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Magazine / Cover Story

Obama to Republicans: Let’s Build Consensus

The president tells National Journal that he hears the message from voters, and will respond with a “sense of humility” about what Democrats can accomplish.

October 21, 2010

President Obama is already preparing shifts in style and substance to deal with a postelection landscape that will almost certainly be populated with more Republicans.

In an exclusive interview with National Journal on October 19, Obama said that Democrats will need to show an “appropriate sense of humility about what we can accomplish,” and he pledged to “spend more time building consensus.” The president will focus his agenda on a handful of issues that he believes Republicans might be willing to bargain over, particularly education, energy, and infrastructure.

And yet, Obama signaled that he would bend only so much to a Republican Party that appears poised to gain control of one or both chambers of Congress on November 2. The president called GOP plans to divert part of the Social Security payroll tax into private accounts “a nonstarter.” He insisted that Republicans must find a way to pay for extending tax cuts for the wealthy. And he virtually dared the GOP to target health insurance reforms that allow young adults to stay on their parents’ insurance plans and forbid insurance companies from denying coverage to people with preexisting conditions. “It turns out that those provisions are hugely popular,” Obama said, “and they’re the right thing to do.”

 

The president’s words suggested that if Republicans make the gains that now seem likely, the next two years in Washington could oscillate between compromise on some fronts and heated confrontation on others.

Obama looked fit, trim, and rested during the 45-minute Oval Office chat, although his hair is noticeably graying. The president didn’t hesitate when asked whether he intends to seek reelection. “Obviously, I haven’t made any formal decision,” he said, “but I feel like I’ve got a lot of work left to do.” Told that his answer sounded like a yes, Obama nodded, then flashed a red-carpet smile. “Take it as you will,” he said, laughing. He called “completely unfounded” reports that he might swap Vice President Joe Biden for Secretary of State Hillary Rodham Clinton on the 2012 ticket.

Sitting in a leather chair, beneath a painting of George Washington, with a bust of Martin Luther King Jr. over his right shoulder and a bust of Abraham Lincoln over his left, Obama didn’t mince words about the economy, warning, “It’s going to take us time to get out of the hole that we’re in.” But he spoke hopefully about the nation’s resilience, noting that America gets stronger each time it endures “these periods of self-reflection and questioning and political tumult.”

Speaking of tumult, Obama said that regardless of the election outcome, the voters will have spoken: “The most important message that will be sent by the American people is, we want people in Washington to act like grown-ups, cooperate, and start trying to solve problems instead of scoring political points.”

Excerpts From The Interview

NJ Absent any big change in policy, is there anything you see on the trajec-tory that would cause the economy, particularly jobs, to grow faster in the next year than they have been growing in the last year?

OBAMA Anybody who says they know exactly what the economy will do is probably overestimating their foresight. What we know is that we’re coming out of the worst financial crisis and the worst recession since the Great Depression. So we’ve suffered a significant body blow. Because of the steps we’ve taken, the economy is now growing again, and we’ve seen nine consecutive months of private-sector job growth. Businesses are profitable, and consumers are cautious but they’re spending.

If businesses got more confident about demand being out there to justify their investments, and in turn that led to slightly increased spending, which then created a virtuous cycle, then you could see significant improvement in 2011 over 2010.

But given the hole that we’re in, it would still take a significantly long time to make up for the 8 million jobs that have been lost, so that’s why we think it’s still important to take those extra measures that can improve demand, give small businesses more confidence in terms of their ability to get financing. The steps we took in terms of cutting capital-gains tax for start-ups, trying to accelerate business investment, allowing them to depreciate faster if they make those investments next year—those kinds of measures can potentially make a difference. [But] those headwinds are going to keep on blowing for some time to come.

NJ You talk a lot about how this is the worst financial crisis since the Depression. We’re also going through an economic restructuring unlike anything we’ve seen in 100 or so years. Given those two pillars, is either party really doing enough to address this?

OBAMA We’re not just going through a restructuring over the last couple years; we’ve been going through a restructuring for the last decade, the last 15 years. It got papered over because of the housing bubble and easy credit. So we now know that between 2001 and 2009, middle-class families lost 5 percent of their income. It’s part of the reason why they maxed out on their credit cards and took out so many home-equity loans. We know that job growth was more sluggish between 2001 and 2009 than at any time since World War II. But the housing boom, in a lot of places across the country, put folks who had lost their jobs in manufacturing to work in construction, and now the tide’s washed out, and those folks are really suffering.

