The politics of economic rescue for the Biden-Harris Administration

One of the factors that Theda Skocpol emphasized about the politics of Obama-Biden Administration during its first term in Obama and America's Political Future (2012) was the way that Obama became identified with the unpopular "bailouts" of banks and large corporations. One way this happened was that Obama even as a candidate was doing what was arguably a very responsible thing: working closely with the Cheney-Bush Administration on anti-recession measures even before the 2008 election.

As Michael Kazin has explained, there was a big contrast from the time when Franklin Roosevelt became President in March 1933 (yes, March, the transition period was longer back then) three-and-a-half-years from the beginning of the Great Depression in 1929 and Obama's ascension to the office soon after the spectacular financial crash of September 2008. The recession in the US technically began in December 2007, but the financial crisis made the seriousness of it dramatically clear weeks before the 2008 Presidential election. That meant that Bush and the Republican Party were not nearly so clearly identified with the economic problems that worsened in the months after Obama's election.

One of 2008 Presidential candidate John McCain's favorite political stunt was to declare he was "suspending" whatever campaign he was running at the moment in order to go to Washington and be a statesman over some serious issue. How effective it ever was, I don't know. But he tried the stunt again after the September financial crisis. But Obama at least exploited the political optics of the moment more effectively. As Skocpol explains:

Obama’s electoral triumph over McCain gained momentum during the Wall Street meltdown that became apparent in September 2008, as conventional wisdom has long recognized. But looking deeper, we can see that candidate Obama was drawn into cooperation with the outgoing Bush administration starting well before the November election, as well as during the presidential transition. Decades earlier, FDR had deliberately avoided invitations to work together from outgoing Republican president Herbert Hoover. But in 2008, with the economic meltdown just getting started, Obama could not avoid transitional efforts to prevent the initial Wall Street crisis from spiraling out of control, a catastrophe that would have taken down the world financial system and plunged the United States into a massive and prolonged depression. FDR came into office when the patient was near death, while Obama wanted to keep the patient’s raging fever from turning into pneumonia. In consequence, just as he was winning the 2008 election and preparing to move into the White House, Obama seemed to be holding hands with the modern- day equivalent of Herbert Hoover, discredited outgoing GOP president George W. Bush. [my emphasis]

As she notes there, it was unavoidable for Obama to have some kind of involvement in economic policy deliberations during the transition. But the politics of it can also be tricky. Particularly with asymmetric partisan polarization in which the Democrats seek to model bipartisan cooperation while Republicans are highly ideological and intensely partisan, with a media network and real as well as "astroturf" grassroots organizations the party can easily mobilize.

Skocpol further emphasizes the point:

Cooperation to deal with Wall Street woes started in earnest during the 2008 presidential campaign in mid- September, when GOP candidate McCain tried to call off the first presidential debate and hold a summit at the Bush White House. As Jonathan Alter reminds us in The Promise: President Obama, Year One, this campaign stunt backfired on McCain because Obama was the one who looked cool, calm, wise, and in charge. Another aspect of this episode mattered just as much, if not more. Soon-to-be president-elect Obama became engaged with Bush administration efforts to mitigate the financial crisis through the politically unpopular decision to build congressional support for a massive financial rescue plan, the Troubled Asset Relief Program (TARP). Starting at that misguided September 2008 session at the White House, Obama gained confidence that he could master complex issues and work with financial experts. Ironically, the insurgent Democratic candidate who campaigned by promising a bottom- up approach to economic growth and renewal in America started his “presidential” economic efforts amid a bipartisan scramble to help Wall Street first. [my emphasis]

Joe Biden didn't have a comparable pre-election opportunity, because there was no comparable September financial crisis this year. And with the COVID-19 pandemic, Trump was careening down a muddy road in a rickety pickup trying desperately not to get stuck in the mud. About all the strategy he had to fight the pandemic was to call it a hoax and hope for herd immunity to take effect. A strategy of trying to coopt Biden into identifying with his COVID policy (such as it was) was not in Trump's bag of bombastic theatrical tricks and in any case wouldn't have been compatible with his hyperpartisan posturing.

