Foner, Eric. Give Me Liberty!: An American History (Brief Fourth Edition) (Vol. One-Volume): 2 (Page 885-897). W. W. Norton & Company. Kindle Edition. The Economy under Bush Continuing chaos in Iraq began to undermine support for Bush’s foreign policy. But the main threat to the president’s reelection appeared to be the condition of the American economy. During 2001, the economy slipped into a recession—that is, it contracted rather than grew. Growth resumed at the end of the year, but, with businesses reluctant to make new investments after the overexpansion of the 1990s, it failed to generate new jobs. Talk of “economic pain” reappeared in public discussions. Ninety percent of the jobs lost during the recession of 2001–2002 were in manufacturing. Despite the renewed spirit of patriotism, deindustrialization continued. Textile firms closed southern plants and shifted production to cheap-labor factories in China and India. Maytag, a manufacturer of washing machines, refrigerators, and other home appliances, announced plans to close its factory in Galesburg, Illinois, where wages averaged fifteen dollars per hour, to open a new one in Mexico, where workers earned less than one-seventh that amount. The Bush administration responded to economic difficulties by supporting the Federal Reserve Board’s policy of reducing interest rates and by proposing another round of tax cuts. In 2003, the president signed into law a $320 billion tax reduction, one of the largest in American history. In accordance with supply-side theory, the cuts were again geared to reducing the tax burden on wealthy individuals and corporations. Left to future generations were the questions of how to deal with a rapidly mounting federal deficit (which exceeded $400 billion, a record, in 2004) and how to pay for the obligations of the federal government and the needs of American society. THE WINDS OF CHANGE The 2004 Election With Bush’s popularity sliding because of the war in Iraq and a widespread sense that many Americans were not benefiting from economic growth, Democrats in 2004 sensed a golden opportunity to retake the White House. They nominated as their candidate John Kerry, a senator from Massachusetts and the first Catholic to run for president since John F. Kennedy in 1960. A decorated combat veteran in Vietnam, Kerry had joined the antiwar movement after leaving the army. Kerry proved a surprisingly ineffective candidate. An aloof man who lacked the common touch, he failed to generate the same degree of enthusiasm among his supporters as Bush did among his. The Bush campaign consistently and successfully appealed to fear, with continuous reminders of September 11 and warnings of future attacks. Bush won a narrow victory, with a margin of 2 percent of the popular vote and thirty-four electoral votes. The results revealed a remarkable electoral stability. Both sides had spent tens of millions of dollars in advertising and had mobilized new voters—nearly 20 million since 2000. But in the end, only three states voted differently from four years earlier— New Hampshire, which Kerry carried, and Iowa and New Mexico, which swung to Bush. Bush’s Second Term In his second inaugural address, in January 2005, Bush outlined a new American goal— “ending tyranny in the world.” Striking a more conciliatory tone than during his first administration, he promised that the United States would not try to impose “our style of government” on others and that it would in the future seek the advice of allies. He said nothing specific about Iraq but tried to shore up falling support for the war by invoking the ideal of freedom: “The survival of liberty in our land increasingly depends on the success of liberty in other lands.” In his first inaugural, in January 2001, Bush had used the words “freedom,” “free,” or “liberty” seven times. In his second, they appeared forty-nine times. But the ongoing chaos in Iraq, coupled with a spate of corruption scandals surrounding Republicans in Congress and the White House, eroded Bush’s standing. Hurricane Katrina A further blow to the Bush administration’s came in August 2005, when Hurricane Katrina slammed ashore near New Orleans. Situated below sea level between the Mississippi River and Lake Pontchar train and protected by levees, New Orleans has always been vulnerable to flooding. For years, scientists had predicted a catastrophe if a hurricane hit the city. When the storm hit on August 29 the levees broke. Nearly the entire city, with a population of half a million, was inundated. Nearby areas of the Louisiana and Mississippi Gulf Coast were also hard hit. The natural disaster quickly became a man-made one, with ineptitude evident from local government to the White House. The mayor of New Orleans had been slow to order an evacuation, fearing it would damage the city’s tourist trade. In November 2002, the new Department of Homeland Security had been created, absorbing many