Only a Bold Stimulus

By Jon S. Corzine
Wednesday, December 24, 2008; A11

When New York Gov. Franklin Delano Roosevelt delivered a commencement address at Oglethorpe University in May 1932, the economic crisis that had befallen the United States three years earlier had already morphed into the Great Depression: One in four Americans was out of work, banks were failing at a rate of 10 per week and the gross national product was at half its pre-crash level.

FDR called on the federal government to "correct, by drastic means if necessary, the faults in our economic system." The times called for "bold, persistent experimentation," he declared.

Strictly by the numbers, today's economic crisis is, fortunately, not as severe as the Great Depression was. But that's cold comfort to the millions of Americans who have lost their jobs, homes, health care and retirement savings. We are living through the toughest times since the 1930s. People reasonably expect government to act boldly.

I've spoken at length about the current economic crisis with other governors, including Deval Patrick (Mass.), David Paterson (N.Y.), Jim Doyle (Wis.), Jennifer Granholm (Mich.) and Ted Strickland (Ohio). We agree that our states -- however diverse they may be -- have similar needs and problems that should be addressed by the economic recovery package being developed in Washington. That can best be achieved if Congress and the new administration keep in mind the following principles:

First, the states, local governments and the federal government must be full partners in the recovery process. Working with counties and municipalities, states have mechanisms in place to pump stimulus funds into the economy quickly and responsibly. But we don't have the federal government's financial capacity or borrowing authority. Any recovery effort should reflect our mutual strengths.

Second, the package should be large. Some estimates put the cost of the economic crisis next year at $700 billion, or about 4 percent of gross domestic product. To offset this, the cumulative value of the stimulus plan should be $1 trillion over two years. This is a large sum, but if the spending is executed effectively, it should be a significant investment in our country's physical and human resources that will pay long-term dividends while also creating and saving jobs.

The stimulus should be roughly divided into five categories: infrastructure, countercyclical programs, housing, education block grants and middle-class tax cuts.

· For every billion dollars we spend on infrastructure, we can put upwards of 20,000 people back to work. On one hand, we've learned painful lessons about the need to modernize our bridges and levees. On the other hand, we must think broadly about the idea of infrastructure: How many hours do people waste circling airports because our air-traffic control systems are outdated? We must commit to improving our transportation system, energy grid, Internet technology, ports, public housing and school facilities.

· Unless we also help states shore up their safety-net social programs, the economic impact of the federal stimulus will be negated.

Most states are constitutionally required to balance their budgets. Given the sharp decline in state revenue, we are not able to support, let alone increase, spending to meet growing demands for basic needs such as unemployment insurance, food assistance programs and health care -- including mental-health services to those with developmental disabilities.

Most states are facing cuts to these essential services, reductions that will exact an enormous toll on our most vulnerable citizens and remove money and jobs from the economy just when we need to promote growth. Put another way, even if the federal government dedicates a large sum to infrastructure, cutbacks in state and local safety-net programs would cancel out much of the effect of the stimulus.

Over two years, the federal government should boost its countercyclical spending by at least $250 billion. It can do so by increasing the Federal Medical Assistance Percentages; the federal share of Medicaid costs; and other health-care-related programs such as reimbursement to hospitals for treating the uninsured, Temporary Assistance for Needy Families and child-care grants.

Many state unemployment trust funds are already depleted. Rising unemployment rates and reduced revenue over the next few months are likely to trigger major payroll tax increases in 2009. This harm could be partly mitigated by doubling proposed federal funding for state unemployment trust funds under the Unemployment Insurance Modernization Act, which would provide incentives to cover vulnerable low-wage and part-time workers who are often denied benefits.

· Unless we strike at the cause of the meltdown -- the collapse of the housing market -- our economy will continue spiraling downward. The federal recovery package should include funding for state housing mortgage authorities and for programs that help people restructure their mortgages, stay in their homes and find new shelter if evicted.

· If we are to pursue relief and recovery, it's essential that we continue developing a workforce that is able to meet the demands of the 21st-century economy. At least $250 billion in preschool-through-college education block grants would help states meet their school budget obligations; more important, such grants would enable greater strides toward universal early childhood education and fully funded programs for special-needs students -- improving the situation today and laying the foundation for a better tomorrow.

· A sizable middle-class tax cut is key. Over the past decade, median family income has failed to keep pace with inflation, especially given the sharply rising costs of health care and education. Most Americans have lost ground. Relief for the middle class would help our families weather the storm and also boost economic demand.

