consistently confounded Obama and turned his bipartisan efforts against him.

Gregg at first appeared prepared to help win bipartisan support for the new president’s initiatives, including the stimulus, when he agreed in early February to serve as Obama’s secretary of commerce. But just 10 days after his nomination, Gregg withdrew his name, saying he was a bad fit with the Obama team. Intense news coverage of the reversal signaled the early end to whatever bipartisan mood had accompanied the new administration.

Gregg said in an interview that he joined his Republican colleagues in voting against the stimulus package because it contained an excess of social-program spending sought by Democrats. It would have attracted more support from across the aisle, he said, if it had been weighted more heavily to spending on roads and bridges.

“A stimulus should have been focused more on infrastructure and capital expenditures,’’ he said. “Instead, it was a long wish list of things [Democrats in Congress] wanted over the years.’’

As it was, the Republicans who had forced inclusion of huge tax breaks in the package and voted against it would later brand it an example of Obama’s “socialist’’ policies. Gregg said in the interview that Obama should have worked harder to bridge policy divides on major legislation, from the stimulus to healthcare act. “On these big issues, you have to have some sort of agreement,’’ said Gregg, “or people don’t accept these proposals as fair.’’

Challenge of housing relief

In the days before the new president-elect appeared at Cardinal Fastener in Ohio to talk up the stimulus, Larry Summers was writing Congress to reassure lawmakers about a crisis of rising home foreclosures. He committed the administration to spending $50 billion to $100 billion from the TARP bank bailout package to help people stay in their homes.

Neighborhoods devastated when the housing bubble burst desparately needed a bailout of their own. Summers called a sweeping homeowner rescue “an absolute imperative if we are to restore the health of our housing sector and the financial system as a whole.’’

Today, Summers, who left the White House at the end of 2010, declines to discuss what became of his specific written pledge to Congress about foreclosures. That may be because the administration failed to keep its promise.

Despite a pot of $45.6 billion set aside for mortgage payment reductions and other housing relief from the TARP bank bailout money, Obama’s treasury department (which administers TARP) had spent just 10 percent of that — $4.5 billion — to help homewners by the end of June 2012, according to a government report. The program was supposed to help 3 million to 4 million remain in their homes. But after three and a half years, only 818,000 had received mortgage modifications.

Obama’s failure to do more has drawn criticism from some economists and dismayed housing activists across the country. Critics maintain Obama and his treasury secretary, Timothy Geithner, were excessively deferential to banks, at the expense of individual families. Its relief programs lacked sufficient strength to force banks to participate, said Neil Barofsky, the former TARP special inspector general and now a New York University lecturer.

“There was remarkably little attention and concern that went into the effectiveness of that program,’’ he said. “That’s because it was much more about the politics of the program than the substance of it.’’

Another voice urging Obama to do more to provide large-scale housing relief was a member of his own White House Economic Recovery Advisory Board, Martin Feldstein, a Harvard economist and former chief economic advisor to President Ronald Reagan.

In a White House meeting of the advisory board in October 2010, Feldstein directly urged the president to inject hundreds of billions into the housing market — in the form of mortgage principal reduction for underwater homeowners. Obama told Feldstein that his administration would review his recommendations, but treasury took little action.

“That’s where presidential leadership would have made a difference,’’ Feldstein said. “If the president had said: ‘This is something that is holding back the recovery, this is not just hurting people who are underwater on their mortgages, but it is hurting every homeowner and hurting everyone who is hurt by the downturn in the economy.’ ’’

The Obama administration argues that critics have not measured the full impact of its efforts to keep people in their homes. Although just $4.5 billion has been spent thus far, the government has committed to spending another $6.5 billion or so in future years to cover multiyear modification deals with individual homeowners — for a total of $11 billion. It also has directed $7.6 billion to states to undertake programs at the local level.

The White House also points out that the private banking system was not immediately equipped to negotiate millions of loan modifications, contributing to delays. Once mortgage bankers established systems under the federal program, they used that template — independent of the federal push — to aid an additional 3 million homeowners without government subsidies, according to the administration.

Leaders ‘have to take flak’

Obama’s difficult working relationship with lawmakers on fiscal matters is exemplified by Congress’s failure to pass a budget for three years in a row, from 2010 to 2012. In the first of those years, as the economy struggled to get airborne and deficits soared, Obama seized on the time-tested way to alleviate political pressure and perhaps break the impasse: he formed a special committee.

Called Simpson-Bowles, after its bipartisan team of chairmen, the panel failed to reach a consensus that would have automatically triggered a vote in Congress on a set of recommendations. But it did produce a list of ideas to cut spending and and increase tax revenues to address the built-in, long-term debts plaguing federal government.

It provided a big opportunity for Obama to lead on fiscal matters. But instead of publicly embracing the Simpson-Bowles recommendations, Obama waited several months before floating a much less specific outline of his own of how to “go big’’ on deficits.

Americans will never know what would have happened if he had put pressure on Republicans to cut a deal by publicly embracing a bipartisan package with cuts and tax increases. The political risks were enormous, and it is difficult to imagine conservatives budging from their determined stance against tax increases of any kind.

Indeed, Ryan, who was a member of the Simpson-Bowles committee and an avowed deficit hawk, voted against the panel’s proposals, helping ensure that it would not get a vote. Liberals, too, would have protested a plan that reduced social-service programs and entitlements.

“His liberal base would have ripped him to shreds,’’ said former Republican Senator Alan Simpson of Wyoming, one of the chairmen. But Simpson believes endorsing Bowles-Simpson would have placed leadership above political expediency and given Obama the moral high ground. “To be a leader, you have to take flak,’’ he said. “

It was not until almost a year later that a visibly frustrated Obama appeared to undergo a shift in his approach to Congress. Republicans in Congress had refused for weeks to raise the debt ceiling and brought the country to the brink of a debt default (which would soon result in a downgrade in the nation’s credit rating).

Obama publicly lashed out in a White House press conference hours after private negotiations with House Speaker John Boehner for a grand budget and deficit plan broke down. The president said Republicans were willing to sacrifice a broad deal to reduce the deficit over the long haul because of their unyielding opposition to any new tax revenues.

“The question becomes, where’s the leadership?’’ Obama demanded. “The challenge really has to do with the seeming inability, particularly in the House of Representatives, to arrive at any kind of position that compromises any of their ideological preferences. None.’’

Democrats point to this moment as a turning point, when the president gave up on trying to work with Republicans and began challenging them publicly in stronger terms.

In September, he convened a joint session of Congress and challenged Republicans in a speech full of populist applause lines to pass a $447 billion package of tax breaks and new spending. He called it the “American Jobs Act,’’ and it looked very much like a smaller version of the 2009 stimulus. Democrats later proposed paying for it with a 5 percent surtax on millionaires.

Most provisions of the bill went nowhere. But the president’s allies cheered his new tone and vision. “For a long period of time, the president was hopeful that an inside strategy could be successful,’’ said Andrew Stern, the former president of the Service Employees International Union who is now a senior fellow at Columbia Business School.

“After Labor Day of last year, the president realized if you want to get things done, it doesn’t necessarily happen by trying to get Washington to move based on logic, reason, persuasion, or compromise. Sometimes you have to take the issues to the American people.’’

Christopher Rowland can be reached at crowland