Looking back, it’s really striking how much economic power Obama and the Democrats had in that short window before they lost Congress. First, they had a free hand to design a stimulus program to rebuild Main Street—and to make it as big as required. After decades of unrelenting cutbacks in social spending, there was suddenly a widespread consensus on the need for the federal government to pull the economy out of recession. The stimulus plan ended up being $800 billion, a staggering sum, although, at the time, it was widely criticized for being too small.
And that was not the only tool that Obama had to make good on his promises to rebuild Main Street. The banks were on their knees, receiving trillions of dollars in public money in direct bailouts and loan guarantees, and there were very lively and heated debates going on, in the United States and around the world, about what governments should demand in exchange for saving the banks from the consequences of their own greed. Should they cap executive salaries? Restore Glass–Steagall, the Depression-era law that separated commercial and investment banks? Should they throw the CEOs responsible for the global crisis in jail? Should the banks be permanently nationalized and run as public trusts? Some of this may sound radical today, but it’s worth remembering that these were the actual debates going on in 2009, even in staid publications like the Financial Times. And there were similar discussions about the fate of the big auto companies, which were also heading to Washington needing bailouts. Two of the Big Three—General Motors and Chrysler—had to declare bankruptcy that same year and were put under government control.
So, let’s zoom out and imagine what might have been…. Obama had the electoral mandate for real change, he had a virtual blank check to design a stimulus package, and he had an opportunity to impose much-needed changes on two failing sectors of the US economy—the banks and the auto companies.
Imagine if the Democrats had used the leverage they had in 2009 and 2010 to make serious, substantive restructuring demands of the banks and the auto giants in exchange for continuing to bail them out. Imagine if Obama, who had been elected on a promise to rebuild Main Street, solve climate change, and stabilize the economy, had treated the banking and automotive sectors as components of a unified vision for reviving the economy, while fighting inequality and climate change at the same time.
To be concrete, what if the auto companies had been mandated to restructure themselves so they were producing the vehicles of the low-carbon future—electric cars, electric buses, and light rail? In the midst of the financial crisis, two million manufacturing jobs were lost and hundreds of factories closed down. What if, instead of letting that happen, those factories had been refurbished and retooled? A similar industrial transformation took place during World War II, when US factories were enlisted for the war effort.
It would have been expensive, yes, but the banks could have been required to spend a healthy portion of their bailout money providing the necessary loans for this industrial transformation (as it was, they hoarded the cash). And stimulus money could have been spent to help workers get the training they needed to fully participate in the transition, building the public infrastructure—transit, energy grids—of this same green economy. Obama’s infrastructure bill did include important support for green energy and green projects, but the clean infrastructure of the future, including public transit and light rail, was shortchanged in favor of the dirty infrastructure of the past, such as highways. And the opportunities presented by the bank and auto bailouts were squandered almost completely. Even after all their failures, the attitude in Washington was still: the banks know best, the auto companies know best, our job is just to get these industries on their feet as quickly as possible so they can get back to a gently tweaked version of business as usual.
The Jobs Revolution That Wasn’t
This road not taken matters because, right now, one of the biggest obstacles to serious action on climate change is the fossil fuel companies’ successful positioning of themselves as the only ones capable of creating well-paying jobs and keeping the lights on. Obama and the Democrats could have buried that claim once and for all.
Other countries, in the same period, did bury the claim. Over the past decade, the German government has treated the green economy as the main way to revive its manufacturing sector. In the process, it has created 400,000 jobs, and now 30 percent of the country’s energy comes from renewables. And Germany has the strongest economy in Europe by far. The energy transition there is incomplete—Germany remains excessively reliant on coal—and its government has inflicted merciless austerity on other countries while choosing another course for itself. But if the US had followed Germany’s domestic example, it would have been so far along the road to a renewables-based economy that it would have been impossible for Trump to undo—no matter how many executive orders he signed. And who knows? The new manufacturing jobs and improved infrastructure might well have been enough to deprive him of his win altogether.
Granted, all of this change and restructuring would have demanded uncommon focus and toughness. If Obama had taken a transformative approach to the failed banks and auto companies and to the reckless energy sector when he came into office, the backlash would have been ferocious and difficult to bear. He would have been painted as a communist, the US’s own Hugo Chávez. On the other hand, his mandate for widespread change, along with the outpouring of goodwill that greeted his election, was accompanied by such rare economic powers that it could well have ushered in a new era of economic fairness and climate stability.