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The Unencumbered Man’

After Barack Obama’s victory in the presidential election last November, the question arose whether the result should be seen as a realignment—a fundamental shift in party dominance that would continue for a good many years. That the era of conservative supremacy was over seemed clear. Beyond that, observers were divided. My view, expressed in these pages, was that such talk was premature and that any notion of Democratic dominance “would depend on what President Obama and the congressional Democrats did with their power.”1

Now, seven months later, this picture is starting to come into focus. On the plus side we’ve seen the passage of a $787 billion stimulus package; an agreement on higher emissions standards for US-made automobiles that a chastened industry accepted (the President and his auto czar, Steven Rattner, are practically co-CEOs of General Motors and Chrysler, and thus could have their way); and a major credit-card reform bill.

Other moves have been less cheering, including a desultory and, say many liberal critics, deeply regressive scheme regarding the banks, with billions of taxpayer dollars going to some of the institutions responsible for the economic crisis, credit flowing only a little more freely than it had been, and no big, Glass-Steagall-style reform proposed as of yet (although new regulations of derivatives have been put forth). In addition, Obama’s policies on detainees were seen by many civil libertarians as scarcely distinguishable from those during the last year of the Bush administration. He made a costly misstep by not preparing a timely, detailed plan for dealing with Guantánamo detainees, following his announcement in January that he would close the prison within one year.

More generally, there has been a sense among some liberal interest groups that their concerns are decidedly second-tier. Labor groups worry that “card-check” legislation that would make it easier for workers to form unions has stalled; and the lesbian and gay lobby suspects that repeal of the “don’t ask, don’t tell” policy in the military has been postponed.

Whatever the criticisms, though, the central fact is that, so far, Obama’s coalition is holding together. This is true in the country at large, where his approval ratings, though down several points from the very early days, are still more than high enough to provide him political capital. And it’s true among Democrats of all stripes in Washington. I recently conducted eighteen interviews (most of them off the record or “on background,” alas) with administration officials, members of Congress and staff, operatives, and insiders—this in addition to casual conversations with other such people that come naturally in my line of work. I heard quibbles, and sometimes more than quibbles, especially about the bank bailout, which was often described as a transfer of wealth from the middle class to Wall Street.

By and large, though, I was struck by the sense of good feeling and optimism among these people. There was a broad understanding of the importance of the historical moment. In stark contrast to 1993 (Bill Clinton’s first year as president), the factions within the Democratic Party are keeping their disagreements pretty quiet for now. People grasp that in this moment of high political capital, when they are up against a GOP that is becoming increasingly forceful in opposition, Democrats must prove this year that they can pass legislation that will fix the country’s problems. And there was a confidence in their ability to do so that surprised me.

Health care reform and climate-change legislation are the two largest domestic items that will be coming along this summer and fall. Each is a huge undertaking—the former having eluded presidents going back a century, the latter entailing an enormous shift in federal policy. On January 20, when Obama was sworn in, I never would have been so rash as to venture that both would become law this year. Now this appears to be possible or even likely, although the question of whether the administration has gone too far in accepting Congress’s terms is in both cases a valid one.

To the extent that internecine warfare is being sublimated in the pursuit of concrete gains, much of the credit for this goes to Obama himself, for two reasons. First, and this is very important to understand, he comes from no faction within the Democratic Party. He has managed to stand apart from all of them. Liberals assume that he’s mostly one of their own, which he almost surely is at the level of personal values (strict civil libertarians are probably an exception here). Centrists see a leader who has placed moderates such as Timothy Geithner and Robert Gates in key posts, and who sends them ample signals that he will bring the liberals in line when he feels he has to—as with the refusal to release more photographs of detainee abuse.

Alone among the party’s three leading candidates last year, Obama showed the ability to walk this tightrope. And while he does not always please liberals and centrists, he still has the basic trust of both. Will Marshall, of the centrist Democratic Leadership Council, calls Obama “the unencumbered man” and says: “He’s the least experienced president we’ve had in some time, but he’s turned that into an asset. He comes in with no great mortgages held by any of the party factions.”

