The take-away line from Barack Obama’s Sunday appearance on “Meet the Press” was the president-elect’s declaration that “the economy is going to get worse before it gets better.”
Obviously, no one would argue with that, and it’s certainly smart politics for Obama to talk in such terms, as a way of tempering the public’s outsized expectations for his presidency. But, as the rest of the interview made clear, the country’s dire economic conditions – which have worsened significantly since Election Day, when they were plenty bad – seem likely to alter Obama’s presidential agenda, with potentially harmful effects on his popularity and his clout with Congress.
For the incoming president, a cautionary tale can be found in the example of Bill Clinton, who came to office 16 years ago amid an apparent recession and with a promise to focus “like a laser beam” on the economy. But Clinton’s presidency got blown badly off course in his early months in office, in part because of his chaotic and disorganized style, but also because the agenda he began pushing wasn’t quite the same as the one he’d campaigned on.
In Clinton’s case, the culprit was the budget deficit and national debt he inherited from George H.W. Bush. The issue of the national debt had never stirred much passion from voters before ’92 – Walter Mondale campaigned on it in 1984 and lost 49 states – and it hasn’t stirred much since then. But in ’92, with the early ‘90s recession still exacting a painful toll on Main Street, a popular sense emerged that the country was, in essence, paying the price for a decade of overindulgence marked by massive tax cuts and exhaustive spending. The debt, which had stood at less than $1 trillion in 1980 and exploded to more than $4 trillion by ’92, came to symbolize this idea.
It was a sentiment that two unlikely politicians, Democrat Paul Tsongas and independent Ross Perot, tapped into to stunning effect. Tsongas went first, pitching a message of self-sacrifice and generational responsibility and, despite his utter lack of charisma, briefly emerging as the front-runner for the Democratic nomination. When his campaign sputtered, Perot stepped in and made the debt the centerpiece of his two campaigns (he dropped out in July and re-entered at the start of October). Perot’s 19 percent showing on Election Day (which could well have been much higher had he not dropped out over the summer) still stands as the best performance by an independent candidate since Theodore Roosevelt in 1912.
But as a candidate, Clinton didn’t project the same debt hawkishness. While Perot and Tsongas called for tax hikes and sacrifice, Clinton maintained that he’d be able to deliver a sweeping middle-class tax cut and warned that, when it came to attacking the debt, “there’s a danger of doing too much, too fast.” He also promised an extensive economic stimulus package.
Between his election in November and the start of his administration, though, Clinton was forced to confront new realities – and realities that he’d intentionally ignored during the campaign. The economy, as dreadful as it still seemed to everyday Americans, was actually improving. Economists would later conclude that the recession had actually ended in November 1991 and that the country had spent ’92 in recovery. And the giant budget deficit that Tsongas, Perot and others had warned about had to be addressed. Federal Reserve Chairman Alan Greenspan and others quickly convinced Clinton that the bond markets that were so key to the burgeoning recovery would respond well to an aggressive attack on government debt.
So Clinton, days after assuming office and after his teams spent weeks laying the groundwork in the press, went on national television to announce that his middle-class tax cut plan, so central to his campaign message, was off the table. Sacrifice, the buzz word that he’d avoided as a candidate, was suddenly in. An economic program was drafted that called for a host of income tax hikes and other new taxes and fees. In presenting it to Congress, Clinton over and over again used the euphemism “contributions” – prompting Republicans to ask sarcastically how the IRS might react if average citizens said they didn’t feel like “contributing” this year.
The stimulus plan was essentially scrapped, too. Instead of crafting a detailed recovery program and working intensely to push it through Congress, Clinton opted instead to go through the motions. A $16 billion bill loaded up with the pet pork projects of every influential senator and congressman was cobbled together, allowing Clinton to claim he was living up to his campaign promise. But Republicans shredded it with ease and killed it in the Senate.
By June of 1993, Clinton was gracing the cover of Time magazine under the headline “The Incredible Shrinking President” and his entire agenda was knocked off track. It took all of his political capital (and threats that breaking with him would sink his presidency) to prod just enough congressional Democrats into voting for his first budget, which Republicans said amounted to “the largest tax increase in the history of the world.” That package, which is now celebrated for creating the foundation for the stock market boom of the ‘90s, was at the time reviled, further eroding Clinton’s shaky public support.
To most Americans, Clinton had promised a pain-free solution to their economic woes. Instead, he’d delivered pain, and broke his word. His negligible political capital undermined what was supposed to be his signature achievement, health care reform, and also led to the embarrassing defeat of a crime bill just months before the ’94 midterm elections – in which his party paid dearly for Clinton’s shaky first two years.
The situation now for Obama, obviously, is not the same. In ’93, the country was quickly realizing that the economy was actually improving and that the tough days were over. Today, though, it seems clear that America’s economic woes are only beginning (only a week ago economists officially notified us that we are in a recession) – and are far more ominous and systemic than those caused by the early ‘90s recession.
But like Clinton, Obama is now shifting in response to the changing conditions. Over and over in his campaign, he stressed that he’d undo the tax cuts that the wealthiest Americans received from George W. Bush. Lately, though, he’s been sending a different signal, arguing that he didn’t actually endorse undoing them in the campaign – he merely meant letting them expire as scheduled in 2011. On “Meet the Press” on Sunday, Obama refused to be pinned down on the question. It seems he’s been persuaded, like Clinton during his transition, that one of his signature economic agenda ideas would be very bad medicine, and now he’s trying to walk away from it.
He’s also poised to blow a hole in the already-enormous budget deficit, a necessary evil, it would seem, given the state of the economy – a far cry from ’93, when Clinton realized that stimulus wasn’t really needed.
“We understand that we’ve got to provide a blood infusion to the patient right now to make sure the patient is stabilized,” Obama said on Sunday. “So that means we can’t worry in the short term about the deficit.”
He probably won’t pay a short term price for that, but it could set him up for bigger problems down the road. Plus, there’s the whole matter of health care. Like Clinton in ’92, Obama has long promised to finally bring about universal coverage. Clinton’s hopes were ruined by his poor political standing. Obama may have to deal with that too: Once his honeymoon wears off, an awful economy figures to drag down his approval ratings quickly. (Remember where Ronald Reagan’s numbers were during the 1981-’82 recession?) Plus, with Obama likely to be forced to invest considerable capital in passing a massive stimulus package early on, he may find all of his favors and I.O.U.’s with Congress exhausted by the time he gets around to health care – something that Clinton also found in ’93.
The silver lining for Obama, of course, is that popular two-term presidents often have rocky starts. Clinton and Reagan were both handed brutal setbacks in their first midterm elections, but recovered quite well. George H.W. Bush, by contrast, was quite popular early in his presidency, only to lose re-election in ’92.
It may be that Obama’s prophecy about the economy will also hold true for his political standing: It will get worse before it gets better.
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