We arrived at the Oval Office for our 45-minute interview with President Obama on the morning of October 11th. After our conversation ended, the president would board Air Force One for Florida, where he was slated to hold a rally at the University of Miami before watching Vice President Joe Biden debate Rep. Paul Ryan. But now, before the tape recorders were turned on, the president and I chatted for a minute about “The Bronco Buster,” the Frederic Remington sculpture next to his desk that once belonged to Theodore Roosevelt. Then, as the small talk began to eat up too much time, Obama took charge. “All right,” he said briskly. “Let’s fire up.”
Barack Obama can no longer preach the bright 2008 certitudes of “Hope and Change.” He has a record to defend this time around. And, considering the lousy hand he was dealt by George W. Bush and an obstructionist Congress, his record of achievement, from universal health care to equal pay for women, is astonishingly solid. His excessive caution is a survival trait; at a time when the ripple and fury provoked by one off-key quip can derail a campaign for days, self-editing is the price a virtuoso must pay to go the distance in the age of YouTube.
Viewed through the lens of history, Obama represents a new type of 21st-century politician: the Progressive Firewall. Obama, simply put, is the curator-in-chief of the New Deal, the Fair Deal, the New Frontier and the Great Society. When he talks about continued subsidies for Big Bird or contraceptives for Sandra Fluke, he is the inheritor of the Progressive movement’s agenda, the last line of defense that prevents America’s hard-won social contract from being defunded into oblivion.
Ever since Theodore Roosevelt used executive orders to save the Grand Canyon from the zinc-copper lobbies and declared that unsanitary factories were grotesque perversions propagated by Big Money interests, the federal government has aimed to improve the daily lives of average Americans. Woodrow Wilson followed up T.R.’s acts by creating the Federal Reserve and the Federal Trade Commission and re-establishing a federal income tax. Then, before the stock market crash in 1929, the GOP Big Three of Harding-Coolidge-Hoover made “business” the business of America, once more allowing profiteers to flourish at the expense of the vulnerable.
Enter Franklin Roosevelt, a polio victim confined to a wheelchair and leg braces. His alphabet soup of New Deal programs – the CCC and TVA and WPA – brought hope to the financially distraught, making them believe that the government was on their side. Determined to end the Great Depression, Roosevelt was a magnificent experimenter. Credit him with Social Security, legislation to protect workers, labor’s right to collective bargaining, Wall Street regulation, rural electrification projects, farm-price supports, unemployment compensation and federally guaranteed bank deposits. The America we know and love today sprung directly from the New Deal.
For the next three decades, the vast majority of voters benefited from Roosevelt’s revolution. And every president from FDR to Jimmy Carter, regardless of political affiliation, grabbed America by the scruff of the neck and did huge, imaginative things with tax revenues. Think Truman (the Marshall Plan), Eisenhower (the Interstate Highway System), Kennedy (the space program), Johnson (Medicaid and Medicare), Nixon (the EPA) and Carter (the departments of Energy and Education). Whether it was Attorney General Robert F. Kennedy going after the Mob or LBJ laying the groundwork for PBS, citizens took comfort in the knowledge that the executive branch was a caring iron fist with watchdog instincts that got things done.
It was the election of Ronald Reagan that started the Grand Reversal. Reagan had voted four times for FDR, but by 1980 he saw the federal government – with the notable exception of our armed forces – as a bloated, black-hatted villain straight out of one of his B movies. His revolution – and make no mistake that it was one – aimed to undo everything from Medicare to Roe v. Wade. Ever since Reagan, both the New Deal and the Great Society have been under continuous siege by the American right. Bill Clinton survived two terms only by co-opting traditional GOP issues like welfare reform and balanced budgets. Unlike Clinton, Obama must hold tighter to the Progressive movement’s reins. There are no more moderate Republicans left in Congress to do business with; today’s GOP conservatives want to roll back, not reform. Having brought Obamacare this far, the president must find a way to close the deal in his second term.
