How the Clintonites Launched Obamanomics

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Brendan Hoffman / Prime

Former President Bill Clinton speaks in Charlotte, N.C., on Sept. 5, 2012

It’s well known that Barack Obama stocked his Administration with Bill Clinton’s people, including his extremely Clintonesque Secretary of State and all three chiefs of staff as well as most of his top economists and dozens of other key aides. What’s not known is how the Clintonite takeover of Obamaworld began before the 2008 campaign was even over, shortly after Obama defeated Hillary Clinton in the Democratic primary. A shadow transition of Clinton veterans — led by former Clinton chief of staff John Podesta — began preparations for the new Administration while Obama and his loyalists were busy on the trail. “That’s when the old guard started taking over,” an Obama aide complained to me in an interview for my new book, The New New Deal.

Below is the story of Obama’s shadow economic team in late 2008, which was so overrun by Clintonites that the only interloper, budget expert Bob Greenstein, was teased because his PowerPoint slides weren’t formatted like everyone else’s. “Guys, I wasn’t in the Clinton White House!” he protested. I’ll also post the shadow group’s secret 36-page document — written by Clinton budget director Jack Lew, who is now Obama’s chief of staff — that laid the groundwork for the Obama stimulus. As Bill Clinton makes his pitch for Obama on Wednesday night, it’s worth knowing how his old team paved the way for Obamanomics, with an unexpected twist.

The shadow economic team was a full-fledged Clinton reunion, led by Bill Daley, a Clinton Commerce Secretary, and Josh Steiner, a Clinton Treasury official. It also included Lew; Doug Elmendorf, a Clinton Treasury economist; and Jonathan Orszag, a Clinton White House economist whose brother Peter, another Clinton White House economist, would become Obama’s first budget director. Dan Tarullo, another Clinton economist, and Karen Kornbluh, another Clinton Treasury veteran, were the only representatives from Obamaworld, and Podesta ordered the team to avoid contact with the campaign, which had more pressing work that fall.

(PHOTOS: The Democratic National Convention)

Since secrecy was a must, the team didn’t do much outreach. Its only sounding board was an advisory committee of even-more-familiar Clinton-era faces: Treasury Secretaries Bob Rubin and Larry Summers, Labor Secretary Robert Reich, economic adviser Laura Tyson, Lew (who doubled as an official team member and unofficial wise man) and just one outsider, Xerox CEO Anne Mulcahy. “It definitely felt like we were getting the band back together,” says one participant.

The band was getting together as the world was falling apart. “Everything was going downhill so fast,” recalls Lew, whose employer, Citigroup, was itself clinging to life. “It was so hard for our thinking to keep up with events.”

That was the unsettling backdrop for the team’s key meeting, an Oct. 17 briefing for the advisory board at a Manhattan law office. In a logistical e-mail, Steiner warned that the goal was not to relitigate the Rubin-Reich centrist-liberal debates of the Clinton era. “We are explicitly NOT making recommendations on matters such as how to prioritize between deficit reduction and investment,” he wrote, adding, “This effort is independent of the Obama campaign and the materials presented should not be construed as reflecting the campaign’s positions.”

(PHOTOS: The Obama Brand)

That was a useful disclaimer, because Lew’s presentation didn’t reflect the campaign’s positions. Three days after Obama proposed a $175 billion stimulus plan, Lew suggested that as much as $300 billion might be needed. “People were like, S—, that’s a big number,” Podesta recalls. “But it was looking cataclysmic out there. Nobody was saying, Oh, we won’t need that much.”

The group briefly discussed whether 2008 had anything in common with 1993, when Clinton decided to focus on deficit reduction rather than investment, and the consensus was: not really. Even the fervent deficit hawks accepted that a depression or a protracted recession would shrivel tax revenue and create more ink than a hefty stimulus ever could. Ultimately, Lew’s final stimulus presentation to Obama — a “Confidential Discussion Draft” dated two days before Election Day — made the case for an aggressive stimulus, while also foreshadowing some of the problems with it and the arguments Republicans would use against it. It’s a fairly remarkable document, and you can read it here.

There has been a lot of commentary about the influence of Clintonites like Summers, Peter Orszag and Tim Geithner on Obama’s economic policies. Liberals say they were too bank-friendly, too deficit-obsessed, too afraid of full-throated populism. But during the transition, at least, what really set the Clintonites apart from the Obama loyalists was their skepticism about postpartisanship. These political combat veterans remembered how Republicans had blocked Clinton’s effort to pass a mere $19 billion stimulus package. So they suggested that the economic emergency might be Obama’s best chance to pursue his campaign priorities, to make the stimulus a Trojan horse for “change we can believe in.”