But Biden's situation right now does bear some uncomfortable similarity to Obama's, in that a recission began in February 2020. Since the onset coincided with the beginning of the COVID-19 pandemic in the US, there is no strong identifiication of the recession with specific failures of the Trump-Pence Administration. And the Biden campaign was based on the theme of I'm Not Trump and it didn't emphasize the problems of Republican Party economics.

So Biden and Harris do face the risk of being blamed for the results of the recession/depression that began during the Trump-Pence Administration. The Republicans are currently working hard during the transition to limit any emergency aid or economic stimulus from being enacted. And they have already pivoted to warn of the horrible threat of the public debt and the budget deficit, a concern that only occupies the Republican Party when a Democrat is in the White House. The first President Bush actually did have some concern about the deficit, and his deficit-control efforts damaged his political prospects in 1992. In any case, they were based on faulty economic assumptions.

The Republicans are already pursuing the same strategy the used against Obama: block effective efforts to address the depression while blaming the Democratic President non-stop for the problems of the economy.

In that context, this posture of Biden's on which David Sirota and Walker Bragman report seems to be politically inept, assuming as I do that he actually wants to have a successful Presidency: Biden Goes To Bat For BlackRock, Stays Vague On Direct Aid To Struggling Americans Daily Poster 12/19/2020.

For weeks, Joe Biden’s team has tiptoed around the [stimulus bill being endlessly negotiated in Congress], and avoided strongly and consistently pushing for direct aid to Americans, even as the country faces mass starvation and rising poverty. But yesterday, Biden’s designee to run federal economic policy suddenly weighed in in an uncharacteristically forceful way — to demand Congress protect a program that has provided little relief to ordinary Americans, but has significantly benefited his Wall Street firm.

In a formal statement from Biden’s transition team, the president-elect’s designee to run the National Economic Council Brian Deese demanded Congress reject Republican-backed legislative language designed to curtain special Federal Reserve lending programs created in the first pandemic legislation passed earlier this year.

“It is in the interests of the American people to maintain the Fed’s ability to respond quickly and forcefully,” Deese said. “Undermining that authority could mean less lending to Main Street businesses, higher unemployment and greater economic pain across the nation.”

While the Fed programs have been criticized for being underutilized, they have significantly boosted BlackRock, the firm that was hired to advise the Fed and that has been employing Deese as a managing director.

For more on Brian Deese, see David Dayen's BlackRock Executive Brian Deese Could Get Major White House Position The American Prospect 11/24/2020.

The Democrats should oppose the malicious proposal on which the Republicans just started insisting to curb the existing power of the Federal Reserve to combat recessionary tendencies and financial crisis. This is part of the Republicans' program of economic sabotage against the Biden-Harris Administration. (And the moment of this writing, Congressional negotiators are announcing some kind of "compromise" on the issue, whatever that may mean. See: Marianne Levine et al, Stimulus deal in sight after compromise reached on Fed dispute Politico 12/20/2020)

But politics is not identical with policy. And if the Biden team is going to weigh in very publicly on that proposal, they need to be very careful to identify with genuinely popular measures like individual relief payments and aid to state and local governments. Unfortunately, the Biden team seems to be at least partially falling for the Republicans' Lucy-holding-the-football-for-Charlie-Brown trap:

At one point, he seemed to signal vague support for direct aid, but at another point when the House and Senate seemed close to reaching a deal that included state and local aid and a corporate liability shield, but no stimulus checks, he seemed to signal his support for such an agreement.

Asked about Sen. Bernie Sanders’ opposition over the lack of checks, Biden acknowledged that the deal would be better with checks and that those may still be “in play.” However, he said, “This is a democracy and you’ve got to find a sweet spot where you have enough people willing to move in a direction that gets us a long way down the road, but isn’t the whole answer.”

That rhetoric is a lot more squishy and noncommittal than the assertive demands to protect the program helping BlackRock — which tells us a lot about priorities. [my emphasis]

The dilemma that Skocpol identified in Obama economic policy image was real. And it had significant political effects, including contributing to the loss of the Democrats' House majority in the 2010 midterms. Outside of the Beltway press, nobody actually cares about having Bipartisanship for its own sake.