In 1932, Roosevelt warned against being of "faint heart, fearful of change, sitting tightly on the rooftops in the flood." His words are still prescient today. We must be bold -- $1 trillion bold. America has abundant resources and a generous, ambitious spirit. If we work together, we'll emerge stronger and more prosperous than ever.

The writer, a Democrat, is governor of New Jersey.

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Obama Report Outlines Talks on Senate Seat

December 24, 2008

By JEFF ZELENY

HONOLULU — In the days after Barack Obama’s election as president, Rahm Emanuel, a top adviser, suggested to Gov. Rod R. Blagojevich of Illinois that Mr. Obama’s Senate seat should be filled by Valerie Jarrett, a confidante of Mr. Obama.

In that same week, as word of her potential interest in the Senate seat spread throughout the Chicago political world, Ms. Jarrett spoke with a labor union official in Illinois who said he had spoken to the governor about the possibility of appointing her to the seat. During that conversation, the union leader mentioned that Mr. Blagojevich had his eye on a possible cabinet position in the Obama administration.

The contact was among the findings of an internal report released Tuesday, compiled by lawyers for the president-elect. The report concluded that Mr. Emanuel had as many as six conversations with the governor’s office about the Senate vacancy, but that Mr. Obama had none, and that neither Mr. Emanuel, Ms. Jarrett, nor any other Obama associates had any talks about a deal in which Mr. Blagojevich would benefit from appointing someone to the Senate seat.

Mr. Blagojevich was charged by federal prosecutors in Chicago this month on a variety of corruption counts, including an alleged effort to trade the appointment to the Senate seat for a job or money. The report also disclosed that Mr. Obama, Mr. Emanuel and Ms. Jarrett were questioned by federal prosecutors last week in the corruption inquiry of the governor. Mr. Obama’s two-hour interview took place in his Chicago office, aides said, and he was not under oath or considered more than a witness in the case.

Mr. Obama did not speak about the matter on Tuesday. He continued his vacation in Hawaii, where he attended a memorial service for his grandmother, who died just before the election.

Ms. Jarrett, a longtime Chicago friend of the Obama family who will serve as a senior adviser in the White House, had no communication with Mr. Blagojevich or his aides, the report said. But it said that three days after the election, she spoke with Tom Balanoff, president of the Illinois chapter of the Service Employees International Union, about the Senate seat and the governor’s ambitions to serve in the Obama administration as secretary of health and human services.

This conversation, outlined for the first time, could be of interest in the criminal case against Mr. Blagojevich, who was recorded on the same day as the Jarrett-Balanoff meeting in wiretapped phone calls expressing an interest in a job with an arm of the union in exchange for a possible Senate appointment. According to an affidavit, Mr. Blagojevich was also captured on tape that day telling an unnamed adviser that he was willing to “trade” the appointment for the cabinet post.

“Ms. Jarrett did not understand the conversation to suggest that the governor wanted the cabinet seat as a quid pro quo for selecting any specific candidate to be the president-elect’s replacement,” Gregory B. Craig, who has been designated by Mr. Obama as his White House counsel, wrote in the report. “At no time did Balanoff say anything to her about offering Blagojevich a union position.”

The Obama transition team delayed the report’s release at the request of Patrick J. Fitzgerald, the United States attorney for the Northern District of Illinois, who wanted to interview prospective witnesses before it was made public. The delay prolonged questions on whether any Obama aides acted improperly in dealing with the governor’s office.

In the conversations with Mr. Blagojevich immediately after the election, Mr. Emanuel recommended Ms. Jarrett for the Senate seat, the report said, a position that later turned out to be contrary to Mr. Obama’s wishes.

“In those early conversations with the governor, Mr. Emanuel recommended Valerie Jarrett because he knew she was interested in the seat,” the report said. “He did so before learning, in further conversations with the president-elect, that the president-elect had ruled out communicating a preference for any one candidate.”

Mr. Emanuel was not available to answer a reporter’s questions on Tuesday, aides said, because he had left for a planned holiday trip to Africa with his family.

The report suggested that Mr. Obama had been more involved in thinking about his Senate successor than his public statements about the topic had indicated.

The report said that after Ms. Jarrett took herself out of the running for the Senate seat, citing Mr. Obama’s preference that she work for him in the White House, Mr. Obama authorized Mr. Emanuel to pass on the names of four people he considered highly qualified to take over his seat: Daniel W. Hynes, the state comptroller; Tammy Duckworth, the state veterans affairs director; and Representatives Jan Schakowsky and Jesse L. Jackson Jr., Chicago Democrats.

Mr. Obama later offered two other names, it said: Attorney General Lisa Madigan of Illinois and the Chicago Urban League president, Cheryle R. Jackson.

