As Americans continued to starve, face evictions, and die during this week’s congressional showdown over desperately needed stimulus legislation, former president Barack Obama weighed in by trying to erase a historical cautionary tale that already seems to be happening again.
Looking back at the economic crisis during his first term, Obama told New York Magazine that he “was full Keynesian at that time in terms of trying to get as much stimulus out the door as quickly as possible” and that his critics were wrong to assume that the Democratic Party — which had full control of Congress — backed a smaller-than-necessary stimulus bill “based on some concerns about deficits at a time when that should have been the last thing we were worrying about.”
“At the end of the day I had to get Ben Nelson’s vote, I had to get Arlen Specter’s vote, and I had to get Susan Collins’s vote — otherwise, I’m getting nothing,” Obama said, referring to conservative Democratic and Republican senators. “I’m making a decision to go ahead and take three-quarters of a loaf rather than have a lengthy fight for the whole loaf that even if I win could delay things significantly and hamper our ability to right the ship.”
The familiar message from Obama to Democratic Party voters is the same one the party’s apologists offer up today: Budget capitulations are not a product of ideological fealty to an austerity agenda, they are only a reflection of political reality — so stop pushing, start falling in line and be pragmatic.
On its face, it is a compelling tale that makes sense if you read nothing else and forgot what actually happened. The problem is, it omits a key detail that collapses the entire story and exposes the austerity ideology at play: In roughly the same time period, Obama and his party congratulated themselves for passing legislation that — in the name of deficit reduction — rescinded the White House’s authority to spend hundreds of billions of dollars to help Americans who were being thrown out of their homes.
Called the “Pay It Back Act,” the Democratic bill reduced the size of the Troubled Asset Relief Program (TARP) just after it had bailed out the banks, but just before a new president might decide to use the money for what it was originally supposed to do: help homeowners.
Amid all the pain and suffering during the financial meltdown, Politico reported in 2009 that “the White House has signaled that it wants to dedicate 2010 to deficit reduction, and putting the bulk of TARP funds into paying down the debt could please budget hawks on the Hill.”
Congressional Democrats the next year issued press releases lauding themselves for passing a bill to prevent the president from using the money to help people. The legislation reduced the amount of TARP funds available to be deployed, and required proceeds from the fund’s securities to be used “for the sole purpose of deficit reduction.”
Obama signed the bill into law as part of the Dodd-Frank financial reform legislation, which was finalized just after the White House launched a commission to slash Social Security in the middle of the Great Recession. A few months later, Democrats were — in Obama’s own words — “shellacked” in the midterm elections. His administration then doubled down on austerity, quickly releasing a proposal for Social Security benefit cuts and pressing the Republican Congress to enact some of them.
Meanwhile, millions suffered through an economic recovery that “was the slowest in post-World War II history, and the degree of fiscal austerity can entirely explain its slowness,” the Economic Policy Institute reported.
The result was a popular backlash that ultimately created the conditions for the rise of Donald Trump.
Sadly, this is all lost history deliberately flushed down the memory hole in service of both helping Obama build his pristine media brand and pretending Democrats have not played a willful role in creating the destructive politics of austerity.
And now, with no societal recollection of the debacle, this same cycle seems to be starting anew — and the broad strokes are eerily familiar.
A new administration entering office during an economic crisis that requires deficit spending. A Republican Party that instantly transitions from spending on corporate bailouts to pretending it cares about debt. A Washington-anchored Democratic Party that fetishizes deficit reduction so that cable news pundits will portray them as sober-minded fiscal hawks, rather than New Dealers. Wall Street executives and bondholders celebrate, serfs outside the palace walls starve, a counterrevolutionary backlash follows, and the cycle starts anew.
This is the Austerity Loop that seems to be starting over again — proving that when we forget our past, history may not exactly repeat itself, but it tends to rhyme.