Last fall, as the economic crisis intensified, a behind-the-scenes struggle opened up in the Democratic Party between fiscal hawks, who considered the Bush administration’s $700 billion financial-bailout package a major limitation on what the next president could propose, and others, like Schumer, who saw the crisis as license to abandon normal fiscal constraints. By Thanksgiving, most Democrats were lining up with Schumer. The question now is not whether to spend generously but how much to spend and on what.
When Bill Clinton took office, 16 years ago, he found himself facing a growing federal deficit and abandoned his middle-class tax cut to focus on balancing the budget. Even though the deficit is much larger today, Obama won’t have to confront this dilemma. Instead, the imperative throughout Washington is to spend (and spend, and spend!) the country’s way out of recession. On this, Obama doesn’t just have a mandate; he has something more like a directive.
A few weeks ago, while everyone was focused on the stimulus package, Schumer walked me through what he thinks the first year of the Obama administration might look like and why it will appeal to his idea of the middle class.
“First, you’ve got to get the economy moving again,” he said. “You do that with a big stimulus and get money into people’s hands.” One likely component is a middle-class tax cut. To broaden support for the large stimulus he favors, Schumer was also pushing provisions to increase middle-class savings and eventually tame the deficit: government-funded “baby bonds” of $500 for every new child, matching federal funds to 401(k)s, and automatic IRA accounts for workers whose employers don’t offer a 401(k). A well-designed stimulus, he said, would quickly rebuild confidence in government.
Schumer listed five things that should follow simultaneously, indicating that each enjoys at least a rough Democratic consensus. Reforming the financial industry would further increase confidence and allay middle-class worries about mortgages and retirement accounts. An energy plan that takes steps to reduce dependence on foreign oil and to promote green alternatives would convince a middle class spooked by $4-a-gallon gasoline that, even if the government cannot control market volatility and prices in the short term, it is taking concrete steps toward solving the problem. On education, Obama has proposed more federal dollars for grades K–12 to attract better teachers and improve schools without raising property taxes, and a tax credit to make college more affordable. An immigration bill similar to what Ted Kennedy and John McCain proposed might upset interest groups on the left and right, but it would appeal to small businesses (i.e., middle-class entrepreneurs) and convince everyone else that government finally had a handle on the problem.
The last issue is withdrawal from Iraq. “I think we’re going to do Iraq early,” Schumer said. “What the right wing didn’t get was that even if the surge succeeded, it was beside the point. People said to themselves, ‘There’s $100 billion a year going over there, when I’m hurting? For what, stability in Iraq?’ I ask people, ‘How many’s first goal is stability in Iraq?’ No one raises their hand. Well, why are we spending more money on that than on all of federal education?”
All of this could be accomplished within the first three months of the Obama administration, he suggested. Were that to happen, the middle class would have the activist government Schumer says it wants, behaving exactly the way Schumer wants it to. “Every one of those things either helps the middle class immediately, or gives them hope in the future that the pie is going to keep growing,” he said. That would open the door to bigger things later in the year, like universal health care and ambitious climate-change legislation.
Schumer says that middle-class problems have expanded to the point that they’ve begun to overlap with the problems of the poor and working poor—and middle-class families lack recourse to the government programs that help the poor. “Twenty years ago, most middle-class people didn’t worry about health care,” he told me. “Today, the person making $70,000 thinks about health care as much as the person making $35,000.” Far from being adversaries, both groups favor things like better schools and reasonable gas prices. “What will happen if we do it right,” he said, “is that there’ll be an alliance between the middle class and the poor, as opposed to the alliance between the middle class and the rich [that held for the past 28 years]. Everything we’re talking about is the work of an active, strong government, and if it works, it will wed the middle class to the Democrats for a generation.”
People think big at the outset of any new administration. Eight years ago, Karl Rove was plotting to bring about a generation-long Republican majority with a set of ideas that sounded pretty convincing. That didn’t work out so well. And Rove was operating at a time of relative peace and prosperity. Some unforeseen crisis or error by Obama—or a crisis in plain sight, like a long, grinding recession—could hamper Democrats and render Schumer no more of a visionary than Rove.
What sank Rove’s grand plan was Bush’s inability to get any of its component parts through Congress. But that problem is unlikely to befall Obama. He has already filled many of the top administration jobs with seasoned congressional veterans, notably his chief of staff, Rahm Emanuel. Before leaving Congress to join the administration, Emanuel was the Democrat who most shared Schumer’s obsessive focus on aspirational middle-class programs.
Obama also seems to want to govern by enunciating broad themes and relying on Congress to fill in many of the specifics. After two terms of a Republican president who showed little regard for the legislative branch, Congress is eager to oblige. As a member of the Democratic leadership, Schumer will be central to the process, and he has logged enough phone time with senior Obama officials to become convinced that the new president shares his worldview.
So Obama not only has money to spend but looks certain, at least initially, to enjoy better relations with Congress than any president in decades. That ought to provide a good head start toward enacting an ambitious agenda—as good as any president has had since Lyndon Johnson.
The last time I saw Schumer, he had just announced his decision to forgo a third term as DSCC chairman. The time had come to test his ideas in the legislative arena. Having at last gained control of government, Schumer and his party must now show that they know how to keep it.