existing intelligence agencies, including the Federal Emergency Management Agency (FEMA), which is responsible for disaster planning and relief within the United States. FEMA was headed by Michael Brown, who lacked experience in disaster management and had apparently been appointed because he was a college friend of his predecessor in the office. Although warned of impending disaster by the National Weather Service, FEMA had made almost no preparations. If the Bush administration had prided itself on anything, it was competence in dealing with disaster. Katrina shattered that image. For days, vast numbers of people, most of them poor AfricanAmericans, remained abandoned amid the floodwaters. Bodies floated in the streets, and people died in city hospitals and nursing homes. By the time aid began to arrive, damage stood at $80 billion, the death toll was around 1,500, and two-thirds of the city’s population had been displaced. The televised images of misery in the streets of New Orleans shocked the world and shamed the country. Hurricane Katrina also shone a bright light on the heroic side of American life. Where government failed, individual citizens stepped into the breach. People with boats rescued countless survivors from rooftops and attics, private donations flowed in to aid the victims, and neighboring states like Texas opened their doors to thousands of refugees. The Immigration Debate In the spring of 2006, an issue as old as the American nation suddenly burst again onto the center stage of politics—immigration. Alongside legal immigrants, millions of undocumented newcomers had made their way to the United States, mostly from Mexico. Economists disagree about their impact. It seems clear that the presence of large numbers of uneducated, lowskilled workers pushes down wages at the bottom of the economic ladder, especially affecting African-Americans. On the other hand, immigrants both legal and illegal receive regular paychecks, spend money, and pay taxes. They fill jobs for which American workers seem to be unavailable because the wages are so low. It is estimated that more than one-fifth of construction workers, domestic workers, and agricultural workers are in the United States illegally. In 2006, with many Americans convinced that the United States had lost control of its borders and that immigration was in part responsible for the stagnation of real wages, the House of Representatives approved a bill making it a felony to be in the country illegally and a crime to offer aid to illegal immigrants. The response was utterly unexpected: a series of massive demonstrations in the spring of 2006 by immigrants—legal and illegal— and their supporters, demanding the right to remain in the country as citizens. In cities from New York to Chicago, Los Angeles, Phoenix, and Dallas, hundreds of thousands of protesters took to the streets. An Iraq War veteran who marched with his parents, who had come to the country illegally, said, “I’ve fought for freedom overseas. Now I’m fighting for freedom here.” At the same time, church groups used to sheltering and feeding the destitute denounced the proposed bill as akin to the Fugitive Slave Law of 1850 for making it a crime to help a suffering human being and vowed to resist it. On the other hand, many conservatives condemned the marches as “ominous” and their display of the flags of the marchers’ homelands as “repellent.” All Congress could agree on was a measure to build a 700-mile wall along part of the U.S.Mexico border. The immigration issue was at a stalemate. Islam, America, and the “Clash of Civilizations” The events of September 11, 2001, placed new pressures on religious liberty. Even before the terrorist attacks, the political scientist Samuel P. Huntington had published a widely noted book, The Clash of Civilizations and the Remaking of the World Order (1996), which argued that with the Cold War over, a new global conflict impended between Western and Islamic “civilizations.” The idea of such a clash reduces politics and culture to a single characteristic—in this case, religion—that remains forever static, divorced from historical development. “Islam,” for example, consists of well over a billion people, in very different countries ranging from South Asia to the Middle East, Africa, Europe, and the Americas. Nonetheless, in the aftermath of 9/11, Huntington’s formula that pitted a freedom-loving United States against militant, authoritarian Muslims became popular as a way of making sense of the terrorist attacks. What did this mean for the nearly 5 million Americans who practiced the Muslim religion? President Bush insisted that the war on terror was not a war against Islam. But many Americans found it difficult to separate the two, even though most American Muslims were as appalled by the terrorist attacks as their fellow countrymen. Some critics claimed that Islam was fundamentally incompatible with American life—a