What an Obama Do-Over Would Look Like

Less money for Wall Street, more for Main Street, and an apology or two

By SHARE

Many Barack Obama supporters felt a messiah had arrived when he assumed the presidency in 2009. But when it comes to predicting the future, Obama has proved he's a mere mortal.

A year ago, the unemployment rate was 7.7 percent, and mainstream forecasts predicted it might hit 9 percent or so before leveling off. The financial system, meanwhile, was a shambles, with banks barely lending. Stocks were still plummeting, huge companies like General Motors and Chrysler were on the brink of insolvency, and investors were worried that a full-blown depression might unfold.

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Obama focused on the financial crisis, assuming that once he got that fixed, employers would start hiring again and the job market would rebound. Then he moved on to a set of long-term priorities: reforming healthcare, combating global warming, creating sustainable, high-paying "green jobs," pushing America down a path toward energy independence. Remember all those comparisons to FDR's first 100 days? Obama thought in big, historical terms and tried to use his popularity and charisma to remake America.

A crushing recession, however, has driven America in a direction Obama didn't anticipate. Unemployment is now at 10 percent, and it's likely to go higher. Aggressive intervention in the financial markets did in fact prevent a deeper downturn and set the stage for a recovery. But middle-class distress has mounted all the same, and it's wrecking the rest of Obama's agenda. These and other lessons from Year 1 will probably guide a shift in Obama's priorities for the rest of his term. So here are six things the president might do differently if he could relive his first year in office:

Stimulate faster. The $787 billion stimulus bill passed last year wasn't really a job-creation bill, and Obama—and the nation—have been paying a steep price for that. Despite all the talk of "shovel-ready projects," well under half of the money went toward the immediate creation or preservation of jobs. Nearly one third went toward various kinds of tax breaks and credits, which put more money in the pockets of individuals and businesses—where it has mostly stayed. Another big chunk—more than $200 billion—paid for health, food, unemployment, disability, and other extended benefits for the needy. In theory, that money was supposed to flow into the mainstream economy, keeping people employed. If it has, it hasn't been enough.

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Explain the bank bailouts better. Most of the bank bailouts were inked during President Bush's term, leaving Obama little room to maneuver on them. Still, he could have said from the outset that the bank bailouts were a necessary evil and explained that even if bankers are the most vile people on earth, a functioning financial system is essential for a healthy economy. It would have helped if tough financial reform measures and the new, $90 billion bank tax came sooner, so that it looked like Obama had a coherent plan and wasn't merely pandering to voter outrage.

Apologize for AIG. This bungled bailout is the biggest blot on an emergency economic triage plan that has more or less worked. Obama should just come right out and say that paying off AIG counterparties in full—which cost American taxpayers an unnecessary $62 billion—was a grievous mistake made in the heat of battle. Even though it mostly happened under Bush, Obama should beg forgiveness in his usual humble-magisterial style. Taxpayers got sold out, and it's not good enough for the president to just let it slide or blame somebody else.

Bail out small businesses on a par with big banks. Part of the outrage over the banker bailouts is the impression that they were the only bailouts. More than a year after the big bank rescues, Obama is now talking about tax credits and other breaks for small businesses, as if these heartland enterprises are a tiny afterthought. If there had been less money for Wall Street and more for Main Street a year ago, fewer Americans would feel abandoned by their government.

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Stall cap-and-trade. Obama and Congress started pushing this complex legislation, meant to reduce pollution, while businesses were still getting hammered by the recession, finding it tough or impossible to get loans, and trying to figure out how sweeping healthcare reform was likely to affect them. Pushing cap-and-trade regulations at the same time made Obama seem insensitive to the intense pressure on business owners who were trying to keep their companies afloat and their workers employed. It would have been better to save this for his second year or even his second term.

Simplify healthcare reform. Healthcare reform legislation has taken so many twists and turns that it has become exhausting to follow and almost impossible to plan for. And it's not even over! It's true that most people don't like change, but they'll accept it if you explain what's coming and give them room to adjust. The healthcare ordeal, by contrast, has left consumers and business owners alike numb, perplexed, and completely distrustful of politicians, including Obama, who seem to vacillate between wildly divergent stances. Obama's strategy has been to let Congress take the initiative, but that has made him seem wishy-washy on a matter he himself has deemed one of America's most vital priorities.

If he had a chance to do it over, Obama might forget all about FDR and his big ideas, choose one set of pragmatic reforms, get it done, declare victory, and then get back to that tricky little matter of jobs. That's where he's headed anyway.