Those names were passed along by Mr. Emanuel in four calls to John Harris, the governor’s chief of staff, from early November through Dec. 8, one day before Mr. Blagojevich and Mr. Harris were arrested.

Mr. Emanuel, an Illinois congressman, was one of the few members of Mr. Obama’s inner circle who had a working relationship and talked occasionally with Mr. Blagojevich. But his contact with the governor was “totally appropriate,” Mr. Craig told reporters on Tuesday afternoon.

The only other name mentioned in the report was Dr. Eric Whitaker, a close friend of Mr. Obama, who was approached by a Blagojevich aide immediately after the election. The aide, the report said, “wanted to know who, if anyone, had the authority to speak for the president-elect.”

“The president-elect told Dr. Whitaker that no one was authorized to speak for him on the matter,” the report said. “The president-elect said that he had no interest in dictating the result of the selection process, and he would not do so, either directly or indirectly.”


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Dec. 22: Countdown names "you" their favorite person of the year for voting Barack Obama to the office of the president in a historic election.



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Now the Real Test for Obama

By Fareed Zakaria
Sunday, December 21, 2008; 6:37 PM

The great sociologist Max Weber described the power of charisma as "a certain quality of an individual personality, by virtue of which he is set apart from ordinary men and treated as endowed with supernatural, superhuman, or at least specifically exceptional powers or qualities." Some of Barack Obama's supporters have at times sounded as if they saw "the one" in these terms. There's no doubt that Obama is intensely charismatic and that it provides him with unusual political capital. But very soon -- say on Jan. 20, 2009 -- his powers will start to mutate, and they will derive less from his persona and more from his office. He will shift, in Weber's terminology, from wielding charismatic authority to legal authority.

Presidents cannot simply remain charismatic symbols. They are forced to tackle the problems at hand and their influence then grows -- or ebbs -- based on how they handle those challenges. However impressive they were as human beings, it was not in being but in doing that George Washington, Abraham Lincoln and Franklin Roosevelt built their enormous reputations. Whatever Obama may have thought when he began this journey, at a time when the war in Iraq was foremost in many voters' minds, whatever his campaign promises, his presidency will be judged on how he handles the economic crisis that envelops the United States and the world. For Obama to be remembered as a great president, he has to do nothing less than rescue capitalism.

The first task is perhaps the most difficult: to restore confidence to Americans and indeed to the world. While there has been much elation over Obama's election, there remains a deep pessimism across the country that is having ruinous effects on the economy. People and corporations are still not doing much in the way of buying, borrowing or lending -- the heartbeats of modern capitalism. The political system has moved on to the automobile bailouts and the fiscal stimulus, but the original problem of trust in the financial system has still not been fixed. "Credit markets are still fundamentally broken," says David Swensen, chief investment officer of Yale University.

How to restore confidence? It's not as easy as it sounds. After all, George W. Bush has pretty consistently projected an air of confidence, one that tends to get people even more worried than they need to be. Perhaps this is because Bush's calm often seems utterly disconnected from the realities around him; he appears thoroughly unaware of the facts on the ground, whether in Iraq, Louisiana or Afghanistan. Like Bush, Roosevelt also projected optimism, but he took great pains to recognize and describe the depth of the difficulties the country faced. In his first fireside chat, Roosevelt explained the basics of banking to the American people and then asked for their help in getting the system working again. "It is your problem no less than mine," he said, enlisting them in the cause at hand.

The next step is to give people a sense that the financial system is stable and predictable. Swensen, who after Warren Buffett is perhaps the most successful investor in recent decades, argues that this has been the crucial flaw in the Bush administration's actions. "Markets need certainty and predictability," he says. "And the administration's actions have actually increased uncertainty and unpredictability. Its measures have been ad hoc, its response to each institution has been different, its reasoning has been opaque -- all this creates confusion, and that drives capital away." Swensen's own solution is simple and systemic -- have the government guarantee all money-market funds, with no limits, for six months. "Right now the government is not facilitating private capital flows; it is substituting for private capital flows. That doesn't solve anything."

The final way that Obama can create confidence is to reform the system itself. His administration will inherit a government that has taken on an extraordinary set of obligations in the private sector -- ownership in banks, guarantees of commercial debts, loans to the automobile industry. Carefully retreating from these obligations to restore a market economy will be as complex an exit strategy as the one from Iraq. But if Obama is able to reform government rules and regulation -- and thus the American economy -- it will give people around the world renewed confidence in the American system. It was only after Japan was able to put in place a new system of tough auditing that its own banking crisis abated.