The second reason for the common resolve has to do with the strategy being deployed by Obama, his chief of staff Rahm Emanuel, and his other lieutenants. Recall Emanuel’s words to The Wall Street Journal last November, after Obama named him to his post: “You never want a serious crisis to go to waste.” The Obama White House has lived by these words more aggressively than most observers would have guessed—offering the legislation mentioned above, a far-reaching crackdown on offshore tax havens, a scheme to overhaul the regulation of banks, and a proposal during his April trip to Europe for drastic reductions in nuclear weapons, among other initiatives.

Meanwhile, and more quietly, legislators are being summoned to the White House—for example, a working group on climate change—to be told by the President that “this is important to me.” In addition, even if Obama has produced no positive results internationally, he has been visibly active, whether in trying to apply pressures in “Af-Pak,” proposing talks on Iran and the Middle East, taking an unusually firm tone with Israel on the settlement question, or showing an unusual degree of interest in Lebanon, which both Hillary Clinton and Joe Biden visited in advance of its important June 7 parliamentary elections. Three days before that vote, Obama was to deliver a major speech on democracy and human rights in Cairo.

The working theory of the White House seems to be to press as hard as possible on as many fronts as possible. A knowledgeable administration insider put it to me well: “I think one thing both Obama and Rahm get is that if the column just keeps rolling, the opposition can’t really form.”

That quote should ring true to any reasonably close observer of the last five months. But now we enter a new phase. Passing trillion-dollar legislation on, for example, health care reform, in which, by law, revenues have to equal outlays, is considerably harder than passing a stimulus bill on which no such demands were made (and even passing that legislation, as we saw, wasn’t easy). Big legislation makes walking the tightrope far more difficult, because “in legislation,” as one person told me, “there are winners and losers.” So now opposition will come not only from Republicans, but also from some Democrats. The next six months—especially with regard to health care, climate change, and the disposition of the Guantánamo issue—may go a long way toward determining the President’s fate.

The main legislative battle will be over health care. It’s first worth noting that the bill now taking shape in Congress will not look very much like the health care reform Obama proposed during his campaign in at least two key respects, the first reflecting a difference he had with Hillary Clinton during the primary season, and the second reflecting a disagreement with John McCain during the run-up to the general election.

It was Clinton whose proposal included a so-called “individual mandate,” requiring people who are uninsured to purchase health coverage as they do car insurance, in order to achieve universality (along the lines of the reform that has taken effect, with mixed results, in Massachusetts). Obama opposed this and criticized Clinton quite strongly at points—saying, for example, in an Austin, Texas, debate in February 2008 that “in order for you to force people to get health insurance, you’ve got to have a very harsh, stiff penalty.” But now, any legislation presented to Obama is likely to include some form of a mandate, and he will sign it. It will not provide universal coverage—policy analysts estimate that it will insure about 30 million of America’s 47 million uninsured and that it will likely take a number of years to reach that level. The administration, seeing that Congress preferred this approach, has warmed to it over the spring.

The second way in which a bill would depart from Obama’s campaign script has even greater political and policy implications. For American workers, employer-based coverage is currently an untaxed fringe benefit.2 John McCain’s health care proposal called for eliminating that benefit, which would require employees who receive coverage through their employers to start paying taxes on the portion of their premiums that is deducted from their paychecks. On the trail, Obama criticized McCain’s proposal as a tax increase on middle-income Americans. But now it’s likely to be part of a final bill.

There are two reasons for these changes. The first is that Congress appears to want them, and it’s Congress, not the administration, that’s writing the legislation. Obama has named an interagency working group to sketch out health care reform legislation. It is led by Nancy-Ann DeParle, the White House health czar, and it includes Kathleen Sebelius, the secretary of health and human services; high-ranking HHS officials such as Jeanne Lambrew, a former academic and a coauthor of Tom Daschle’s recent book on health care reform, Critical, and Neera Tanden, the highest-profile Hillary Clinton staffer to join Obama after the primary season; and administration economists such as Gene Sperling, who under Bill Clinton held the post that Lawrence Summers now occupies and is currently in the Treasury Department, and Jason Furman, a campaign adviser to Obama last fall who has become a top deputy to Summers.