So you’re exactly right that we’ve got some structural issues that we put off for a long time, and we’re not going to transform overnight. The best example of that is probably the education issue. So what we’re doing with Race to the Top, what we’re doing in terms of expanding student-loan programs—all those steps are designed to make sure that in this highly competitive environment, we’re going to be better positioned.

When it comes to manufacturing, the investments we made in research and development, particularly in sectors like clean energy that show promise for the future. Those aren’t going to pay off immediately, but if we start positioning ourselves so that we’re a leader in advanced-battery manufacturing, we’re a leader when it comes to solar and wind energy, then we have the opportunity once again to make up some of that ground that we lost over the last decade.

 “We’ve got some structural issues that we put off for a long time, and we’re not going to transform overnight. The best example of that is probably the education issue.”

I would still not trade our position with any other country’s in the world because we still have these enormous assets—the best universities and colleges in the world, the most productive workers in the advanced world, the most entrepreneurial culture in the world. Those advantages can make up for a lot.

It does mean, though, that this election matters. If we make a decision right now that we potentially cut education spending by 20 percent, that’s going to make a difference in terms of how well we’re positioned to compete 10 years from now.

“We’ve got some structural issues that we put off for a long time, and we’re not going to transform overnight. The best example of that is probably the education issue.”

NJ Let’s talk about that, because the Republican candidates in both the Senate and the House are running on an agenda divergent from your own. In your view, what would be the cumulative impact of that agenda, if implemented?

OBAMA When it comes to repealing the health care law, the question to ask these Republicans [is], do you want to go back to a time where people can’t get health insurance if they’ve got preexisting conditions? And if you ask them that question, almost all of them will say, “Oh, no, no, no; we don’t mean that provision.” Well, how about closing the doughnut hole for senior citizens? “Well no, that part of it, we like.”

What is clear to me is that, in the abstract, everybody on the Republican side is for repeal. What’s going to be tested after the election is these specific provisions and how do they feel about them? Because it turns out that those provisions are hugely popular and they’re the right thing to do.

More importantly, they’re going to have to answer the fact that according to the Congressional Budget Office, not according to me, implementing health care will save us a trillion dollars over the course of two decades. They will have to answer where we’re going to make up that trillion dollars and how do they square that with their claim that they want to balance the budget.

When you ask them about a balanced-budget amendment—everybody’s for a balanced-budget amendment in the abstract. I have yet to hear anybody, with the exception, to his credit, of [Rep.] Paul Ryan [R-Wis.], give me any specifics on what exactly do they want to cut. They’ll say, “Well, we’re going to eliminate the last part of the stimulus.” Well, when you actually look at the amount of money that’s not already out the door, turns out a big chunk of that are tax cuts to middle-class families. Do they really want to raise taxes on middle-class families?

When it comes to education, part of their suggestion to pay for a fraction of the high-income tax cuts, which would cost $700 billion; they don’t answer how they’d get all the way there, but a small sliver of the answer is to roll back some of the increases that we’ve made on things like education. And as I’ve said before, if we are not able to produce more scientists and more engineers, and more highly skilled technical workers, then other countries are going to clean our clock.

NJ If there are the votes in the next Congress to extend the Bush tax cuts for all earners, would you veto such an extension of the tax cuts for all earners?

OBAMA I think it’s premature to talk about vetoes because, maybe I’m a congenital optimist, but I feel as if, postelection, regardless of how it plays out, the most important message that will be sent by the American people is, we want people in Washington to act like grown-ups, cooperate, and start trying to solve problems instead of scoring political points. And it is going to be important for Democrats to have a proper and appropriate sense of humility about what we can accomplish in the absence of Republican cooperation. I think it’s going to be important for Republicans to recognize that the American people aren’t simply looking for them to stand on the sidelines; they’re going to have to roll up their sleeves and get to work. In that context, my hope is that a lot of these tax issues can be resolved.

The one thing I will insist upon, though, is if the Republicans are insisting on a permanent extension of the high-income tax cuts, then they have to explain to me how we’re going to pay for them. And I don’t think it’s sufficient for them to say that we feel confident that the economy, because of these tax cuts, will grow sufficiently to make up for them, which is their usual supply-side argument. It’s been around for 40 years now; it has been disproved again and again, and at some point we’re going to have to be honest about what our priorities are.

NJ Another area that a lot of Republicans have been talking about this year is the idea that President Bush attempted, of carving out individual investment accounts from Social Security.