Lew recognized the pitfalls of this strategy, including “risk of package growing large and losing control” as well as “risk of driving too much spending to longer-term agenda and not providing sufficient short-term stimulus.” He also foresaw that the rush to fund ready-to-go public works could accelerate lower-priority projects and suggested an “absolute policy of no earmarks” to prevent Congress from larding up the package with pork. But the Clintonites also saw the crisis as an opportunity to keeping Obama’s promises to reform energy, health care, education and the entire economy: “stimulus may be only chance for quick action on longer-term growth and energy/environment agenda.” At the time, Obama wore a halo of hope. Since it probably wouldn’t survive four years of Washington slime, this seemed like a pretty good time to do the things he ran to do.

And in fact, he did. The stimulus included $90 billion for clean energy, when the U.S. had been spending a few billion dollars a year. It included $27 billion to drag our pen-and-paper medical system into the digital age, laying a foundation for his larger health care reforms a year later. It included Race to the Top, the most ambitious education-reform program in decades. It also included the largest infrastructure investments since Eisenhower’s, the largest middle-class tax cuts since Reagan’s and the largest onetime investment in research ever. That was Obama’s agenda. But it was the Clintonites who recognized the urgency of passing it in his first month.

37 comments
Frediano
Frediano

Clinton campaigned in 1992 on the absolute need for his Stimulus Plan, which passed the House...but died in the Senate.  And the economies grew.


Clinton campaigned in 1992 on the absolute need for a BTU Tax, which wasn't passed....and the economies grew.


Clinton campaigned in 1992 on the absolute need for Nationalized Health Scare, which wasn't passed ... and the economies grew.


Clinton actually did what any president in the wake of the collapse of the USSR would have done, and reduced federal spending by leveling off the Reagan defense spending increases....and the economies grew.

According to Dr. Laura D'Andrea Tyson at a talk at UCal/Berkley in Nov 1997, "Nothing we did."   Because she can multiply and add,  as can anyone with access to the population distribution of income data, or who instinctively know that in a nation where AWI was around $40K/yr, synmbolic 3.6% surcharges at six times AWI could no possibly account for the surpluses.


So yes, Clinton did give birth to Obamanomics...and it was a still birth.   Because the present Wreck on Rails (set in motion by Reagan's grand compromise with O'Neill, a little more guns in exchange for a lot more butter) is driving our economies to their knees.


Go read Nixon's 1970 Economic Stabilization Act.  It is a stolen chapter from Atlas Shrugged.    Ask yourself why Reagan needed to accelerate the demise of a system that was farming with ox carts in the 80's-- even as we knew they were farming with ox carts in the 80s.    Reagan didn't win the Cold War, he helped America catch the Cold, and we are still coughing up phlegm.    The biggest impediment to freedom in this nation is not the No Hope For Freedom Democrats and their flirtation with Totalitarianism;  the biggest impediment for freedom in this nation is the False Hope for Freedom GOP and their soul-less pandering for power, by which they not only embrace Totalitarianism with their "No, let US run the US Economy with our BETTER five year Plan!", but court it with candy and flowers..


The GOP is a distraction.  It doesn't need a PR workover -- again.   It needs to go.   It has never recovered from Nixon, and never will..

Mary Waterton
Mary Waterton

Obamanomics = TRILLION dollar deficits as far as the eye can see ... or until the economy collapses under the weight of the national debt, which ever comes first

akpat
akpat

 Sure it needs some big cuts but not where Ryan proposes them. We need a 50% cut in military spending a 50% cut in non SS and med 'entitlements' a 100% cut in pork and after all that we will have to raise taxes on imports and those who can afford them.

Brian Willis
Brian Willis

more hope and change vol 2? no thanks. Lies and lies is what it is. 

the_sons_of_lot
the_sons_of_lot

No Republican President has balanced the budget since Eisenhaur.

WHY CAN'T ROMNEY PAY HIS FAIR SHARE IN TAXES?

SiDevilIam
SiDevilIam

Who Wants to be a Democratic Party President? not I

I have learned in my life that serves me well. Keep no secrets. I have been blessed by my creator. I got a short memory and a long journey till I kick bucket. Why add extra baggage?