This group will follow the lead of figures in Congress such as Senator Max Baucus of Montana, whose Senate Finance Committee has in recent weeks released a series of “options papers” on issues such as ways to expand coverage and generate revenue. Other legislators will be important here, either because they have partial jurisdiction or simply because of history: in the House, Californians Henry Waxman and George Miller, along with New York’s Charles Rangel; and in the Senate, Ted Kennedy, whose Health, Education, and Labor Committee—it shares Senate jurisdiction with Baucus—is drafting legislation right now. The hope of the White House group is to have the legislators take responsibility for the bill and negotiate the details.

The second reason for the switch from Obama’s campaign position—especially as it pertains to the McCain proposal—is that he now has to get serious about how to pay for all this. According to Jonathan Cohn of The New Republic, one of the country’s top health care journalists, the Congressional Budget Office has recently estimated that health care reform will cost $1 trillion over ten years. As a candidate, Obama was pretty fuzzy about revenues, emphasizing cost savings. But there is ample skepticism about how much savings these proposals will produce. Such experts as Arnold Relman, whose article appears on page 38 of this issue of The New York Review, strongly doubt that Obama’s reform will generate the $300 billion in savings assumed by the budget. Hence, administration officials—and Baucus, who initially opposed the McCain idea —have been coming around to it.

Health care experts, in shorthand, refer to this as the “exclusion” issue—that is, should employees’ contributions to their health plans under employer-sponsored coverage continue to be excluded from taxation? (An employer’s tax liability would be essentially unchanged.) As I commented in the June 1 issue of New York magazine, several possibilities are being explored. Eliminating exclusion altogether would of course raise the most money—some estimate that excluding employee contributions from tax now costs the federal government $200 billion a year, which would more than pay for reform. But this could cause some political problems for Obama, who vowed not to increase taxes on anyone earning less than $250,000.

How much could a partial elimination of exclusion raise? Professor Jonathan Gruber of MIT proposes a plan with the following features: no taxes on plans for families with incomes under $125,000; a tax on higher-end plans for families in the $125,000 to $250,000 range; and taxes on the premiums paid by families with incomes above that amount. This would generate, he estimates, at least $440 billion over eight years.

This would not fully pay for the reform, but it would probably be politically palatable to most parties. Many Republicans, arguing that the easy availability of coverage from employers leads to overuse of medical services by full-time employees, have long wanted to move away from employer-sponsored coverage and toward a system in which individuals purchase plans on the free market. Many nonpartisan health analysts agree with this, and add other points—for example, Gruber argues that the exclusion is also regressive (the higher an employee’s tax bracket, the bigger the break). So they believe a change is long overdue. Liberals agree that over time this change will erode the entire system of employer-based insurance, but a compromise that taxes only people with incomes above $250,000, which seems most likely—permitting Obama to keep his pledge, and originating in Congress, so that Obama can say he didn’t propose it—would affect only about 2 percent of taxpayers and thus would not radically alter the insurance market.

A central feature of Obama’s campaign proposal for health care was the so-called “public option,” by which the government could set up its own insurance company to compete with private insurers. This is the most controversial part of Obama’s plan, and the most emotionally charged. It is emerging as a litmus test both for the powerful lobbies arrayed against it (insurers, doctors, and hospitals) and for liberals who want serious reform.

To the lobbyists, this is the dreaded “socialized medicine” that will limit consumer choice (though it will not, in fact) and get the government in the business of setting standards of care and reimbursement rates to doctors and hospitals. For the liberals, a public option is useful only if it’s like Medicare, i.e., fully backed by a government that can support it with taxes and appropriations.

Republicans will oppose a public option, and many moderate Democrats are dubious about whether it’s worth falling on their swords over it. Senator Chuck Schumer of New York has proposed creating a public health insurance plan, but one that would have to sustain itself on the premiums and co-payments paid by policyholders. A New York Times editorial favored this option3 —a signal, perhaps, of prevailing winds. Others spoke to me of the possibility that the public option wouldn’t survive the sausage-making phase at all: that perhaps a bill would include a trigger for a future public option if private insurers don’t hew to the tighter regulations that a bill will impose upon them. Some believe that the lack of a public option might be acceptable if new regulations and oversight are sufficiently muscular. This will be intensely debated over the summer.

One strategic question will be whether the White House and congressional leaders will pass a bill on a partisan basis or try to enlist some GOP support. “Health care has to be bipartisan,” says Tennessee Congressman Jim Cooper, a leader on health care issues among the Democratic moderates. History does show that most major social legislation has had bipartisan support, which helped sustain the created programs over the long haul (both Social Security in 1935 and Medicare and Medicaid in 1965 had such backing).

