‘Only Nixon Could go to China’: Why Donald Trump Might Make the Radical Recovery Obama Failed To
Cast your mind back to 2009. President Barack Obama has just been inaugurated, in front of the largest crowd ever assembled on the Washington Mall (sorry, Donald Trump). ‘Hope and change’. ‘Yes we can’, and all that. The case for change was certainly overstated, but it’s hard not to look back on the Obama years with some sense of nostalgia — not least because, due in large part to the paucity of decent competition, he remains by some comfortable margin the best president of my lifetime (since 1994, for those of you keeping score at home).
It’s easy to forget just how dire the economic situation was at that same time.
I won’t reiterate the causes and nature of the 2008 ‘great crash’ here, but it might pay to keep some headline statistics in mind:
- The stock market lost nearly $8 trillion in value between late 2007 and 2009.
- Far more pressing for many Americans, house prices plummeted and retirement savings became worthless, seeing the people of the country lose nearly $10 trillion in wealth.
- Unemployment soared, eventually reaching a peak of nearly 10% in October 2009.*
This was a serious and ongoing crisis, then. And one the incoming president would need to deal with.
In the United Kingdom, a mendacious and self-interested opposition was able to paint the crisis as solely the fault of the Labour Party, which had been in government since 1997, leading to a loss for Labour in the 2010 election and the beginning of a brutal programme of austerity, the consequences of which we are still reaping today. Worse, the gap between the 2008 crash and the 2010 election left Labour to take responsibility for both the crisis and the response to it.
In the United States, by contrast, the election was set for November 2008. The collapse of Lehman Brothers on 15 September of that year is often seen as the turning-point — the first major bank the US government allowed to fail. On 3 October, President George W. Bush signed the Emergency Economic Stabilization Act into law, establishing the Troubled Asset Relief Program (TARP).
TARP was a mixed bag, to be sure. Essentially ‘bailing out’ the big banks who had gambled so recklessly, it remains a bitter pill to swallow, especially those of us on the left. If the problem with socialism is that ‘eventually you run out of other people’s money’, the problem with capitalism seems to be that you don’t — that there’s always more of someone else’s money to prop up failing institutions.
Crucially, though, TARP was enacted by bipartisan consensus. Legislators from both parties worked to build a recovery programme, and it finally went through the Senate 74–25 and the House 263–171. In both chambers, a majority of members from each party voted in support of the measures.
The United States had avoided total collapse by buying up and insuring around $400 billion of ‘toxic assets’. The young senator from Illinois romped to victory over an aging Republican opponent and his unhinged running mate, winning by the largest electoral margin of the 21st century.
Now came the hard part.
Obama’s Recovery Plan
Enter Barack Obama.
His administration’s understanding of the crisis, as outlined in a 13 March 2009 speech from Lawrence Summers, then director of the National Economics Council, saw it in terms of ‘vicious cycles’. Americans had shifted from ‘greed’ to ‘fear’, and this fear was depressing economic activity across the board. I am not an economist, and there are many more nuances to the Obama administration’s approach, but this simple summary seems to capture the core points.
Given congressional opposition that skirted on obstruction, the new president’s team made a decent fist of addressing the situation, pumping money in to key areas and stabilising economic activity. It worked, more or less. The economy rebounded to a healthy if unspectacular level, and, despite the bleating of Republicans who, as ever, found themselves afflicted with a sudden and overwhelming concern about the federal budget deficit the minute a Democrat took office, there were no further major shocks to the US economy for the rest of the Obama presidency. The sky, as it so often does, failed to fall in.
But for many on the left, this was not enough. Obama had raised expectations in his campaign, and liberal-leaning Americans were eager for change after eight years of Republican dominance (not to mention the light Reaganism implemented by the seedy and triangulating Clinton administration).
The economy had recovered, but none of those who had caused the crisis were punished. In fact, in all too many cases, they were rewarded, taking home exorbitant bonuses even as those less fortunate were left destitute.
We should note, at this point, that Obama cannot hide behind Republican intransigence for his failure on the economy. As this New York Times opinion piece notes, the president’s party enjoyed a majority in the House and even, for a brief five-month period at the end of 2009, a 60-vote supermajority in the Senate. Had it wanted to take radical action to restructure the US economy to the benefit of the American people, the administration had ample opportunity.
Where President Franklin Roosevelt had, for all his faults (don’t mention the Japanese internment!), used the extraordinary crisis of the Great Depression to enact an extraordinary transformation of the US government’s role in economic and social life, Obama was content to plug the gaps, stabilise the system, and restore business as usual.