position reminiscent of prejudice in the nineteenth century against Catholics and Mormons. In a number of states, politicians appealed for votes by opposing the construction of new mosques and raising the nonexistent threat that courts would impose “sharia law”—the religious rules laid down in the Koran—on all Americans. The Constitution and Liberty Two significant Supreme Court decisions in June 2003 revealed how the largely conservative justices had come to accept that the social revolution that began during the 1960s could not be undone. In two cases arising from challenges to the admissions policies of the University of Michigan, the Supreme Court issued its most important rulings on affirmative action since the Bakke case twenty-five years earlier. A 5-4 majority upheld the right of colleges and universities to take race into account in admissions decisions. Writing for the majority, Justice Sandra Day O’Connor argued that such institutions have a legitimate interest in creating a “diverse” student body to enhance education. In the second decision, in Lawrence v. Texas, a 6-3 majority declared unconstitutional a Texas law making homosexual acts a crime. Written by Justice Anthony Kennedy, the majority opinion overturned the Court’s 1986 ruling in Bowers v. Hardwick, which had upheld a similar Georgia law. Today, Kennedy insisted, the idea of liberty includes not only “freedom of thought, belief, [and] expression” but “intimate conduct” as well. The decision was a triumph for the feminist and gay movements, which had long campaigned to extend the idea of freedom into the most personal realms of life. Kennedy reaffirmed the liberal view of the Constitution as a living document whose protections expand as society changes. “Times can blind us to certain truths,” he wrote, “and later generations can see that laws once thought necessary and proper in fact serve only to oppress. As the Constitution endures, persons in every generation can invoke its principles in their own search for greater freedom.” The Court and the President Nor did the Supreme Court prove receptive to President Bush’s claim of authority to disregard laws and treaties and to suspend constitutional protections of individual liberties. In a series of decisions, the Court reaffirmed the rule of law both for American citizens and for foreigners held prisoner by the United States. It ruled that an American citizen who had moved to Saudi Arabia and been captured in Afghanistan had a right to a judicial hearing. The justices offered a stinging rebuke to the key presumptions of the Bush administration—that the Geneva Conventions do not apply to prisoners captured in the war on terrorism, that the president can unilaterally set up secret military tribunals in which defendants have very few if any rights, and that the Constitution does not apply at Guantánamo. In June 2008, the Supreme Court rebuffed the Bush administration’s strategy of denying detainees at Guantánamo Bay the normal protections guaranteed by the Constitution. Written by Justice Anthony Kennedy, the 5-4 decision in Boumediene v. Bush affirmed the detainees’ right to challenge their detention in U.S. courts. “The laws and Constitution are designed,” Kennedy wrote, “to survive, and remain in force, in extraordinary times.” Security, he added, consists not simply in military might, but “in fidelity to freedom’s first principles,” including freedom from arbitrary arrest and the right of a person to go to court to challenge his or her imprisonment. The Midterm Elections of 2006 With President Bush’s popularity having plummeted because of the war in Iraq and the Hurricane Katrina disaster, Congress beset by scandal after scandal, and public-opinion polls revealing that a majority of Americans believed the country to be “on the wrong track,” Democrats expected to reap major gains in the congressional elections of 2006. They were not disappointed. In a sweeping repudiation of the administration, voters gave Democrats control of both houses of Congress for the first time since the Re publican sweep of 1994. In January 2007, Democrat Nancy Pelosi of California became the first female Speaker of the House in American history. As the end of his second term approached, Bush’s popularity sank to historic lows. In January 2009, as Bush’s presidency came to an end, only 22 percent of Americans approved of his performance in office—the lowest figure since such polls began in the midtwentieth century. Indeed, it was difficult to think of many substantive achievements during Bush’s eight years in office. His foreign policy alienated most of the world, leaving the United States militarily weakened and diplomatically isolated. Because of the tax cuts for the wealthy that he pushed through Congress during his first term, as well as the cost of the wars in Iraq and Afghanistan, the large budget surplus he had inherited was transformed into an immense deficit. The