Cooper, who calls Schumer’s compromise an “excellent” proposal, is heartened by the direction in which negotiations are moving and thinks getting up to forty GOP votes in the House could be possible. The Senate is another question, which is why Democratic leaders agreed earlier this year that if there’s no bill by October 15, they would invoke a “reconciliation” provision to pass the revenue-related portions of the bill in that body. Under those rules, a cloture vote—requiring a super-majority of sixty—is not needed, so a bill can pass with a simple majority of fifty-one.

Connecticut Congresswoman Rosa De Lauro, a liberal who has a leadership position in the House, told me that she will “fight like hell for the full thing” on the public option. She acknowledged that it will be difficult, but she was resolute about the final outcome: “It’s gonna happen. It’s going to happen.”

The details of the looming health care fight are interesting because they show us what happens when a White House political offensive runs up against the Ardennes Forest of Capitol Hill. The Obama administration has made it clear that it will compromise—it wants a bill while it has the political muscle to get one. But how much compromise is too much? Obama likes to refer to his position as one of “progressive pragmatism.” That’s a safe phrase for general public consumption. But some liberals suspect that it is the second word that counts.

With respect to climate change, again, there is a White House effort, led by climate adviser Carol Browner, who was head of the Environmental Protection Agency under Clinton, but Congress is writing the bill. The legislation, which comes from Henry Waxman and Massachusetts’s Ed Markey, is a cap-and-trade bill, in which the federal government establishes emissions caps for utilities and other polluters. Companies that come in below the cap get credits, which they can sell at auction to companies that exceed the cap. Having to buy these credits gives companies that exceed their emissions allowances an incentive to lower their emissions—and, over time, the government lowers the overall cap.

Waxman and Markey’s original legislation called for a reduction in carbon emissions of 25 percent by 2025. Sensing resistance, they went down to 20 percent by 2020. But legislators from both parties—those from coal-producing and other industrial states—still balked. On May 14, the two sponsors reached a deal with Virginia Democratic Congressman Rick Boucher, who negotiated for the coal and industrial states. They arrived at 17 percent by 2020. And not all credits would be auctioned; some will be given away. Final numbers aren’t set yet, but apparently the percentage that will be auctioned will remain under 50 percent for several years, rising gradually. Boucher endorsed the deal but added that he hopes to lower that 17 percent figure once the bill reaches the House floor.

One environmental expert told me that the bill would represent a genuine breakthrough—the line proponents use is that it’s the equivalent of taking 50 million cars off the roads every year for ten years—but acknowledged that it’s also “a substantially weaker bill than the science would require.” And so environmental groups are split. The League of Conservation Voters and the Natural Resources Defense Council support the bill, while Greenpeace, which tends to have a more left-leaning membership base, does not. There are also, the expert says, “serious, serious divisions in the industry right now” about whether business should play ball. In May, Duke Energy of Charlotte, North Carolina, quit the National Association of Manufacturers—the country’s most influential business lobby after the Chamber of Commerce. Duke CEO Jim Rogers said, “We are not renewing our membership in the NAM because in tough times, we want to invest in associations that are pulling in the same direction we are.”

Again, most people I spoke to predicted that a bill will pass, probably in November. (Senate Republicans may well see this differently.) There is a major climate-change meeting in Copenhagen in December, and it seems clear that the White House and Democrats in Congress want to have a law in hand by then.

As distasteful as some of these compromises will be to many in the Democratic base, it seems unlikely that Obama will lose much support over them. If both of these bills pass, there will be hundreds of news stories and columns that will begin, “Not since Lyndon Johnson…” or even “Not since Franklin Roosevelt…” Discourse in Washington tends to reduce to headlines; the headlines will proclaim Obama hugely successful on the domestic front, and in such an atmosphere the coalition will hold together to press the President for more.

The Guantánamo situation is far trickier. Congress’s unwillingness to approve funds to close the facility is the administration’s biggest setback so far, and it stems from what is clearly the administration’s biggest political error. Not only did Obama announce in January that the place would be closed down without having worked out a practical alternative, but, in contrast to the (perhaps excessive) deference it is showing to Congress on health care and climate change, it later failed to present Congress with any clear plans at all. In such a situation, legislators are certain to flex their muscles, just to show a president that they matter, too. In addition, a Republican National Committee television advertising campaign, which implied that terrorists were going to be dumped in mainland neighborhoods, obviously had some effect on Democratic legislators.