The rough and tumble world of US politics makes me very energized. Keeps me going.

The system of selecting a transition team comes (free) when elected president takes his rest before getting in the routine of governing. The time it takes to figure it out as to whom he can trust, depend upon is so short that as a human being, he may never fully prepare for the job, unless, a readily available, experienced and able team helps him out in style, substance and creativity.

Mitt Romney campaign has bunch of George W Bush people doing some creative planning while he goes on his campaigning. All is fair. His team is found lacking in every respect. For instance, teaching him ABC of foreign policy, as we all know by his rather rude and crude behavior overseas.

By contrast, Bill Clinton transition team did wonders. Any questions, Mr smarty-pants, Michael Grunwald, Sir?

...and I am Sid Harth@webworldismyoyster.com

Mahmoud hadipour dehshal
Mahmoud hadipour dehshal

A president who has been four years in office needs his ex-opponent to be reelected!! What is his record? Clinton’s records are different.

dwmanning
dwmanning

Yes. Clinton prefers Fleetwood Mac. His favorite album is Rumours.

superlogi
superlogi

You're making this stuff up Grunwald.  Clintonomics and Obamanomics are two entirely different animals.  Clintonomics had it's genesis with people like Newt Gingrich and John Kasich.  After all, NAFTA, GLBA, Welfare Reform, the capital gains tax cut, and reduced government spending were all Republican ideas, thankfully one's which Mr. Clinton went along with. Obamanomics, on the other hand, had its genesis with Karl Marx.

dwmanning
dwmanning

Pal, a cut in the capital gains tax rate to stimulate ecomonic growth was first adopted during the Kennedy administration. Newt Gingrich nor John Kasich had that idea, although Republicans do deserve alot of credit for carrying the idea to the illogical extreme, and cutting the tax so low it did nothing to encourage further investment but instead encouraged money hoarding, while diminishing Federal revenue.

Ditto for reduced government spending, which certainly wasn't a feature of Reagonomics or any Republican budget for the last fifty years.

As for welfare reform, Clinton campaigned for exactly that in 1992, and his plan as stated was adopted almost exactly as written. It was modeled on a smaller set of reforms he'd put in place as governor of Arkansas in the '80s.

And if you are so eager to claim credit for NAFTA, a wretched mistake from the word go, which Clinton should never have signed. then by all means go ahead. I'll agree with you. Any idea that bad had to come from a Republican.

superlogi
superlogi

You're not my pal.  In fact, I'd consider you an historical buffoon. Marginal tax reductions began in the Harding administration.  The goofy prick, named Willy only did it because the economy was slowing. He made the right decision, but not because it was in his genetics.  Kasich authored the" Balanced Budget Amendment" and it was Republicans that dragged Clinton kicking and screaming to sign Welfare reform after the third time at bat.  With regard to a reduction in government spending, that was never a platform of for Democrats who are notoriously the biggest spenders in history.  After all, they are responsible for over 60% of all annual spending,40% of which is borrowed.  You are either stupid or just another obtuse and ignorant buffoon.  Next time you address me, address me with a fact.

Again, you're not my pal. We were talking about tax cuts. Period. And, Clinton cut taxes, admittedly with Republican help. Period. With regard to 60%, that is approximately the size of the portion of just the Federal Budget as it relates to entitlements and welfare programs, most of which were passed during the New Deal and Great Society programs. It doesn't even include the state run programs mandated by the Federal Government. With regard to walking down memory lane and getting you the facts concerning welfare reform and it's passage, read this article from Slate, not exactly a conservative rag. Again, get back to me, when you have the facts.

http://www.slate.com/articles/...

dwmanning
dwmanning

Hey Pal,

It's ok. No need to get your knickers in a twist. Let's take a stroll down the vernal halls of American political history together, just us two pals. I'm aware of the cuts in tax rates under the Harding administration. Did you know, however, that capital gains were not cut in that time? That in fact, the capital gains tax rate was raised to 12.5% from it's initial 7% rate, via the same tax reform act you allude to? No, obviously you didn't know that. You see, the original post was about the capital gains tax rate only, no other. And you hadn't brought up Warren G. Harding, only John Kasich and Newt Gingrich, so I hadn't felt compelled to go back that nearly one hundred years.

Did you know that Warren G. Harding is considered by most historians to be our worst President?