Paul Nitze, the foreign-policy guru of the Truman administration, once told me that the problem with historians like myself is that we’re always hunting for a cache of documents to analyze. What our ilk tends to forget, he chided, is that inaction is also policy. Under this criterion, Obama must also be judged by the things he won’t allow to happen on his watch: Wall Street thieving, Bush-style fiscal irresponsibility, a new war in the Middle East, the reversal of Roe v. Wade, the dismantling of Medicare into a voucher program – the list is long. The offense-driven, Yes-We-Can candidate of 2008 has become the No-You-Won’t defensive champion of 2012. Obama has less a grand plan to get America working than a NO TRESPASSING sign to prevent 100 years of progressive accomplishments from being swept away, courtesy of Team Romney, in a Katrina-like deluge of anti-regulatory measures.
No wonder the right has such a gleam of hatred for Obama – he is the roadblock to their revolution. The conservative movement, however, has a crippling problem: If they can’t beat Obama with a 7.8 percent unemployment rate, then how can they hope to derail Hillary Clinton in 2016 when presumably that number will be substantially lower?
If Obama wins re-election, his domestic agenda will be anchored around a guarantee to all Americans that civil rights, Social Security, Medicare, Medicaid, affordable health care, public education, clean air and water, and a woman’s right to choose will be protected, no matter how poorly the economy performs. Obama has grappled with two of the last puzzle pieces of the Progressive agenda – health care and gay rights – with success. If he is re-elected in November and makes his health care program permanent, it will take root in the history books as a seminal achievement. If he loses, Romney and Ryan will crush his initiatives without remorse.
The main goal of Obama’s second term, besides driving down unemployment, will likely be the conversion to clean energy. While Obama doesn’t wear an Inconvenient Truth T-shirt, he nevertheless understands that environmentalism makes for good business in the 21st century. The high seas and savage winds of fossil-fuel abuse are upon us. Obama has made clear that addressing climate change is the issue of most long-term consequence facing not only America but human civilization itself. “I will not walk away from the promise of clean energy,” he declared in his State of the Union address this year. “I will not cede the wind or solar or battery industry to China or Germany because we refuse to make the same commitment here. We have subsidized oil companies for a century. That’s long enough.” When Obama was prepping in Nevada for his first debate with Mitt Romney, he took a break to tour the Hoover Dam. Critics scoffed at the trip, but a second-term Obama presidency seems poised to build a clean-energy grid in the same infrastructure-driven vein as the New Deal’s dams and road projects. Why not take advantage of proximity to learn about how thousands of workers were paid to build the towering dam, which continues to protect the Southwest from flood damage and irrigate thousands of acres of farmland, all while providing low-cost power to California, Arizona and Nevada?
Every so often I see CNN flash the Electoral College map on my TV screen, and some wizard pollster describes a convoluted formula, a running of the tables, in which Romney becomes president without winning Ohio. He probably can’t. Shortly after Obama was elected, he provided U.S. auto manufacturers with $62 billion in emergency aid. The federal government, in essence, became the principal stockholder of General Motors (it still holds 500 million shares). Romney not only disagreed with Obama’s decision but wrote perhaps the dumbest op-ed in American campaign history, titled “Let Detroit Go Bankrupt.” Theodore Roosevelt came to the rescue of San Francisco after the Great Earthquake of 1906 and George W. Bush helped rebuild New York City in the wake of the 9/11 terrorist attacks, but Romney wanted to pull the plug on the Rust Belt as it struggled to jump-start its troubled economy. Thanks to the Obama bailout, which saved the auto industry, unemployment in Ohio stands at 7.2 percent, well below the national average. They should erect statues of Obama in Toledo and Akron. Name a boulevard after him in Dayton and Elyria. Without the bailout money, GM and Chrysler likely would have gone bankrupt, and many Ohio towns would have become Hoovervilles.
Over the summer, I brought my wife and kids to an Obama rally in the Ohio town of Maumee, not far from where I grew up. The president delivered a speech about how bailing out GM and Chrysler saved thousands of jobs in Ohio. When he started working the rope line, two young African-American girls began squealing with joy. Playing the good Samaritan, I escorted them to the front of the line so they would be sure to meet the president. The younger girl asked Obama to sign her T-shirt with a Sharpie.
“How old are you?” he asked.
He gladly obliged.
The older girl had the same request. Obama, however, eyed her with warm parental disapproval. “How old are you?” he asked.
