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points to US gross domestic product and paid for itself in higher tax revenues. On
economic grounds it is as close to an open and shut case as you get.
On political grounds, the largest fiscal stimulus in history is close to being toxic. Mr
Obama failed to produce a “moonshot” which would live on in the public
imagination. Under Franklin Roosevelt’s New Deal, millions of Americans were
directly employed the US federal government. They could also see and feel the
Hoover Dam, New York’s LaGuardia airport and San Francisco’s Golden Gate Bridge.
Mr Obama’s stimulus left nothing anywhere near so tangible. There was money for
rural broadband, cash to keep teachers in their jobs and resources to upgrade roads
and highways. Mostly they will be remembered for traffic jams.
Even Mr Obama’s “make work pay” tax cuts, which took up more than a third of the
stimulus, passed by unnoticed. In contrast to George W Bush, who had passed his
own mini-stimulus a year before leaving office, American taxpayers did not receive
cheques in the post signed by the president. Economists advised Mr Obama that a
one-off tax windfall would more likely be saved than spent, thus defeating its
purpose. Instead they said it should be secreted into their fortnightly pay stubs.
Among Mr Obama’s advisers, only Joe Biden, the vice-president, saw the futility in
giving most Americans an invisible boost of roughly $40 a month in their take-home
pay. “Are you totally kidding me?” Mr Biden asked – or words to that effect.
Apparently not. Instead of seeing that Mr Obama had cut their taxes, most
Americans believed they had gone up. They still do (quite wrongly). Mr Obama is
seemingly powerless to convince them otherwise.
But the largest fallout from what was Mr Obama’s biggest act as president – more so
even than his healthcare reform – is bitter polarisation. It was Richard Nixon, a
Republican president, who said: “We are all Keynesians now.” That held true right up
until February 2009. Mr Bush passed two stimulus bills – both of which pasted his
name all over the tax rebate cheques. Even after Mr Obama was elected, Republicans
drafted their own stimulus bill, which was only marginally smaller than the
Democratic version. Everyone understood the need to revive a plummeting US
economy. Only the means were disputed.
The Keynesian Humpty Dumpty was shattered the day Mr Obama’s stimulus was
enacted. It is very hard to see how it will be put back together again. Only three
Republicans – all of the them in the US Senate – voted in its favour, having extracted
big concessions in the form of larger tax cuts and less spending.
Every single Republican in the House of Representatives voted no. In place of
Humpty Dumpty, Republicans have adopted Hamlet’s Polonius as their mascot:
“Neither a borrower nor a lender be.” Keynesianism has been supplanted by
Austerianism. Technical expertise be damned. All that matters is perception.
Can Mr Obama do anything to change it? Probably not. Whether his successor is
Hillary Clinton or a Republican, the US federal government is more distrusted than
ever, according to the polls. Mr Obama inherited a historic low of public mistrust. It
has since plumbed new depths.
Worse, the more that he argues for something, the less people seem to believe him.
Some of the blame for this must go to the mishandling of the rollout of his
“Obamacare” health reform, which continues to poll terribly for Democrats.
Promising to fix your own law is never going to be an easy sell.
But Mr Obama’s political failing began in his first 100 days with his mis-selling of the
stimulus. It helped give rise to the Tea Party that put an end to a sensible debate on
what fiscal policy can do for US growth. In the president’s defence, it is hard to argue
that “things could be so much worse!” – even if that was true of the stimulus. It is far
easier to say: “See how rapidly things are getting better!”
The first was the case Mr Obama needed to make. He botched it. And thus we are left
with a trademark Obama legacy. The US president assumed a good policy would
make the case for itself. Republicans filled the vacuum with their own. Mr Obama
won the policy and lost the politics. Now he is losing both.