Obama has certainly left civil libertarians and leading opponents of torture disillusioned. His decision not to release the photos of detainee abuse at prisons in Iraq and Afghanistan (a decision many other liberals, myself included, supported), his announcement in his major May 21 address that he would continue prolonged detentions in some cases, and his statement in that same speech that seemed to shut the door on both an independent commission to investigate past abuses and potential prosecutions of Bush administration officials are just three of several decisions he has made that have rankled his liberal supporters. But those are probably not make-or-break issues. Guantánamo unquestionably is. A party insider said to me: “At some point, he’s got to close Guantánamo. Or his trust is blown.”

Spokesman Robert Gibbs came right back after the crushing 90–6 Senate vote against funding the base’s closure to confirm that it would be shuttered on schedule by January 22, 2010 (a year from the day Obama announced the intention to close it). But can he change the minds of forty-five senators (the difference between six and a majority)? The key figures here will be not Democrats, but John McCain and South Carolina’s Lindsey Graham. Politico reported the day after Obama’s speech that these two Republicans were sending positive smoke signals in the White House’s direction.4 They will probably come around, and bring lots of Democratic votes with them. But of course they will not do it free of charge: Graham has made it clear that he is against trying any terrorism suspects in federal courts, as Obama proposed for some cases.

Passing bills on health care and climate change and nailing down a deal to close Guantánamo would surely make for an impressive rookie year. But, to go back to where we started, would they herald Democratic dominance? No. The reforms, once passed, have to work. And this is where some of the people I spoke with remain nervous.

The Obama-Emanuel theory is to pass a bill, take what you can get, and fix it later: establish the principle. Some may prefer to wait for a much better time, when the stars are aligned for larger reform, but in politics there is almost never any such thing as a much better time. “People say they should propose X instead of Y, but Y is often on the outer edge of what’s possible on the Hill,” says Robert Greenstein of the Center on Budget and Policy Priorities. And, other defenders say, these are not small matters. John Podesta told me: “I fundamentally disagree with this idea that we’re accepting warmed-over spit and that he’s only moving an inch at a time. Insuring 30 million people? The equivalent of taking 500 million cars off the road? These are big, huge deals.”

They are. But they need to happen in fact, not just in press releases when the bills are passed. So the question of whether workability is being sacrificed in order to get votes is a fair one that won’t be answered for some time. And if these measures don’t produce results, will the President still have the political capital to go back to Congress and ask for more legislation to fix what wasn’t done right the first time?

The economy looms over everything else. Economists expect jobless numbers to increase over the rest of the year, and growth to remain negative. This will lead liberal economists to begin calling for another stimulus bill (an effort is already underway). Lawrence Mishel, an economist and the president of the liberal Economic Policy Institute, told me he plans to push for such a bill. Robert Rubin, well known for being a deficit hawk, has said on numerous occasions that he could support a second stimulus on two conditions: if the economy dips down again in a serious way, and if the stimulus comes with strict assurances about future deficit reduction.

The unencumbered man will find, over this pivotal summer, that the factions, whether centrist or liberal, will start to take out mortgages on him. That’s the cost of big legislation. Obama and his team will have earned the right to celebrate if these bills pass; but the manner in which these outcomes are being achieved may set the precedent of giving Congress too much control in shaping the President’s agenda. It’s the best strategy for now, but control, once ceded, can be difficult to regain.

June 3, 2009

  1. 1

    See “How Historic a Victory?,” The New York Review, December 18, 2008.

  2. 2

    The entire employer-sponsored system is a hangover from the World War II era, when the government placed wage controls on domestic employment. Those controls were on wages only, not benefits, so employers began offering untaxed benefits to lure workers. It was intended to be temporary, but both employees and large corporations, which deduct their health plan costs from taxes, liked it, and nothing ever changed.

  3. 3

    A Moderate Plan for Health Care,” The New York Times, May 11, 2009.

  4. 4

    See Victoria McGrane, “Barack Obama May Get Support of Rivals on Guantánamo,” Politico, May 22, 2009.

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