Obama Passes The Clinton Test on TARP

President-Elect Obama is a former College Professor, and reader of history, notably Lincoln. His actions, however, on the most recent Senate vote for TARP funding, show that he is also a student of other administrations, notably the Clinton administration. Let's take a look:

During 1993, despite large majorities in both the Senate and House, Bill Clinton managed only limited (at best) success in getting his agendas passed (passing tax hikes and government stimulus without a single Republican crossover, and failing in other measures such as health care and gay rights in the military). This success was pretty limited, and in the end, he never had another chance to work with a Democratically controlled congress after his first two years. It was only after losing a few legislative battles, and his party losing control of Congress, that Clinton managed to figure out how to better deal with the Congressional leadership, to craft fiscal policy.

So, Barack Obama in 2009 has Democratic majorities in much the same numbers as Clinton did in 1993, and is faced with a similar, albeit worse, economic situation today. One very important vote were staring him in the face as of yesterday--TARP Funding

Obama knew that without the funds to be made available through TARP, he would be left to watch helplessly, as the Dow Jones cratered to 6,000 and beyond, Credit freezes completely, and unemployment figures for February and March climb to 1 million jobs lost per month. So he had already threatened to veto any bill that lands on his desk cutting off funds for TARP. He knew that the Senate couldn't override his veto, and he'd get the money anyway. But this would have been a Pyhrric victory, and in the end, he would have hated to start his term off losing a battle he should have won. Pundits and Print Media would have talked about his inability to achieve consensus, and it could have been a total disaster.

So Obama made sure to get the victory in his pocket. He reached out to the middle of the Senate base, and knew that he would lose support on the far right, and far left of the spectrum (which he did). He knew that there were enough Fiscally Pragmatic Republicans that could support this action, that he could afford to lose a few Democrats, and still prevail. Equally important, he knew that there were Republican Senators vulnerable to a 2010 election in states where a vote against TARP could look bad. Even so, the Republicans would need some convincing--from him, and/or Emmanuel.

And so, that's exactly what they got. Republican leaders have praised Obama and his team for reaching out and making the assurances to them on proper use and oversight on the funds, to warrant a tepid support of TARP. A breakdown of the votes shows that TARP funds would be released with enough Republican support, to offset Democratic losses.

The Republicans who supported TARP all tended to be more moderate (Judd Gregg-NH, Lamar Alexander-TN, Olympia Snowe-ME, George Voinovich-OH), or more Fiscally inclined (Richard Lugar-IN, John Kyl-AZ).

This overrode nine Democrats voting to end TARP funding. Many of these Senators were up for re-election (Evan Bayh-IN, Blanche Lincoln-AR, Ron Wyden-OR, Byron Dorgan-ND, Russ Feingold-WI), knew that TARP would pass, but wanted to hedge their bets with the electorate, in case TARP Version 2.0 doesn't help the banks to recover.

And so, Obama and his team got a victory on a tough vote, (52-42) and did so with little fanfare, and with an honest attempt to work with Democrats and Republicans. This is a very good start, and hopefully, a positive sign of things to come.