Obama will find many dire challenges in his inbox, but none -- not Iraq, not Russia, not Pakistan, China, Afghanistan -- is as important as this one huge task: to restore confidence, certainty and reform to America. It's a lot easier said than done. But if he manages to pull it off, people might well start wondering whether Barack Obama has some supernatural powers after all.

The writer is editor of Newsweek International and co-host of PostGlobal, an online discussion of international issues. His e-mail address is comments@fareedzakaria.com.

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It's About Time:Every Second Counts When You're Obama's Scheduler

By Shailagh Murray
Washington Post Staff Writer
Monday, December 22, 2008; C01

A week before the election, Alyssa Mastromonaco was sitting at her desk at Chicago campaign headquarters, watching Barack Obama deliver a speech in Chester, Pa.

Uh-oh, she thought. It was pouring rain and the boss was shivering. As Obama hurried offstage, his trusty "Ms. Fix-It" started to count: Five, four, three, two . . . ring!

"Who thought this was a good idea?" Obama barked into Mastromonaco's ear. She tried to reassure him that at least the footage looked terrific, she recalled, "and then he hung up on me."

Mastromonaco can't control the weather, but she can handle just about anything else. Obama's campaign was a marvel of strategic logistics, with an upbeat former high school band president as its chief engineer. For two years, under every conceivable circumstance, Mastromonaco kept the planes, trains and luxury buses -- always ESPN-ready and stocked with organic tea -- running more or less on time.

The 32-year-old improvisational ace booked Obama's cherished gym sessions and organized the huge rallies that became the campaign's trademark. She compiled guest lists for backstage visits and determined whose phone calls would get returned. She kept Obama's secrets and took his grief.

And now Mastromonaco, who once studied French, Japanese and Bernie Sanders at the University of Vermont, is heading to the White House to be Obama's official gatekeeper there. Her title stays the same -- director of scheduling and advance -- but the job is infinitely more complex and more confining. Like other campaign aides who are making the transition, Mastromonaco is bracing for culture shock.

"We were so efficient," Mastromonaco said. "That's why the government feels a little weird right now."

Working in Chicago the past two years after decamping from Obama's Senate office, Mastromonaco, who's single, commanded a corps of savvy young people who made big things happen fast. She patched together flights and call lists via BlackBerry with a few hours' notice. Mastromonaco had weeks, not months, to plan Obama's overseas trip in July, an ordeal that involved eight advance teams and 15 events in five countries -- with no official U.S. government help.

If she thought Obama's delivery was flat, or that he was neglecting a certain constituency or issue, she told him so. Likewise, when the candidate started to slump, he could lean on Mastromonaco to make adjustments, so he could sleep more or stop by Chicago to see his family.

"When he thinks his life is out of control, or there's too much going on, he calls Alyssa," said Pete Rouse, Obama's Senate chief of staff and a senior campaign adviser, who also is White House-bound.

In her new role, Mastromonaco will execute elaborate protocols that have been in place for decades, and her immediate staff of about 35 will include a "diarist," responsible for recording every one of Obama's moves -- the telephone calls, the meals, the basketball games. Each step in the White House scheduling process, from request to approval, must be documented in writing. Decisions are made by committee -- a very large committee of administrative heavyweights from the national security and domestic policy offices, speechwriting, catering, the first lady's and vice president's shops, the Secret Service and so on. Advance teams involve casts of hundreds, swarming into each of the locales, here and abroad, that a president will visit.

The process is "very regimented, very bureaucratic," said former White House aide Bradley Patterson, author of "To Serve the President," about the machinery behind the man.

In the Bush White House, for instance, nine people -- including political boss Karl Rove when he was still on staff -- meet weekly to sift through some 1,000 requests and decide where the president should go. A confidential electronic calendar charts everything in the mix for the next 18 months to two years; wall boards in the scheduling office document flow charts for each day over the next four months. "There are no surprises!" said Patterson. "No one wants to be surprised."

"The flow of communications seems daunting for sure," said Mastromonaco, who has been debriefing current and former White House staffers, including Betty Currie, who worked for President Clinton. "We really had it down to a science in the campaign, and getting to know a load of new people and prove yourself once again is an exhausting thought."

Because she didn't travel with Obama or speak to reporters, Mastromonaco was the least-known member of the senior campaign team. But she became closer to the candidate personally, and played a more influential role in developing and executing campaign strategy, than did some of her more visible colleagues.

Her credits include all of Obama's high-profile appearances, from his announcement speech in Springfield, Ill., to the Berlin rally before 250,000 to the Denver convention speech and the election night celebration in Chicago's Grant Park. She choreographed Obama's 2006 book tour, his debate "camps" and the secret negotiations that led up to Sen. Joseph Biden Jr.'s selection as his running mate.