Your ill-mannered and huffy retort to me mentions that John Kasich authored the Balanced Budget Amendment. And...so? The efficacy of that must be alluding me. John Kasich seems to be a folk-hero to you, so I won't begrudge you your crush on him. But please know that it has absolutely no relevance to anything I posted to you.

By the way, how's that piece of Kasich legislation doing these days? That was nearly twenty years ago. Made any progress on that yet?

And how is that Democrats account for 60% of all spending? What, who, where? Where do those statistics hail from, my friend? Is that for the entire history of the Republic, the last century, the last month, when? Enlighten me, teach.

As for welfare reform--no dice, at all. You lose. Your charming reference to our former President as "goofy prick" aside, Clinton spearheaded welfare reform through, as promised in his campaign, modeled once again I say very closely on reforms he'd instituted in Arkansas in the 80's. Paul Ryan and Mitt Romney actually both credited him with the acheivement this week--though my referencing them as reliable sources is admittedly a tactic fraught with peril.

As for Clinton's genetics, I don't know. Maybe you know something I don't. What scoop do you have on the former President's genetics?

In your charming signoff, you said I was either stupid, or an obtuse and ignorant bufoon. Which is actually nearly synonymous with stupid. So congrats: You're an amateur at history, genetics, and linguistics. The Hat Trick!

Toodles,

Your pal

P.S. I'll address you any way I damn well choose.

Subject: [timeswampland] Re: 'Stimulus May Be Only Chance For Quick Action': How the Clintonites Launched Obamanomics

Paul Dirks
Paul Dirks

Oddly enough, a Stimulus relying on tax cuts and Health case reform based on an individual mandate are ALSO Republican ideas that date from the same period. It would appear that the main difference between Obama and Clinton is most significantly in the nature of their opposition.

superlogi
superlogi

The were ideas from Republicans on how to pay for Universal Healthcare.  They were never Republican ideas.  With regard to the difference in allowing wealth producers more of their resources to create more wealth and redistributing that wealth to be consumed, the first is from "The Wealth of Nations", the second comes from "The Communist Manifesto" and "Das Kapital".  But the biggest difference is, the first idea works, the second never has.

Communism and Marxism are garbage and failed economic policies. That is my point. Unfortunately, many of you embrace those policies because they promise ease on earth.

Frediano
Frediano

If AWI(average wage index)was around $40K/yr and at 1xAWi less than that is $0, then what be true of 6xAWI if AWI is AWI?    It is so far down in the noise that is a pencil line on top of the X-axis.   The center of taxable income is and always has been around AWI.   That is where the money is, that is why the longstanding charade of the payroll tax and the 'employer paid half' has been in place for decades.


Remember when Reagan and Tip "saved SS" -- by raising rates from 6% to over 15% of earnings?   The justification was because of the future retirement of the Boomers-- they needed to be overtaxed in order to save for a future rainy day.   That rainy day is on our doorstep, so ... where are the savings?   Nothing but IOUs -- bonds due -- handed over the the next generation.  But worse-- the hidden borrowing all this time has left a massive hole in the budget-- the SS Trust Fund was, as in used to be, the Number One WIlling Holder of Us Treasury Debt.   It today must freshly be replaced.   But worse -- by overtaxing the Boomer middle class for its entire productive earnings and tax paying years(previous generation paid 6%, generation before paid 2%, and generations before paid 0%) the Boomer generation as whole has had almost 10% less of its earnings to save for its own pension needs.    That triple whammy defines the current Wreck On Rails set in motion by Reagan and Tip.  They "saved SS?"  Sure they did.  And they "simplified the tax code" in '86, too.

Frediano
Frediano

@MrObvious The facts are, Clinton's stimulus plan, BTU Tax, and Nationalized Health Care -- all actions that he swore were an absolute necessity -- never passed, and the economies grew.   In a nation where AWI was around $40k, his symbolic surcharge of 3.6% at six times AWI did not come close to raising the realized revenue.   No, what Clinton actually reasonably did was level off the Reagan years defense spending buildup -- translated, he reduced federal spending --  and the economies grew.


The precise opposite of Obamanomics and his stimulus, tax increase, and nationalized health programs.   As well as the precise opposite result..

MrObvious
MrObvious

In other words; you avoid the facts by throwing out some gabrage about 'communism/marxism'.