“Fourteen,” she replied. The same age as Malia Obama.
“Oh, no,” the president said with a broad smile, crouching down to make eye contact. “You’re too old to have someone writing on your clothes. Do you understand? That’s a nice shirt you have. Take care of it. I’ll give you a fist-bump instead.”
It was a wonderful moment to witness. This wasn’t a president who merely kissed babies for votes. Even though the commotion all around him was louder than a Sousa band, Obama was able to differentiate the ages of the two girls, and then offer the older one a lesson about being a young woman and having selfrespect.
I was reminded of this incident when our interview with the president ended. As we left the Oval Office, executive editor Eric Bates told Obama that he had asked his six-year-old if there was anything she wanted him to say to the president. After a thoughtful pause, she said, “Tell him: You can do it.”
Obama grinned. “That’s the only advice I need,” he said. “I do very well, by the way, in that demographic. Ages six to 12? I’m a killer.”
“Thought about lowering the voting age?” Bates joked.
“You know, kids have good instincts,” Obama offered. “They look at the other guy and say, ‘Well, that’s a bullshitter, I can tell.'”
Let’s start with how the campaign has been going. Ever since the first debate, Romney has abruptly shifted his position on a whole host of issues, from his tax plan to financial regulation.
He made a strong sales pitch for what I think are really wrongheaded plans. But the facts haven’t changed. The fundamentals haven’t changed. The essence of this race is, “Do we have an economy that is building on all the work we’ve done over the last four years – an economy where we’re focused on growing a strong, vibrant middle class, where we’re focused on creating a strong manufacturing base here in the United States, where we are continuing to cut our imports of foreign oil, not only by developing homegrown oil and gas, but also by making sure that we are developing and taking leadership in clean energy? Are we going to continue to make investments in education that ensure that every kid in America has a shot at success if they’re willing to work hard? Are we going to reduce our deficit in a way that’s balanced and allows us to continue to make the investments that help us to grow?” That’s what I’m putting forward.
What Governor Romney’s putting forward is a return to the very same policies that got us into this mess in the first place: tax cuts skewed toward the wealthy and rollbacks of regulations that we fought very hard against lobbyists and special interests to put in place, to make sure that we don’t have taxpayerfunded bailouts, to make sure that insurance companies aren’t taking advantage of folks who need health care, to make sure that we have a strong consumer advocate in place to protect people from unscrupulous lenders.
So what I’m absolutely sure about is that we’ve got the better argument. And Governor Romney understands that. It’s the reason why, after a year and a half of campaigning on plans that very clearly were going to involve $5 trillion worth of tax cuts, he’s trying to fog up the issues, because he knows that the American people aren’t buying what he’s selling.
Many observers have commented on how Romney has misrepresented or even changed his positions in this last leg of the campaign – that he’s been like a chameleon on plaid. Do you feel that he has lied to the American people?
What I think happened is that we won the battle of ideas during the course of the last year. His argument for a $5 trillion tax cut skewed toward the wealthy – which would necessarily involve either blowing up the deficit or increasing taxes on middle-class families – is not a recipe for growth. It won’t create jobs, it won’t reduce the deficit, and the American people understand that. So two weeks ago, or three weeks ago, they had to figure out, “Is there some way that we can fuzz up what we’ve been proposing?” In the first debate, he made as good a presentation as he could on what is a fundamentally flawed economic theory. What we’re going to be focused on is making certain that he has to answer for those theories – ones that will not be good for the middle class and won’t grow the economy long term.
But understand, there’s no doubt that what he has campaigned on for the last year is what he believes, because we’ve seen it before. We saw it when he was the governor of Massachusetts: His efforts to balance the budget involved raising taxes and fees on middle-class families, even as wealthy families were getting tax breaks, gutting investments in education and forcing costs down to local school districts and local communities. We saw it in how he answered a question on 60 Minutes as recently as two weeks ago, when he said he thought it was fair for someone like him, who’s making $20 million a year, to pay a lower tax rate than a teacher or bus driver making $50,000 a year. His basic theory is that if folks at the top are doing well and are unencumbered, that prosperity will rain down on everybody else, because they’ll make better decisions about allocating capital.