Housing Bubble At one point in his administration, Bush might have pointed to the economic recovery that began in 2001 as a major success. But late in 2007, the economy entered a recession. And in 2008, the American banking system suddenly found itself on the brink of collapse, threatening to drag the national and world economies into a repeat of the Great Depression. The roots of the crisis of 2008 lay in a combination of public and private policies that favored economic speculation, free-wheeling spending, and get-rich-quick schemes over more traditional avenues to economic growth and personal advancement. For years, the Federal Reserve Bank kept interest rates at unprecedented low levels, first to help the economy recover from the bursting of the technology bubble in 2000 and then to enable more Americans to borrow money to purchase homes. Housing prices rose rapidly. Consumer indebtedness also rose dramatically as people who owned houses took out second mortgages or simply spent to the limits on their credit cards. In mid-2008, when the median family income was around $50,000, the average American family owed an $84,000 home mortgage, $14,000 in auto and student loans, $8,500 to credit card companies, and $10,000 in home equity loans. All this borrowing fueled increased spending. An immense influx of cheap goods from China accelerated the loss of manufacturing jobs in the United States but also enabled Americans to keep buying, even though for most, household income stagnated during the Bush years. Indeed, China helped to finance the American spending spree by buying up hundreds of billions of dollars worth of federal bonds— in effect loaning money to the United States so that it could purchase Chinese-made goods. Banks and other lending institutions issued more and more “subprime” mortgages—risky loans to people who lacked the income to meet their monthly payments. Wall Street bankers developed complex new ways of repackaging and selling these mortgages to investors. Insurance companies, including the world’s largest, American International Group (AIG), insured these new financial products against future default. Credit-rating agencies gave these securities their highest ratings, even though they were based on loans that clearly would never be repaid. Believing that the market must be left to regulate itself, the Federal Reserve Bank and other regulatory agencies did nothing to slow the speculative frenzy. Banks and investment firms reported billions of dollars in profits and rewarded their executives with unheard-of bonuses. The Great Recession In 2006 and 2007, overbuilding had reached the point where home prices began to fall. More and more home owners found themselves owing more money than their homes were worth. As mortgage rates reset, increasing numbers of borrowers defaulted—that is, they could no longer meet their monthly mortgage payments. Banks suddenly found themselves with billions of dollars of worthless investments on their books. In 2008, the situation became a full-fledged crisis, as banks stopped making loans, business dried up, and the stock market collapsed. Once above 14,000, the Dow Jones Industrial Average plunged to around 8,000—the worst percentage decline since 1931. Some $7 trillion in shareholder wealth was wiped out. Lehman Brothers, a venerable investment house, recorded a $2.3 billion loss and went out of existence in history’s biggest bankruptcy. Leading banks seemed to be on the verge of failure. With the value of their homes and stock market accounts in free fall, Americans cut back on spending, leading to business failures and a rapid rise in unemployment. By the end of 2008, 2.5 million jobs had been lost—the most in any year since the end of World War II. Unemployment was concentrated in manufacturing and construction, sectors dominated by men. As a result, by mid-2009, for the first time in American history, more women than men in the United States held paying jobs. Even worse than the economic meltdown was the meltdown of confidence as millions of Americans lost their jobs and/or their homes and saw their retirement savings and pensions, if invested in the stock market, disappear. In April 2009, the recession that began in December 2007 became the longest since the Great Depression. “A Conspiracy against the Public” In The Wealth of Nations (1776), Adam Smith wrote: “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public.” This certainly seemed an apt description of the behavior of leading bankers and investment houses whose greed helped bring down the American economy. Fueled by revelations of corporate misdeeds, the reputation of stockbrokers and bankers fell to lows last seen during the Great Depression. One poll showed that of various social groups, bankers ranked third from the bottom in public esteem—just above prostitutes and convicted felons. Resentment was fueled by the fact that Wall Street had long since