OBAMA There’s no evidence that carving out a portion of Social Security revenues and putting them in private accounts helps the solvency of Social Security. In fact, the reason that, when President Bush proposed it, it died a fairly rapid death, is the recognition, at least among honest fiscal conservatives, that given the way Social Security is structured, you’d actually have to borrow a trillion dollars to make up for the money that was siphoned into the private accounts, and this would weaken the solvency of Social Security.

“It’s going to be important for Republicans to recognize that the American people aren’t simply looking for them to stand on the sidelines.”

Moreover, it’s hard to imagine that anybody who is paying attention over the last couple years would feel real confident that putting part of their Social Security into Wall Street accounts, after they’ve been watching what happened to their 401(k)s, would somehow be comforted by that. So, I think that that approach is a nonstarter.

NJ In 1995, shortly after the midterm debacle for the Democrats, President Clinton began a series of course corrections. What course corrections can you see yourself making [after this election]?

OBAMA My first two years in office were essentially characterized by having to deal with emergencies. We had the financial crisis, that led to a broader economic crisis, that led to the potential collapse of the auto industry in America, that led to a fiscal crisis, and we had to respond rapidly on each of these fronts. It was a lot for the public to digest. It was also a lot for me to be able to communicate effectively to the public in any coherent way.

If you think about it, the amount of work that should have gone into communicating just what was in the stimulus might have taken six months. We didn’t have time. Because right away we had to figure out how do we apply a stress test to the banking system that stabilizes it and what are we going to do about autos? Now that the economy is stable and growing—although still much weaker than we want—I think it’s possible for us to be more deliberate, to spend more time building consensus.

I’ll take an example like infrastructure, where historically you’ve had a strong bipartisan consensus around roads, bridges, runways, railways; and a [highway bill] reauthorization is going to be coming up. For us to be able to say to the Republicans, even in a context of fiscal restraint, we can’t let our core infrastructure deteriorate. What’s the best way to do it? Are there ways that we can redesign how we fund infrastructure so that taxpayers are getting better bang for the buck? Are there ways that we can leverage private capital to come in on top of public dollars?’ That is the kind of conversation that may take a little more time to build that consensus, but I think is possible.

On education, as it becomes time for us to renew what has been No Child Left Behind, hopefully, we can find some common ground. Those are the kinds of opportunities I’m going to be looking for. Hopefully, we will have more time because we’re not going to be putting out fires, day in and day out.

“It’s going to be important for Republicans to recognize that the American people aren’t simply looking for them to stand on the sidelines.”

NJ What are the promises that you can make now to the American public, the things you can get done in the next two years?

OBAMA I just mentioned two that I think we can get done. [Also,] we still need an energy policy in this country. I think that it is not realistic to expect that we have another big omnibus, comprehensive one-size-fits-all energy bill. We’re probably going to have a series of more bite-sized pieces that have to do with renewable energy standards, that continue to build on the good work we’ve done to improve fuel efficiency in cars, energy efficiency in buildings.

I think there are going to be a whole bunch of Republicans who continue to be interested in how we can foster a clean-energy industry here, and how can we do a better job with traditional energy sources like nuclear and natural gas. It won’t be easy, but I think we can get something like that done. But everything we do is going to have to be focused on how do we kick-start this economy so that it is growing faster.

NJ But when you listen to what you’re hearing from the campaign trail from Republicans, are you seeing mostly opportunities of the sort you’ve mentioned in energy, infrastructure, and education, or do you think that the policies they’re promoting are mostly going to provoke resistance from you?

OBAMA It’s always hard to gauge what ends up being campaign rhetoric and what actual governance looks like. It is my hope that Republicans will say to themselves, “We need to get things done. In order to get things done we’re going to have to cooperate with the president.” What they won’t be able to do, I think, is to say, “We’re going to cut taxes, balance the budget, and not impact on services that we know poll well and people like.”

 

“It is hard to foresee, over the course of the next several decades, any country being able to catch up to us in terms of our ability to influence what’s happening around the world.”

If the “Pledge to America” says, “We’re not going to do anything on Social Security; we’re not going to do anything on Medicare; we’re not going to do anything on veterans; and we’re not going to do anything on defense,” I don’t know a lot that’s left. Maybe they think that the national parks, they think somehow we can extract enough money out of them, or the Environmental Protection Agency.

If that’s the case they’re going to have to look at the budget, and I’ll be happy to sit down with them, and we can work through it line by line.