I’ve got a different theory. I believe that when middle-class families are doing well – they’ve got money in their pockets, they’re getting decent wages, they’ve got some health care security – then we all do better. Because those are customers who are buying goods and services, so businesses do better. It goes back to what Henry Ford understood when he decided to pay higher wages to his workers: that meant those workers on the assembly line making those Model T’s could end up buying those cars. That’s how we grew a middle class. So more than anything, our task over the next four weeks is just to lay bare just what these economic choices are. The American people are going to understand which choice is better for them and what is going to be better for the country as a whole.
Where were you when you first saw Romney’s speech in Boca Raton about the 47 percent? What was your first reaction?
We were out campaigning. I don’t remember which state we were in – probably Ohio. [Laughs] Since we’ve been there so often, the odds are, it was probably Ohio.
It took a while before we actually saw the full transcript of what he said. I think it was pretty surprising. It’s an indication of a story that Republicans have been telling themselves for a while, at least a sizable portion – that somehow, half the country consider themselves victims and want to be dependent on government. Obviously, he was wrong on the facts, since the overwhelming majority of that 47 percent are either folks that are working every day and paying all kinds of taxes but just don’t earn enough money to pay income tax; or are senior citizens who worked all their lives and did everything right so they could count on some sense of security as they got older; or they are veterans who have sacrificed for our country, or soldiers who are sacrificing as we speak on behalf of our country. But that sense that folks who have contributed to this country but are at the lower ends of the income scale are somehow looking for government to do something for them, or feel some sense of entitlement, is just fundamentally wrong. It doesn’t jive with what I see as I travel across the country every day.
Are there people who, both at the top and the bottom, aren’t pulling their weight and are looking for a special deal? Sure. But as was pointed out when this controversy erupted, there are a whole bunch of millionaires who aren’t paying any income tax, as well as people at the lower end of the income spectrum who may be taking advantage of the safety net that we’ve put in place. We should hold everybody accountable who’s not doing their fair share. That’s what the American people believe: They don’t like bailouts, they don’t like handouts, but they do understand that we have to have a government that ensures that if somebody is working hard and carrying out their responsibilities, that they can succeed and that they can give the prospects of a better life to their kids and their grandkids.
What has surprised you the most about the Republican campaign this year?
What was interesting was the degree to which Governor Romney was willing to embrace the most extreme positions in the Republican Party: on immigration, on environmental issues, on women’s issues and on the economy. Frankly, I think that’s telling when you start thinking about the presidency. If you can’t say no to certain elements of your party, if you don’t have sets of principles that you’re willing to fight for, even if they’re not politically convenient, then you’re gonna have a tough time in this office.
It was only at a point where it was determined that the American people had soundly rejected those views that you started seeing him try to fuzz up those positions. But they remain his positions. He continues to believe, when it comes to immigration, that the Arizona law is a model for the nation, and that self-deportation is the answer. When it comes to women’s health issues, he continues to believe that Roe v. Wade should be overturned. He would be supportive of a constitutional amendment overturning a woman’s right to choose, would eliminate funding for Planned Parenthood, is supportive of legislation that would allow employers to make determinations as to whether women could get contraception through their insurance companies.
Four weeks out from an election, you can’t hide from positions that ultimately are out of sync with how the majority of Americans think. I guarantee if you talk to not just Democratic women, but a whole bunch of Republican and Independent women, they will tell you they’re very capable of making their own health care decisions. If you have a chance to meet these Dream Act kids, some of whom were brought here when they were two or three or five, and are American in every sense, except for their papers – love this country, have pledged allegiance to this flag, want to contribute – then you would reject the idea that somehow they should be deported to some country where they’ve never been. But those are Governor Romney’s positions, and we gotta make sure that the American people understand those positions.
Do you have any fear that Roe v. Wade could be overturned if the Republicans win the presidency and appoint another Supreme Court justice?
I don’t think there’s any doubt. Governor Romney has made clear that’s his position. His running mate has made this one of the central principles of his public life. Typically, a president is going to have one or two Supreme Court nominees during the course of his presidency, and we know that the current Supreme Court has at least four members who would overturn Roe v. Wade. All it takes is one more for that to happen.