She's made her share of mistakes. Early on, Mastromonaco booked a private plane for the wrong day. Obama shrugged it off and flew commercial. Days of ridicule might have been avoided had she caught the faux presidential seal before it was unveiled at a June event. At the end of the Europe trip, a visit to Landstuhl Regional Medical Center in Germany was abruptly canceled after U.S. military officials argued that Obama would be visiting the hospital as a candidate, instead of as a senator.

But over two years, "she just hung the moon," said campaign manager David Plouffe. "Every time we had a high-wire act, Alyssa would come through." Her plans to get Obama into as many markets as possible between the South Carolina primary and Super Tuesday -- just 10 days -- were, said Plouffe, "a thing of beauty."

* * *

Her first memory of event planning is from nursery school. Her signature blend of extroverted insistence on organization and political savvy asserted itself when she threw an elaborate party for one of her teachers. She called a meeting with her fellow 4-year-olds and gave each of them an assignment: cupcakes, streamers, balloons.

"The teachers scolded me for organizing a rogue party!" Mastromonaco remembers. "But I had all bases covered."

The daughter of a business consultant and a high school teacher, she grew up in Rhinebeck, N.Y., and started in politics on the fringe, while she was studying French and Japanese at the University of Vermont. It was 1996, and Rep. Bernie Sanders, the frumpy and somewhat prickly socialist since turned senator, was seeking a fourth House term. He showed up at her dorm to campaign; she decided to intern for him.

"He would ask about my life, and talk to me about what was happening in Washington, D.C.," when she drove him to events or hung around the office, she said. "Even though I was just a sophomore in college, he treated me like I had a brain and something to contribute."

One of Mastromonaco's jobs was to call voters in the Northeast Kingdom, the most conservative part of the state. It wasn't an easy sell, but the small-town girl with a head full of Baudelaire found this all fascinating. "I became obsessed with Bernie Sanders and politics," she said.

She transferred to the University of Wisconsin and changed her major to political science, and in 2000 -- after a pleading letter and three interviews -- Mastromonaco persuaded Sen. John Kerry's Boston office to hire her as a $19,000-per-year staff assistant.

It was not a glamorous job, but it was revealing. She learned she could keep a secret when Kerry landed on Al Gore's vice presidential short list and Mastromonaco helped to see Kerry through the selection process, without feeling compelled to tell all her friends. And with her amazing memory and unflappable demeanor, she was a natural at logistics. Sending Kerry around the country to campaign for Gore, she found it thrilling to inform him, "This FedEx plane is going to pick you up in Miami and take you to Pittsburgh."

After Kerry's presidential campaign, Obama hired her to be his Senate scheduler, said Rouse, because the freshman senator sensed her political astuteness. Obama already had a high profile, and everyone wanted a piece of him. Mastromonaco's job was to turn down almost every request.

A year later, she became political director of Hopefund, Obama's political action committee, and dispatched both money and the senator to particular candidates for the 2006 congressional races. At every stop on the trail, Mastromonaco would line up a local official or two for her boss to meet -- just in case.

After that election, Obama started to think seriously about running for president, and Mastromonaco was part of the small group called together to walk him through the process. She created a mock three-month schedule to show Barack and Michelle Obama what a campaign would entail. When the senator decided to proceed, Mastromonaco was among his first hires. At first, Mastromonaco and Obama weren't an obvious match. She can be a bossy micromanager. She played flute growing up, not sports. And she carried the baggage of Kerry's losing campaign, with all of its leaks and infighting. "He's not D.C., and I seemed very D.C. to him," said Mastromonaco of Obama. "He would say, 'Why would you even want to do this job?' We didn't know each other at all. I had to convince him that I was a real person."

Their bond was forged when they started traveling together in 2006, and spent hours driving through congressional districts and to book-tour events. They would eat meals at Subway, stop for gas station snacks, and tangle over radio stations and the temperature (Obama likes the car warm). Eventually, Mastromonaco felt comfortable enough that she stopped carrying a Time magazine to disguise what she was really reading: Us Weekly, or Star, or some other celebrity rag. Soon they were flipping through the magazines together.

When her White House job became official last month, Obama issued an unusually effusive personal statement, describing Mastromonaco as a "talented and dynamic individual" with "diverse skills" who is "ready to work hard in service to the American people."

But starting Jan. 20, the formalities begin, and it's all fodder for the White House diarist.

"You always have to remind yourself, he's the president-elect," Mastromonaco said. "I used to call him Barack. He wants me to keep calling him Barack. But it doesn't feel right anymore."

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