A Presidential Wake-Up Call

The AIG mess should be a warning to Obama that even popular presidents can squander good will.

By Eleanor Clift Newsweek Web Exclusive
Mar 20, 2009

Who would have thought 55 days into this administration we would be asking the question, what did he know and when did he know it? Word that a provision in the stimulus bill gave the green light for AIG to hand out bonuses using taxpayer money sent the media bloodhounds hot on the trail of whoever is the culprit. For a time, it looked like Senate Banking chairman Chris Dodd would take the fall, but after 24 hours of twisting in the wind, Dodd said the change that exempted past agreements to pay bonuses was made at the request of the administration.

President Obama likes to remind voters that he inherited a mess, and that's true, but this one is of his own making. And until he comes up with a satisfactory explanation of who did what when, and why, his credibility will suffer. Forty-eight hours ago, I didn't think Treasury Secretary Tim Geithner was in trouble, but if the transaction with Dodd turns out to have Geithner's fingerprints on it, his job could be in jeopardy. The deadly chain of events may have started innocently enough, with Treasury Department lawyers raising questions about the government retroactively curtailing private-sector contracts, but did Dodd, who authored the restrictive language, capitulate to some Treasury flunky, or did someone more senior lean on him?

Whomever it was, it's fair to say they did not recognize the time bomb they were setting in motion. Obama hates what he calls "process stories," but they are a staple of Washington reporting, and the backstory of this first major Obama blunder has consequences. First, it undermines the president's credibility with his own party on Capitol Hill. Democrats voted almost unanimously for the stimulus package and now Republicans have a weapon to use against them with this Treasury-inspired provision that benefits AIG. Second, the controversy undermines the trust that the American people have in government at a time when it is spending billions upon billions. Obama promises transparency, but the layers of bureaucratic double-talk look like business as usual. Geithner—formerly with the New York Federal Reserve Bank and an alumnus of Goldman Sachs, a recipient of AIG funds—is schooled in secrecy and, when he does speak, the kindest thing to say is that he's badly in need of media training.

It's not uncommon for leaders to feel that because they are giving a problem their all that others don't recognize the gains that are being made. And certainly Geithner, who is at his desk before dawn and puts in 15-hour days, is no slacker. Nor is his boss. In his new book, "Dispatches From the War Room," Democratic pollster Stan Greenberg describes what it's like to confront the big names he's worked for with bad news, and how disbelieving they were, particularly when it came to their performance on the economy.

The book is about that inevitable and painful moment of truth in his relationship with five extraordinary leaders, Bill Clinton and Nelson Mandela among them. Each of the men Greenberg profiles came to office, like Obama, amid great hope and expectation, with people at least for a time suspending their cynicism. "Then they discover how hard it is to keep their promises. Not that they walk away from promises—they are consumed by them," Greenberg noted at a talk last weekend at Politics and Prose, a bookstore in northwest Washington. He recalled doing a focus group in Ft. Lee, N.J., shortly before Clinton took office, with his economic team looking on to gauge if Clinton had a "read my lips" problem. He had campaigned on a middle-class tax cut and his economic advisers were telling him deficit reduction was more important. Breaking the promise wasn't trivial, but Greenberg assured Clinton he would survive as long as he kept the interests of the middle class front and center in his policies. After Clinton failed to deliver on health-care reform, Republicans won control of both houses of Congress in the 1994 election—and Clinton fired Greenberg.

Mandela, more than any of the others, cared about public opinion, says Greenberg. Having spent 27 years in prison, he worried he was out of touch as he took the African National Congress from being a liberation movement to heading the government. Mandela sat through a three-hour polling seminar that Greenberg conducted and even went to focus groups. It was almost inevitable that the ANC couldn't deliver results to keep pace with the expectations Mandela had unleashed. When Greenberg presented negative findings to the ANC, the leaders were so stunned, they accused Greenberg of rigging the poll and using a nonrepresentative sample. They had brought electricity and water to rural areas but they hadn't created the jobs or the housing they'd promised. Voters felt betrayed.

What these leaders had in common is they all crashed politically. Some came back—Clinton, more than once. Mandela's support fell within three years to below 50 percent, and he didn't run for a second term. "If Mandela can crash, so can Obama," Greenberg says, adding that the economy is where leaders get it most wrong. This week's fiasco with AIG should serve as a warning to Obama that good will is not unlimited and that the people serving him can bring him down.
© 2009