How do you feel about Justice Roberts’ ruling on the Affordable Care Act? Were you surprised?
I wasn’t surprised. I was always confident that the Affordable Care Act, a.k.a. Obamacare, was constitutional. It was interesting to see them, or Justice Roberts in particular, take the approach that this was constitutional under the taxing power. The truth is that if you look at the precedents dating back to the 1930s, this was clearly constitutional under the Commerce Clause. I think Justice Roberts made a decision that allowed him to preserve the law but allowed him to keep in reserve the desire, maybe, to scale back Congress’ power under the Commerce Clause in future cases.
What made you so certain that the law was constitutional?
It’s hard to dispute that health care is a national issue of massive importance. It takes up 17 or 18 percent of our entire economy; it touches on everybody’s lives; it is a massive burden on businesses, on our federal budget and on families. It’s practiced across state lines. So the notion that Congress could not take a comprehensive approach to that problem the way we have makes no sense.
I am very proud of the steps we’ve taken already: making sure that insurance companies can’t impose lifetime limits that could leave families high and dry if somebody gets a severe illness. Parents being able to keep their kids on their own plans until they’re 26 years old. The rebates that are already going out to customers because we’ve said to insurance companies that you’ve got to spend the dollars you collect in premiums on actually providing care, not just on overhead and CEO salaries. The $600 a year that seniors are saving on their prescription drugs. The tax breaks we’re providing small businesses in order to provide health insurance for their families. The cost-control measures that are trying to develop better ways of providing care. All those things are already happening. By 2014, people who have pre-existing conditions or individuals who are paying 18 or 20 percent more for health insurance than somebody on a big group plan – they’re going to have a chance to get affordable care, and we’ll provide tax credits to the folks who need it.
So this is a model that we know can work. It’s working in Massachusetts right now – you have 98 percent of adults and 99.5 percent of kids in Massachusetts with health insurance. For the greatest nation on Earth not to make sure that people aren’t going bankrupt when they get sick – that was a blot on our society. And for us to take this step forward is something that is really going to make a big difference for millions of families for decades to come. It also gives us our best opportunity to start really going after the waste and inefficiencies of the system, so that we can start cutting back on the health care inflation that is driving our deficit and hurting families and businesses every single day.
You said, “a.k.a. Obamacare.” Do you mind if historians call the achievement Obamacare? I’ll be very proud. Because I’m confident that I’m going to win this election, and that we’re going to implement it over the next four years. Just like Medicare and Social Security, as time goes on, as people see what it does, as it gets refined and improved, people will say, “This was the last piece to our basic social compact” – providing people with some core security from the financial burdens of an illness or bad luck.
You sometimes use the term “fair shake.” FDR had the New Deal, Lyndon Johnson had the Great Society. Is the Fair Shake something you’d be comfortable with to describe your legacy?
I’d be comfortable with that, and hearing it from a historian, it sounds pretty good to me.
But look, the key thing I’ve tried to communicate, and I will continue to try to communicate to the American people, is that when you talk about economic fairness, it’s not just an issue of fairness – it’s also an issue of growth. It’s how the economy succeeds. Republicans, and certainly Mitt Romney, often tries to frame this as “Obama’s a redistributionist, whereas we want to grow the pie instead of taking from Peter to pay Paul.” But look at our history: When we’ve been successful, it’s because everybody is in on the action. Everybody feels a sense of ownership, because everybody is benefitting from rising productivity, everybody is benefitting from a growing economy. When prosperity is broad-based, it is stable, it is steady, it is robust.
But when you have just a few people at the very top benefitting from what we do together as an economy, then growth gets constrained. On one end, you’ve got a lot of money in the hands of a very few people who are speculating and engaging in a lot of financial transactions that can get our economy in trouble. We saw that in 2007 and 2008. On the other end, you’ve got middle-income people and low-income people who are overextended, taking on too much debt, and that can create problems. You don’t have enough customers to buy the products and services that are being produced, so businesses then pull back and you get into a negative cycle. When the opposite is the case, you get into a virtuous cycle, and that’s what we’re constantly trying to push.