NJ You have very vexing problems in Afghanistan, Pakistan, and Iran. At this point, which one worries you the most?

OBAMA Well, let me start by saying that, on Iran, we had a theo ry coming in that we should reach out to Iran and give them the opportunity to do the right thing, but also have some sticks in place and apply them if they didn’t reach back. We have executed on that policy, I think, as well as anybody could have anticipated. And independent analysts have been struck by the degree to which the Iranian sanctions have had a significant impact on their economy. But that is a highly ideological regime, and we do not yet know whether the costs of pursuing a nuclear program, in their eyes, is now outweighing the benefits. But we’re going to keep on pushing.

I think Afghanistan and Pakistan are the same problem—which is, how do we address militant extremist terrorist networks that are embedded in that region and metastasizing in other parts of the world that are vulnerable? And that will continue to worry me, I suspect, through the duration of my presidency; and I think that will worry the next president as well.

“It is hard to foresee, over the course of the next several decades, any country being able to catch up to us in terms of our ability to influence what’s happening around the world.”

In order of importance, my most important task is making sure that those extremist networks never get their hands on a weapon of mass destruction, and we organized a nuclear-nonproliferation conference that was very successful, and we made strides with a whole range of different countries from Ukraine and other former Soviet satellites to other countries in the Middle East and Asia to try to lock up loose nuclear materials.

My second task is to make sure we’re dismantling and ultimately destroying these networks. The Afghan policy and our approach to Pakistan are both designed to achieve those goals. It is a hard slog, and I think General [David] Petraeus is pursuing the right strategy. We put before the Pakistanis our expectations of them in terms of being a partner with us on this. It’s uneven, the help we will get, but I think that we are generally moving in the right direction. But it’s going to keep on worrying me for some time to come.

 

NJ You’re a student of history. When you look at the enormous economic and social change going on right now, what era in our history can you compare this to, and what have you learned by what presidents in those times did or didn’t do?

OBAMA There are different pieces of our current challenges that I can draw parallels to. Obviously, we have gone through, in the past, transitions, economic, where we went from an agricultural society to an industrial society, and we had to retrain the population to be able to get those new jobs. Starting with folks like Lincoln, we made investments in human capital that allowed people to equip themselves. And that goes on right to the GI Bill. Each successive shift of the economy meant we were retooling our population, giving them the capacity to adapt in that economic climate. I think we are going through one of those periods right now.

Internationally, I’m not sure there are any parallels right now, because even though the world is more complex than ever, even though you have these emerging countries like China and India that have huge potential and are starting to throw their weight around on the world stage, we are still, by far, the largest, most powerful country on Earth. And as much as these countries complain about us, when the world gets in a real bind, whether it’s who’s going to help northern and southern Sudan negotiate a referendum, or who’s going to effectively assist Haiti after an earthquake, lo and behold, it turns out that everybody’s expecting the United States to carry the weight on this.

In that sense, I think we are not like Great Britain, when militarily it was declining. Because that happened fairly quickly; almost overnight, they were supplanted. It is hard to foresee, over the course of the next several decades, any country being able to catch up to us in terms of our ability to influence what’s happening around the world and being willing to take responsibility for the events that are taking place around the world. China, as rapidly as it’s growing, still spends a fraction of what we spend on our military. It still has 700 million people who are in dire poverty that they have to attend to. So when it comes to underwriting an international framework that allows for peace and security and economic stability, they’re still lagging behind and will be for a while.

Now, that is both a challenge for us and a responsibility for us. That means we carry an extra burden and that means that we’ve got to be, again, more humble about what we can accomplish, because we have finite resources. On the other hand, it’s also an opportunity. Despite everything we’ve gone through, I think the world still looks to us for leadership. That means we can still shape the world in ways that not only create more peace and more security worldwide for our kids and our grandkids, but it means that we can still attract talent from all around the world to help create new businesses here. It means that the values we care about in terms of democracy and human rights are ones that we still have the ability to promote and extend beyond our shores. As I said before, I don’t know of anybody who wouldn’t want to trade places with us despite of all the challenges we’ve gone through.

I do see a historical parallel in what has happened probably every 20 or 30 years in this country. We get down on ourselves, or the existing circumstances. We see other countries maybe doing better; we’ve got some structural problems. Yet each time we’re able to lift ourselves up out of those difficulties and remake ourselves. In fact, part of what I think makes America strong is, we do go through these periods of self-reflection and questioning and political tumult. That sparks the desire to do better than we’ve done.

 

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