Paul Dirks
Paul Dirks

Odd. One of your allies here was just complaining the other day about how NAFTA is a disaster and it's all Clinton's fault. I guess the folks who claim that you all read from the same script are mistaken. 

superlogi
superlogi

One of my allies?  If that were the case, he'd be defending NAFTA as I have always defended it.  Just which of my mythical allies are you talking about?  Or are you simply building another of your many straw men?  After all, if you'd read my post, I didn't give Bill Clinton much credit for any of those bills he signed into law, other than he signed them into law.

And, this ahandout…….is my ally because of?

Kevin Groenhagen
Kevin Groenhagen

So, the Democrats are featuring serial adulterer and rapist Bill Clinton? I guess they weren't serious with that whole GOP war on women nonsense.

MrObvious
MrObvious

Because it takes just one man to remove all that anyone else might feel or work hard for.

You're not really serious about the whole GOP and logic nonsense are you?

jsfox
jsfox

"Sixty-six percent of Americans now have a favorable view of Clinton, tying his approval rating at the time of his inauguration in January 1993, according to the Gallup poll."http://politicalticker.blogs.c... yeah putting him up on stage is a very good idea.

Frediano
Frediano

@jsfox WHat's not to like?  His Stimulus Plan didn't pass, his BTU Tax didn't pass, his Nationalized Health Care didn't pass, he cut federal spending by leveling off the Reagan years defense spending buildup, and he claimed that a symbolic surcharge of 3.6% at six times AWI was the miracle that created surpluses, unlike Dr. Laura D'Andrea Tyson in a talk at UCal/Berkley in Nov 1997. who admitted on the topic of those symbolic tax charges "Nothing we did...the numbers don't add up, don't begin to explain the increased revenues...the economies grew, period."

No stimulus...economies grew.   No BTU Tax ... economies grew.   No Nationalized Health Care...economies grew.   Cut defense spending buuldup -- economies grew.   That mad rush of economic activity that came after the 1994 spanking, delivered after the failed over-reach,  was called 'relief' that government was in gridlock and totally ineffective.

deconstructiva
deconstructiva

Thanks, MG, especially for pointing out Clintons’ wariness about post-partisanship. Many here (including me) complained often that Obama insisted on dealing with R’s waaaay too long after they made it clear they wouldn’t deal with him, especially in the Senate. Both he and Hillary were in the Senate before their job changes and they knew McConnell. Why did Obama believe Mitch would work with him? Did Hillary already know this was a lost cause? Certainly Bill knew how the R’s operated, but how much communication got lost in translation during the transition?

Sue_N.
Sue_N.

I tend to think that Obama believed (mistakenly) that, because of the severity of the crisis, the Repubs, being such self-described "patriots," would chuck politics (and über-partisanship) and actually, you know, put their country and its needs first. Of course he was mistaken.

I think a large part of his problem is that he's a rational, reasonable, intelligent man who just never understood how absolutely bugfüch crazy the GOPers had gone.

Andre
Andre

my roomate's step-aunt makes $66 every hour on the computer. She has been out of work for 9 months but last month her income (was)$14202 just working on the laptop for a few hours. Go to this web site and read more ­ C­ashLazy.­com

Frediano
Frediano

@Andre Andre the mental giant?

Andre
Andre

my neighbor's step-sister makes $60/hour on the internet. She has been without a job for nine months but last month her payment (was) fourteen thousand dollars

Andre
Andre

my classmate's mother-in-law makes $74 hourly on the laptop. She has been out of work for 9 months but last month her check (was) nineteen thousand dollars

Andre
Andre

my friend's sister makes $65/hour on the computer. She has been fired from work for seven months but last month her payment (was) nineteen thousand dollars just working on the computer for a few hours. ­ C­ashLazy.­com

Kevin Groenhagen
Kevin Groenhagen

 Only in Bizarro World did Obama insist on dealing with the GOP. In the real world, Obama told Republicans that he won and, thus, he did not have to deal with them.

dwmanning
dwmanning

Even Mitch McConell admits the GOP strategy from day one after the election was to present a united front against the new President and his policies, and that if they blocked every measure possible for them to block, they could wheedle down a great deal of his momentum and the enthusiasm of his support.

The great thing about Mitch McConnell is that he sometimes inadvertently tells the truth, since he's so eager to get the credit for the strategy that ultimately derailed Barack Obama. Honesty is rare for the man, or the party as a whole, but every now and then they slip up and tell a fact.

AfGuyReturns
AfGuyReturns

Speaking of a dispatch from Bizarro World...