The success we’ve had, although we’ve got a long way to go, is based on making sure that everybody feels they’ve got a stake in the system. Look at what happened in the auto industry: You’ve got management and workers coming together, everybody making some sacrifices. Suddenly, what was an industry on the brink of collapse is now resurgent. GM’s on top again, Chrysler is making profits like it hasn’t made before, all the supplier chains that employ people all across the Midwest are benefitting. And that model, I think, is one that the American people instinctively get.
The auto bailout helped rescue states like Ohio from economic disaster. What, in turn, have you learned from the people of Ohio during your many visits to the state?
They just want to work hard, but they want to make sure that hard work is rewarded. When you go into these auto plants, you get folks who not only have been working at the plant for 15 years, their dad worked at the plant, sometimes their grandfather worked at the plant. It’s not just a paycheck for them – they really take great pride in making great products, making a great car. One plant we went to, a bunch of workers had just won the lottery, and they were still showing up to work every single day. One of them had bought his wife one of the cars he had made, for her birthday, and he had bought flags for his entire town, because he was proud of his country and there was no place he’d rather be. That’s what you see in Ohio, that’s what you see across the country. People want to work hard, they want to feel like they’re contributing, they want to feel like they’re helping to build the country. All they want is just a chance.
Have you ever read Ayn Rand?
What do you think Paul Ryan’s obsession with her work would mean if he were vice president?
Well, you’d have to ask Paul Ryan what that means to him. Ayn Rand is one of those things that a lot of us, when we were 17 or 18 and feeling misunderstood, we’d pick up. Then, as we get older, we realize that a world in which we’re only thinking about ourselves and not thinking about anybody else, in which we’re considering the entire project of developing ourselves as more important than our relationships to other people and making sure that everybody else has opportunity – that that’s a pretty narrow vision. It’s not one that, I think, describes what’s best in America. Unfortunately, it does seem as if sometimes that vision of a “you’re on your own” society has consumed a big chunk of the Republican Party.
Of course, that’s not the Republican tradition. I made this point in the first debate. You look at Abraham Lincoln: He very much believed in self-sufficiency and self-reliance. He embodied it – that you work hard and you make it, that your efforts should take you as far as your dreams can take you. But he also understood that there’s some things we do better together. That we make investments in our infrastructure and railroads and canals and land-grant colleges and the National Academy of Sciences, because that provides us all with an opportunity to fulfill our potential, and we’ll all be better off as a consequence. He also had a sense of deep, profound empathy, a sense of the intrinsic worth of every individual, which led him to his opposition to slavery and ultimately to signing the Emancipation Proclamation. That view of life – as one in which we’re all connected, as opposed to all isolated and looking out only for ourselves – that’s a view that has made America great and allowed us to stitch together a sense of national identity out of all these different immigrant groups who have come here in waves throughout our history.
If Americans re-elect you, what will be different in your second term? What is your plan to avoid four more years of gridlock?
It’s important for people to understand how much we’ve gotten done, because sometimes folks obsess with gridlock and the ugliness of the process here in Washington. We passed health care – something that presidents have tried to do for 100 years, and we will implement it. We passed the toughest Wall Street reform since the 1930s, and we will implement it and continue to strengthen it. We have put in place a Consumer Finance Protection Agency that’s going to be an ongoing advocate for every American out there who is involved in a financial transaction, saving people billions of dollars. We have expanded access to college through the Pell Grant program and by keeping student loans low. The list of things that we’ve accomplished, even once the Republicans took over, is significant.
Now, there are some things that are undone. We are going to have to get a handle on our deficit and debt, but we need to do it in a balanced way that doesn’t simply stick it to middle-class families. I’m confident we can get that accomplished, in part, because the Bush tax cuts lapse at the end of this year, and we’ll have a showdown about how we’re going to fund the government that we need to grow in a sensible way, in a balanced way. Immigration reform I believe we’ll get done, because the Republican Party will start recognizing that alienating the fastestgrowing segments of our society is probably not good politics for them – not to mention the fact that immigration reform is the right thing to do.