‘Only Nixon Could go to China’
In 1972, President Richard Nixon made a visit to the People’s Republic of China (PRC). While there, he met with Chairman Mao Tse-Tung, the brutal leader of the country’s authoritarian communist regime. This marked a major step towards US recognition of Mao’s government, which came in 1979, ending the US policy of providing aid and diplomatic assistance to the embattled and exiled ‘Republic of China’ in Taiwan.
While we may question the long-term wisdom of Nixon’s extending the hand of friendship to the People’s Republic, it was a major diplomatic coup at the time. No US president had engaged with Mao’s regime since it had won power in 1949, and indeed the ‘loss’ of China to communism (as if it had ever been America’s to lose) was a major stick with which the era’s Republicans beat President Harry Truman and his party.
Perhaps with some irony, Senate majority leader Mike Mansfield (D-MT) had noted in a December 1971 interview that ‘only a Republican, perhaps only a Nixon, could have made this break and gotten away with it’.
Mansfield was no opponent of Nixon’s foreign policy, and indeed supported the president on many key initiatives. But his comment hit on a core truth about Nixon’s move: only someone with such a long-established and severe reputation as a Cold Warrior could have made the trip. Any Democratic president who tried would have been eaten alive.
Trump’s Saving Throw
President Donald Trump’s initial response to the coronavirus was, not to put too fine a point on it, a disaster. He lied and misled about the nature of the ongoing crisis, and even admitted that he would prefer to keep US citizens on the Grand Princess cruise ship stranded off the coast of California than allow them back onto American soil, in order to artificially keep case numbers down.
As ever, the president lived down to his deservedly low reputation.
But in the last week or so, something has changed. State and local governments have produced a variety of responses to the coronavirus pandemic, showing the virtues of the US federal system. House speaker Nancy Pelosi (D-CA) worked closely with Treasury secretary Steve Mnuchin to devise a budget response that could achieve bipartisan support, which eventually passed the Senate 90–8.
One of the greatest virtues of the US political system is its capacity to act without needing prompting from the president. While the United Kingdom has been left stranded, waiting for its overpromoted, arrogant shirker of a leader to put away the dice and get to work, the United States has been able to leave its own braggadocious blowhard scrambling to catch up.
Perhaps surprisingly, he has made some moves to do so. Senator Mitt Romney (R-UT), continuing his surprising reinvention as the Republican it’s okay for liberals to like, proposed something akin to a universal basic income, suggesting that all Americans should receive checks for $1,000 or more to help them through the economic slowdown caused by the virus. While it is true that the US government has given citizens money in previous crises, these have come in the form of tax rebates. Policies such as protections for renters have also been floated.
Moreover, with November’s general election looming on the horizon, Trump may find it in his interest to provide economic assistance directly to the American people — not least because many of his most important voters are part of a discontented post-industrial working-class. If he does get behind proposals to protect the working and middle classes, it is unlikely to see the Republican Party standing against him. If one thing has been proven by Trump’s first term, it is that there is nowhere the president can go that today’s Republicans will not follow.
Now, it’s always possible that these intriguing proposals will turn out to be nothing but hot air. Or that, once implemented, they will be scrapped as soon as the crisis is over. And, given Trump’s character, public statements, and policies, it is highly likely that any major economic benefits will be restricted to an ever-more racially defined US population. The left must not stop organising, and success in these areas would not be enough to grant Donald Trump a reprieve. He is a danger, and must be removed.
But, if President Trump is able to lead (or, more accurately, cling to the coattails of) a radical economic response to this, it’ll be precisely because he is so far to the right.
Only Nixon could go to China. And, perhaps, only Trump can bring universal basic income.
If you’re not sure how to feel about that, you’re not alone.
For a helpful timeline on the 2008 crash, see the Washington Post’s retrospective: https://www.washingtonpost.com/business/economy/a-guide-to-the-financial-crisis--10-years-later/2018/09/10/114b76ba-af10-11e8-a20b-5f4f84429666_story.html
*This article is also the source of all my statistics on the great crash, cited above.
For a decent if somewhat surface-level recounting of TARP, see here: https://www.history.com/topics/21st-century/troubled-asset-relief-program
The Financial Times provides a solid assessment of Obama’s economic recovery here, from the vantage point of January 2017: https://www.realclearpolitics.com/articles/2009/03/responding_to_an_historic_econ.html
These two opinion pieces, meanwhile, can be taken as representative of the left critique of the Obama administration’s recovery plan and its policies in general: https://www.nytimes.com/2019/09/18/opinion/obama-2008-financial-crisis.html, https://www.theguardian.com/commentisfree/2017/jan/09/barack-obama-legacy-presidency
For a quick summary of US ‘basic income’ proposals, see here: https://www.washingtonpost.com/business/2020/03/17/checks-virus/