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The Next New Deal


But as Obama’s plans have unspooled over the past year, the economy has gone from pre-recessionary to perhaps pre-depressionary, the financial system began its epic meltdown, and the bailout of the banking system has imposed a gargantuan, unforeseen cost on the federal coffers. What had been expected to be a $450 billion deficit next year is now going to clock in, according to the latest estimates by the Congressional Budget Office, at $750 billion, minimum. (The Committee for a Responsible Federal Budget pegs it at $1 trillion.)

Deficit numbers like that, approaching 7.5 percent of GDP, are enough to put a scare even into someone as unflappable as Obama. In a recent interview with Rolling Stone, he was asked what would be the hardest part of Bush’s legacy to undo. “The budget,” Obama answered without hesitation. “We are going to be in a massive hole … Digging ourselves out of the fiscal mess we’re in is going to be a big, big challenge, and it’s going to require some tough decisions that will not always be popular, particularly when there’s going to be a lot of pent-up energy among Democrats. If I win, every member of Congress on the Democratic side, and some on the Republican side, is going to have ideas about pressing needs and worthy programs. Trying to set some very hard, clear priorities is going to be tough.”

Already Obama is hinting strongly at what his priorities will be. Consistent with what Emanuel told me, Obama now informs Time’s Joe Klein that endeavoring to spark “a new energy economy [is] going to be my No. 1 priority when I get into office.” At the same time, Obama will surely press immediately for his middle-class tax cut, which happens to be sound economics in recessionary times and also irresistible politically.

What isn’t likely to happen anytime soon is Obama’s version of near-universal health care. Even before the financial crisis hit, a number of senior Democratic lawmakers were quietly expressing doubts about trying to fast-track the issue. “I’m not sure we have a consensus for health care, even on our side,” one Democratic senator tells me. “Remember back in 1992, when Pat Moynihan told Clinton to do welfare before health care and Clinton didn’t listen? That’s a lesson Obama should pay heed to—health care is a quagmire.”

More problematic for Obama may be the need to abandon his tax hikes on the wealthy. The notion of raising taxes on anyone in the teeth of a precipitous downturn will meet with stiff resistance from many sides. Yet without the revenues provided by such measures, it’s difficult to fathom how Obama will pay for even a fraction of his proposals without pushing the deficit from the realm of the merely terrifying to the absolutely crushing.

Some Democrats will say—are already saying—damn the deficit, full speed ahead. They are talking about a new New Deal, about the revival of Keynesian pump-priming. On the other side, however, stand the fiscally conservative House “blue dogs,” without whose support Obama will find it nearly impossible to move his agenda through the lower chamber. His outreach to that group—including his embrace of pay-as-you-go rules for budgeting—has been ardent, and if he were to spurn them now, the political consequences could be dire.

Obama plainly sees this conflict coming, this potential replay of the Clinton wars between deficit hawks and public-investment liberals. He has moved adroitly to give himself maximal running room. “I was heartened to see that page-one profile the other day on the role of Paul Volcker in The Wall Street Journal,” says a former Clintonista. “Some of these left-right tensions are going to be mitigated by the fact that Obama has built himself such a loud cheering section among the fiscal-responsibility crowd.”

Some, but not all. If the economic crisis worsens in the way that so many in the financial sector are now certain that it will, Obama will be faced with choices much more wrenching than he now imagines—choices that are likely to pin him down squarely on an ideological spectrum that he has labored mightily to transcend.

In a way, that attempt has been the raison d’être of the whole project of Obamaism. And its success has been a source of fascination and frustration to those who have observed him for much of his adult life. From as far back as his days at Harvard, where I first ran across Obama, his bedrock political orientation—centrist? Liberal? Neoliberal? What?—has remained opaque. The evidence, much of it on display during this campaign, points in all directions. His Senate voting record: traditionally liberal. His temperament: technocratically pragmatic. His rhetoric: somehow centrist.

It’s possible that these timeworn labels will prove as unhelpful in defining Obama’s administration as they have been in limning his campaign. Maybe the real dichotomy that will matter will be between boldness and cautious moderation. His campaign has by turns been both: starkly audacious in conception—a political neophyte taking on the Clinton machine? C’mon, you must be kidding!—but cautious tactically and strategically in execution.

FDR, of course, ran a cautious campaign in 1932, as the historian Alan Brinkley reminded me the other day. Indeed, Brinkley noted that “Roosevelt’s was much more cautious and much more conservative than Obama’s. Obama has been fairly careful, not terribly controversial or aggressive or innovative; he’s played it safe on the whole, but not nearly so much as Roosevelt did. Roosevelt played it safe because he pretty much knew he was going to win unless he screwed up. I don’t think Obama has ever quite felt that way.”

But Roosevelt was compelled to abandon caution by the great trauma of his day; the Great Depression gave him little choice but to be bold. Perhaps the same will be true for Obama. The gathering shitstorms on the horizon will test him quickly and severely. How he handles them will either place him on the road to ruin or the path to greatness—any less dramatic a destination would seem, well, so very un-Obaman. And it will finally answer a question posed by McCain for reasons of his own, but that the rest of us, if we’re being honest, would admit to puzzling over, too: Who is Barack Obama?

Additional reporting by Michelle Dubert


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