On energy and climate change, we will continue to develop oil and natural-gas resources, but we’ll build off the work we’ve done, doubling fuel-efficiency standards on cars and doubling the investment we’ve made in clean energy. There’s a huge opportunity for us to focus on energy efficiency in our buildings, in our schools and in our residences. If we can make our economy as energy efficient as Japan, say, we would be cutting our greenhouse emissions by 20 percent and saving consumers billions of dollars every single year. And by the way, we can put a whole bunch of construction workers back to work in the process.
Internationally, having ended the war in Iraq, I am now committed to ending the war in Afghanistan by 2014. Doing that in a responsible way will have a huge impact, because we’re also going to be able to take the money we’ve saved on war to do some nation-building here at home.
We’re going to have a full agenda in the second four years, but people shouldn’t underestimate how much we can get done. Obviously, I’d love to see a shift in Congress where we are electing people who are less interested in the next election and obstruction and are more interested in getting stuff done. And that’s true whether it’s Republicans or Democrats. I just want to make sure that there are people who have some sense of service toward their constituencies.
Forget for a moment about obstruction by Wall Street lobbyists and Republicans in Congress. If you could single-handedly enact one piece of regulation on the financial industry, what would it be?
The story of Dodd-Frank is not yet complete, because the rules are still being developed. Dodd-Frank provided a platform to make sure that we end some of the most egregious practices and prevent another taxpayer-funded bailout. We’ve significantly increased capital requirements and essentially created a wind-down mechanism for institutions that make bad bets, so the whole system isn’t held hostage to them going under. We have to make sure that the rules issued around the Volcker Rule are actually enforced. So there’s a lot of good work that will be done around Dodd-Frank.
I’ve looked at some of Rolling Stone‘s articles that say, “This didn’t go far enough, we didn’t institute Glass-Steagall” and so forth, and I pushed my economic team very hard on some of those questions. But there is not evidence that having Glass-Steagall in place would somehow change the dynamic. Lehman Brothers wasn’t a commercial bank, it was an investment bank. AIG wasn’t an FDIC-insured bank, it was an insurance institution. So the problem in today’s financial sector can’t be solved simply by reimposing models that were created in the 1930s.
I will tell you, the single biggest thing that I would like to see is changing incentives on Wall Street and how people get compensated. That ultimately requires not just congressional legislation but a change in corporate governance. You still have a situation where people making bets can get a huge upside, and their downsides are limited. So it tilts the whole system in favor of very risky behavior. I think a legitimate concern, even after Dodd-Frank, is, “Have we completely changed those incentives?”
When investment banks, for example, were partnerships, as opposed to corporations, all those partners understood that if there was some tail risk out there – some unanticipated event that might result in the whole firm blowing up – that they were going to lose all their money, they were going to lose all their assets. They weren’t protected. These days, you’ve got guys who are making five years of risky bets, but it’s making them $100 million every year. By the time the chicken comes home to roost, they’re still way ahead of the game. So I think it’s something that needs to be discussed. But that’s not something that can entirely be legislated – that’s something that also has to involve shareholders and boards of directors being better stewards of their institutions.
Bill Clinton – how important is he as a surrogate for you? What’s your friendship with him like these days?
Our relationship is terrific. He did a masterful job, obviously, at the convention. He has been a tireless surrogate on our behalf. I’m talking to him regularly, and he’s given me good advice. Not only is he a great politician, but he’s also somebody who has a lot of credibility with the public when it comes to how the economy works. Because the last time we had healthy, broad-based growth was when he was president, and people remember that. So he can say things that people immediately grab on to. And one of the things he said during the convention that I thought was very helpful was to put this whole economic crisis in context.
The biggest challenge we’ve always had is that unlike FDR – who came into office when the economy had already bottomed out, so people understood that everything done subsequent to his election was making things better – I came in just as we were sliding. Because of the actions we took, we averted a Great Depression – but in the process, we also muddied up the political narrative, because it allowed somebody like Romney to somehow blame my policies for the mess that the previous administration created. Bill Clinton can point that out in ways that are really helpful and really powerful.
Halloween’s coming up. If you could have Mitt Romney dress in a costume, what should he be for Halloween?
I don’t know about this Halloween. Next Halloween I hope he’ll be an ex-presidential candidate.
This story is from the November 8th, 2012 issue of Rolling Stone.