abandoned the idea that pay should be linked to results. By the end of 2008, the worst year for the stock market since the Depression, Wall Street firms had fired 240,000 employees. But they also paid out $20 billion in bonuses to top executives. In 2010, Goldman Sachs, the Wall Street banking and investment firm, paid a fine of half a billion dollars to settle charges that it had knowingly marketed to clients mortgage-based securities it knew were bound to fail and then in effect bet on their failure. (This was like a real-estate agency selling an unsuspecting customer a house with faulty wiring and then taking out insurance so that the agency would be paid when the house burned down.) But no changes followed in management, and the fine represented only two weeks’ profit for the mighty firm. It was also revealed that Bernard Madoff, a Wall Street investor who claimed to have made enormous profits for his clients, had in fact run a Ponzi scheme in which investors who wanted to retrieve their money were paid with funds from new participants. Madoff sent fictitious monthly financial statements to his clients, but he never actually made stock purchases for them. When the scheme collapsed, Madoff’s investors suffered losses amounting to around $50 billion. The crisis exposed the dark side of market fundamentalism— the ethos of deregulation that had dominated world affairs for the preceding thirty years. Every president from Ronald Reagan onward had lectured the rest of the world on the need to adopt the American model of unregulated economic competition and berated countries like Japan and Germany for assisting failing businesses. Now, the American model lay in ruins and a new role for government in regulating economic activity seemed inevitable. Bush and the Crisis In the fall of 2008, with the presidential election campaign in full swing, the Bush administration seemed unable to come up with a response to the crisis. In keeping with the free market ethos, it allowed Lehman Brothers to fail. But this immediately created a domino effect, with the stock prices of other banks and investment houses collapsing, and the administration quickly reversed course. It persuaded a reluctant Congress to appropriate $700 billion dollars to bail out other floundering firms. Insurance companies like AIG, banks like Citigroup and Bank of America, and giant financial companies like the Federal Home Loan Mortgage Corporation (popularly known as Freddie Mac) and the Federal National Mortgage Association (Fannie Mae), which insured most mortgages in the country, were deemed “too big to fail”—that is, they were so interconnected with other institutions that their collapse would drive the economy into a full- fledged depression. Through the federal bailout, taxpayers in effect took temporary ownership of these companies, absorbing the massive losses created by the companies’ previous malfeasance. Few of the rescued firms used the public funds to assist home owners threatened with foreclosure; indeed, because they pocketed lucrative fees from those who could not pay their mortgages, they had no incentive to help them keep their homes or sell them. Giant banks and investment houses that received public money redirected some of it to enormous bonuses to top employees. But despite the bailout, the health of the banking system remained fragile. Firms still had balance sheets weighed down with “toxic assets”— billions and billions of dollars in worthless loans. The crisis also revealed the limits of the American social “safety net” compared with those of other industrialized countries. In western Europe, workers who lose their jobs typically receive many months of unemployment insurance amounting to a significant percentage of their lost wages. In the United States, only one-third of out-of-work persons even qualify for unemployment insurance, and it runs out after a few months. The abolition of “welfare” (the national obligation to assist the neediest Americans) during the Clinton administration left the American safety net a patchwork of a few national programs such as food stamps, supplemented by locally administered aid. The poor were dependent on aid from the states, which found their budgets collapsing as revenues from property and sales taxes dried up. THE RISE OF OBAMA With the economy in crisis and President Bush’s popularity at low ebb, the time was ripe for a Democratic victory in the election of 2008. To the surprise of nearly all political pundits, the long series of winter and spring caucuses and primary elections resulted in the nomination not of Hillary Rodham Clinton, the initial favorite, but of Barack Obama, a relatively little-known forty-seven-year-old senator from Illinois when the campaign began. Obama was the first black candidate to win the nomination of a major party. His triumph was a tribute both to his own exceptional skills as a speaker and campaigner and to how American