Barak Obama became President in January 2009. A global recession from the previous administration was underway. People had been losing their jobs. Real estate prices were falling. Many households were struggling to pay down their debt and to restore their overstretched finances. The Dow was down to around 8,000 points from its high of 14,164 in October — a loss of money for corporations and a loss for those who had been paying into 401k retirement accounts.
The recession was international. On January 19th, Britain's banking stocks were collapsing, and Prime Minister Gordon Brown announced a bailout for the country's financial system. Also that day, European stocks in general were falling, and Iceland had its largest protest in history, people calling for the resignations of government officials and for new elections.
Obama's inauguration was on the 20th, and, trying to be optimistic, he announced that the economic recovery had begun. He described America's possibilities as "limitless" and said: "My fellow Americans, we are made for this moment, and we will seize it – so long as we seize it together. (Applause.)
On 24 January, in the first of his weekly Saturday talks to the nation, Obama said: "if we do not act boldly and swiftly, a bad situation could become dramatically worse."
What to do? Obama has been described as a bipartisan centrist by inclination. He wanted to work with Republicans. He also wanted extended unemployment benefits, to stimulate the economy with spending on infrastructure and to invest in education, health, and renewable energy. The Democrats dominated the House, 263 seats to 178, and they held the Senate with 58 seats plus two independents (Bernie Sanders and Joe Lieberman) against 40 Republicans. It was power to be challenged in the November 2010 midterm elections but secure if they performed well enough.
On January 26 (2009), a bill was introduced to a House, and on the 28th the bill passed 244 to 188, 11 Democrats and 177 Republicans voting against it. Senate Republicans managed a number of changes in the bill, and on 10 February the bill passed the Senate 61 to 37, only three Republicans voting in favor: Susan Collins, Olympia Snowe, and Arlen Specter. On 17 February, Obama signed the bill — the American Recovery and Reinvestment Act of 2009 — into law.
The bill included tax relief for worker families, expanded tax credit for college education; credit for first-time home buyers; funds for Medicaid (created in 1965), health research, community and VA health centers; funds for scientific research; tax relief for companies to offset their losses; and more.
Wikipedia writes of the disappointment of some economists:
Economists such as Martin Feldstein, Daron Acemoğlu, National Economic Council director Larry Summers, and Nobel Memorial Prize in Economic Sciences winners Joseph Stiglitz and Paul Krugman favored a larger economic stimulus to counter the economic downturn... Just after the bill was enacted, Krugman wrote that the stimulus was too small to deal with the problem, adding, "And it's widely believed that political considerations led to a plan that was weaker and contains more tax cuts than it should have – that Mr. Obama compromised in advance in the hope of gaining broad bipartisan support."
Pollsters in the next couple of days were describing Obama's approval rating at around 63 percent and his disapproval around 24 percent.
The Bush administration in September 2007 had rescued the investment bank Bear Stearns. In November 2008 it had bailed out the finance and insurance corporation AIG and the huge commercial bank Citigroup. There were those who saw all this as a rip-off of taxpayers, with some to right-of-center questioning whether President Bush was really a conservative. The Tea Party was gathering, and some associated bailouts with "crony capitalism" (businesses succeeding without risk through their connections with those in government).
Obama's bill was seen as including bailouts. His Treasury Secretary, Timothy Geithner, had worked in the Bush administration under Bush's Treasury Secretary, Hank Paulson. And like Paulson, Geithner saw it important that banks started lending again, immediately — no waiting months for a full of the banking industry.
Some Republicans were riding the wave of opposition to bailouts. Newt Gingrich accused the Obama administration of "transplanting" European socialism to Washington. "Stalin would love this stuff," said Mike Huckabee. Rush Limbaugh's declared that he wanted President Obama's economic stimulus policy to fail and predicted that it would not succeed.
Robert Reich, who had been President Clinton's Labor Secretary, complained about AIG Corporation issuing bonuses to its executives. Something that also annoyed Geithner. But investors were pleased enough with Geithner's plan to send stocks upward, on March 23, 497 points, to 7,775.
In April, Geithner would be accused of coddling "banksters" and "taking care of his pals on Wall Street because he IS one." Geithner would reply that he was not acting "for the benefit of those banks," that the system as a whole was his focus, "whether the system as a whole has the capacity to support the credit [borrowing] the economy requires."
Toward the end of March, Obama said:
One of the challenges we've confronted from the beginning of this administration is what to do with the state of the struggling auto industry. In recent months my Auto Task Force has been reviewing requests by General Motors and Chrysler for additional government assistance, as well as plans developed by each of these companies to restructure, to modernize, and to make themselves more competitive.
On April 30, Chrysler filed for bankruptcy. General Motors filed on June 1. Ford Motor Corporation was in better shape financially but eventually it joined Chrysler and GM in asking for government help. (The governments of Japan and South Korea were also helping their automakers weather the economic downturn, and so too had Britain, Sweden, France, Italy and Germany. And there would always be complaints about Chinese Corporations receiving government help.)
The "Big Three" US automaker's global market share had declined from 70 percent in 1998 to 53 percent in 2008. According to a CNN opinion poll in March 2009, a government-backed rescue of the American auto industry had the support of only 37 percent of US citizens. Ford's CEO, Alan Mulally, was to say: "If GM and Chrysler would've gone into free-fall they could've taken the entire supply base into free-fall also."