politics had changed. Obama’s life story exemplified the enormous changes American society had undergone since 1960. Without the civil rights movement, his election would have been inconceivable. He was the product of an interracial marriage, which ended in divorce when he was two years old, between a Kenyan immigrant and a white American woman. When Obama was born in 1961, his parents’ marriage was still illegal in many states. He attended Columbia College and Harvard Law School, and worked in Chicago as a community organizer before going into politics. Obama was elected to the U.S. Senate in 2004 and first gained national attention with an eloquent speech at the Democratic national convention that year. Clinton sought the Democratic nomination by emphasizing her political experience, both as First Lady and as a senator from New York. Obama realized that in 2008 people were hungry for change, not experience. Indeed, although Clinton’s nomination would also have been pathbreaking—no woman has ever been the presidential candidate of a major party—Obama succeeded in making her seem a representative of the status quo. His early opposition to the Iraq War, for which Clinton had voted in the Senate, won the support of the party’s large antiwar element; his race galvanized the support of black voters; and his youth and promise of change appealed to the young. Obama recognized how the Internet had changed politics. He established an e-mail list containing the names of millions of voters with whom he could communicate instantaneously, and his campaign used Web-based networks to raise enormous sums of money in small donations. With its widespread use of modern technology and massive mobilization of new voters, Obama’s was the first political campaign of the twenty-first century. The 2008 Campaign Having won the nomination, Obama faced Senator John McCain, the Republican nominee, in the general election. At age seventy-two, McCain was the oldest man ever to run for president, and he seemed even more a representative of the old politics than Clinton. He surprised virtually everyone by choosing as his running mate Sarah Palin, the little-known governor of Alaska, in part as an attempt to woo Democratic women disappointed at their party’s rejection of Hillary Clinton. Palin proved extremely popular with the Republican Party’s conservative base. But her performances in speeches and interviews soon made it clear that she lacked familiarity with many of the domestic and foreign issues a new administration would confront. But the main obstacles for the McCain campaign were President Bush’s low popularity and the financial crisis that reached bottom in September and October. Obama’s promise of change seemed more appealing than ever. On election day, he swept to victory with 53 percent of the popular vote and a large majority in the electoral college. His election redrew the nation’s political map. Obama carried not only Democratic strongholds in New England, the mid-Atlantic states, the industrial Midwest, and the West Coast, but also states that had been reliably Republican for years. He cracked the solid South, winning Virginia, North Carolina, and Florida. He did extremely well in suburbs throughout the country. He even carried Indiana, where Bush had garnered 60 percent of the vote in 2004 but which now was hard hit by unemployment. He did exceptionally well among young voters. Obama carried every age group except persons over 65. Thus, he was elected even though he received only 43 percent of the nation’s white vote. The Age of Obama? Obama’s victory seemed to mark the end of a political era that began with Richard Nixon and his “southern strategy.” Instead of using control of the South as the base to build a national majority, Republicans now ran the danger of becoming a regional and marginalized southern party. In the wake of the Iraq War, the economic meltdown, and the enthusiasm aroused by Obama’s candidacy, Republican appeals to patriotism, low taxes, and resentment against the social changes sparked by the 1960s seemed oddly out of date. Democrats not only regained the presidency but ended up with 60 of the 100 seats in the Senate and a large majority in the House. The groups carried by Obama—young voters, Hispanics, suburbanites—represented the growing parts of the population, auguring well for future Democratic success. The election of the nation’s first African-American president represented a historic watershed. Only time would tell whether Obama’s election announced the end of the Age of Reagan—the era of economic deregulation, the demonization of the federal government, and an aggressive foreign policy abroad— and the beginning of something fundamentally different. Foner, Eric. Give Me Liberty!: An American History (Brief Fourth Edition) (Vol. One-Volume): 2 (Page 885-897). W. W. Norton & Company. Kindle Edition.
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