The auto bailout issue was to be debated along ideological lines going into the 2012 presidential elections (Obama versus Romney), but by the year 2010 some would be giving both the Bush and Obama administrations credit for saving the auto industry. The US auto industry was to emerge more competitive. Dealerships and parts stores benefitted. (www.politifact.com)
In 2008, when running for president, Obama said that fixing healthcare would be one of his top four priorities as president. By mid-year 2009, healthcare reform bills were being worked on in the House and the Senate. On November 7 2009, the House passed what was called the Affordable Health Care for America Act — to be known as Obamacare. All Republicans but one voted against the bill. Also voting against were 39 Democrats, mainly those who felt vulnerable regarding the upcoming 2010 midterm elections.
Senate Democrats worked on their version of the bill without cooperation from their Republican colleagues, and the vote of 60 to 39 to end debate and to end a Republican filibuster came on December 23. On the 24th, by the same number, the bill passed, all but one Republican voting against.
The New York Times described the Senate as having voted "to reinvent the nation’s health care system, passing a bill to guarantee access to health insurance for tens of millions of Americans and to rein in health costs." It added:
The bill would require most Americans to have health insurance, would add 15 million people to the Medicaid rolls and would subsidize private coverage for low- and middle-income people, at a cost to the government of $871 billion over 10 years, according to the Congressional Budget Office.
Following the market crash of 1929 and the election of Franklin Roosevelt, the Glass-Steagall Act was enacted, and it separated commercial banking from "Wall Street" and investment banking. (Commercial banks managed deposit accounts (checking and savings) for individuals and businesses. In 1999 the Gramm-Leach-Bliley Act repealed Glass-Steagall, allowing banks to once again invest depositors' funds in unregulated derivatives, a deal President Clinton made with Republicans as part of a move to stimulate business activity.
A return to Glass-Steagall regulations was on Obama's mind when he took office January 2009. In early December, revised versions were introduced in the House as the Dodd-Frank bill (Senator Dodd and Congressman Frank both Democrats). The bill was intended to regulate the financial markets, improve financial stability and protect consumers. The initial version of the bill passed the House on December 14 by a vote of 223–202. In a news conference following the vote, Speaker of the House Nancy Pelosi said, "This is really a very important day for our country ... Never again will reckless behavior on the part of the few threaten fiscal stability of our people." The Ranking Member of the House Financial Service Committee (a Republican), Spencer Bachus, described the vote as a "missed opportunity to end the bailouts... The array of new regulations and taxes on consumers, investors and businesses will destroy jobs and further undermine the fragile economy.
The bill with amendments was voted on in the Senate in mid-July 2010. Three Republican senators — Scott Brown of Massachusetts, Olympia Snowe and Susan Collins of Maine — joined 57 Democrats in passing the bill 9called the Wall Street Reform and Consumer Protection Act). According to the Washington Post:
...most Republicans continued to argue that the bill creates bigger, more intrusive government and fails to prevent future bailouts of financial companies using taxpayers' money. These critics joined with leaders in the banking and business communities in insisting that the new regulations will undermine the competitiveness of the U.S. economy, stifle growth and kill jobs at a time when unemployment is high.
During the first three months of 2009 the economy had shrunk 5.7 percent. From April to June it shrank another 5 percent. Accoring to Paul Krugman, the purely fiancial aspect of the economic crisis ended during the summer of 2009. It was in October 2009 that the National Association for Business Economics announced that the recession had ended. But finance had been only one aspect of the problem. The bursting housing bubble had created what Krugman calls a "powerful downdraft on the economy" that included reduced household wealth and a lack private enterprise stimulus. In June 2009 the unemployment rate was at 9.5 percent, in October at 10.0 percent. The economy for the entire year of 2009 had declined 2.8 percent.
During the first quarter (January-March) of 2010, economic growth bounced back at an annual rate of 1.7 percent. From April to June it grew 3.9 percent. From July to September it grew 2.7 percent. In August, the Dow was up around 12,500, but the Dow was an expression of the attitude of people with money to invest.
Unemployment figures were reaching a high. It was in August 2010 that Obama's approval rating hit bottom: down to 41 percent with a disapproval at 52 percent. Four-out of five citizens rated the economy as bad or fairly bad. In September the unemployment rate was measured at ten percent.
Campaigning for the November midterms would be described as about ideology. Conservatives were talking about economic benefits as derived from the private sector and of the government as a problem. (The economy's public sector in 1920 had been 8 percent of GDP and that was now up around 35 percent.) Republicans and the Tea Party activists were talking about reckless spending, socialism and skyrocketing deficits. The Tea Party was denouncing Washington's "elite." There was a placard that read: "big government + big spending = slavery.
Election returns flipped the distribution of power in the House, the Republicans gaining 63 seats, giving them 242 seats compared to 193 seats for the Democrats. In the Senate the Republicans gained 6 seats, Republican candidates together winning 49.4 percent of the vote compared to 44.0 percent for the Democratic Party's senatorial candidates, leaving the Democrats with a slim majority of 51 to 49.
Obama had the elections of 2012 to look forward to, and with the interim in mind he offered the Republicans discussions for working together.
CONTINUE READING: Obama and the Arab Spring in 2011
Copyright © 2018 by Frank E. Smitha. All rights reserved.