How TARP Begat Obamacare

Wall Street titans successfully lobbied Congress for TARP in 2008.  Their success made Obamacare possible.  [Credit: UPI]

Wall Street titans successfully lobbied Congress for TARP in 2008. Their success made Obamacare possible. [Credit: UPI]

Obamacare goes live on October 1, when newly-created government exchanges are to begin selling health insurance and enrolling people in Medicaid. The date carries an eerie significance. October 1 also is the fifth anniversary of the Senate vote that made Obamacare possible: a 74-25 vote to create the Troubled Asset Relief Program, the $700 billion Wall Street bailout bill, more commonly known as TARP.

Wall Street bailouts and the new health care law might seem worlds apart, but the massive and costly changes to the health care system were possible only because Democrats controlled 60 Senate seats, enabling them to pass the new law over solid GOP opposition. Had they not voted for TARP just weeks before the elections, several Republican Senate candidates who lost narrowly might well have returned to the Senate, holding Democrats below the critical 60-vote benchmark.

Some of the Senate races were so close that they weren’t formally decided until weeks or months after the election. When the late Arlen Specter switched parties the following April 29, he became the 59th Democrat.  Democrats did not pick up their 60th seat until early July after a court declared that Al Franken (D-MN) had narrowly unseated Norm Coleman.

No sooner had Franken been sworn in than Chuck Schumer (D-NY) proclaimed that there was no need for Democrats to compromise on health care legislation.

Coleman’s was the tightest contest and his vote in favor of TARP may well have been the decisive factor in his defeat. He had led Franken by 215 votes in the initial count, but was subsequently declared the loser. Thousands of voters backed candidates running to Coleman’s right, many no doubt enraged that Republicans had helped enact a Wall Street bailout bill that they detested.

Ted Stevens also was in a close race. Despite being damaged by a conviction for understating the value of renovations on his Alaska home – a conviction that later was overturned at the request of Justice Department prosecutors – it took vote counters weeks to confirm that he’d lost. The bogus felony conviction undoubtedly loomed larger in the outcome, but the margins were nonetheless razor-thin. A phalanx of candidates to Stevens’ right together polled over 17,000 votes, several times his margin of defeat. Many of these voters were no doubt motivated by their disgust with TARP.

Then there were candidates who were unseated by somewhat larger margins. Oregon’s Gordon Smith had led his opponent, Jeff Merkley (D-OR), in most polls until the mid-September Wall Street meltdown, when he fell behind by a few percentage points. His vote in favor of TARP likely sank whatever hopes he had of regaining momentum. A candidate running to his right won more than 92,000 votes, nearly twice Smith’s margin of defeat.

John Sununu of New Hampshire, another TARP backer, lost his seat to Jeanne Shaheen (D-NH). Shaheen would likely have bested Sununu in any case, although a Suffolk University poll taken in late September showed the race deadlocked and a Rasmussen poll conducted during the same period showed him leading by 7 points.

His vote in favor of TARP a week later could not have helped his ill-fated bid. TARP still cast a shadow months after the election. The newly-elected Shaheen proudly boasted on her website that she’d voted against TARP, although she wasn’t a Member of Congress when the fateful votes were taken. (She probably was referring to her vote in 2009 against releasing additional TARP funds.) Whether or not his TARP vote cost Sununu his Senate job, it won him another. He was appointed to the board to oversee TARP spending in December 2008.

Then there were the GOP challengers who suffered at the polls after defending TARP. Bob Schaffer was running for Colorado’s open seat against Mark Udall (D-CO). Rasmussen showed Schaffer lagging Udall by just two points in late September until he curiously called TARP “necessary,” but “essentially a tax.” It’s hard to imagine a statement that would have alienated Republican voters more. And alienate them he did, helping doom his Senate bid.

It’s also worth looking at GOP incumbents who voted against TARP. Roger Wicker (R-MI) was considered a top target of national Democrats. Wicker had been appointed by Mississippi’s Governor to the Senate to temporarily fill in for Trent Lott, who had resigned his seat. In November 2008, Wicker was running statewide for the first time, seeking voter approval to serve out the remainder of Lott’s term. Polls showed a close race. Rasmussen had Wicker leading by just 2 points on September 30. The following day, Wicker voted against TARP.  He won his race by a comfortable margin.

And though 11 of 13 Democratic incumbents who stood for election in 2008 voted in favor of TARP, the most vulnerable Democrat, Mary Landrieu (D-LA), did not. Landrieu, who always faces stiff electoral challenges, was in a competitive race against Republican John Kennedy. And while Kennedy never did get within striking distance, Landrieu’s opposition to TARP denied him a potential opportunity.

It would be interesting to know whether Landrieu, before voting against TARP, had a conversation with the man who was heading up her party’s national effort to win Senate races: Chuck Schumer. “The Senator from Wall Street” was unsurprisingly among TARP’s most vocal cheerleaders. But once the votes had been taken and TARP was enacted, Schumer’s Democratic Senatorial Campaign Committee ran ads attacking Republican incumbents for voting in favor of TARP.

If a shrewd political operative like Schumer saw TARP votes as a political liability for Republicans, it almost certainly was a factor in those close races. I can’t prove that, of course. Elections are complex events that defy analysis, and it was a toxic environment for Republican Senate candidates even without TARP. But the timing and magnitude of the financial meltdown undoubtedly made it one of the biggest things on voters’ minds in November 2008. Opinion polls on the Wall Street bailout taken in the run-up to the election varied depending on how the question was worded. When the survey question mentioned that TARP spent $700 billion, most voters expressed disapproval.

That disapproval ran deepest among the GOP’s conservative base, which saw TARP as an act of crony capitalism that bailed out wealthy investment houses while leaving ordinary Americans to suffer the consequences of Wall Street excesses. Those voters are especially critical in close races. It is impossible to determine how many of them may have voted for third party candidates or just stayed home in November 2008, but it wouldn’t have taken many to turn even two or three of the tightest Senate elections.

And that — along with Specter’s party switch — was enough to provide Democrats with the 60 Senate seats they needed to enact Obamacare. Had they captured fewer seats, they would have had to negotiate the specifics of a bill with their GOP colleagues. A compromise may or may not have been possible during 2009 but, as Schumer noted, compromise became unnecessary once his party controlled 60 seats. The process for gaining the support of every Senate Democrat was crude and politically ham-handed, with votes procured through special provisions for Louisiana’s Mary Landrieu (the “Loiuisana Purchase”) and Florida’s Bill Nelson (“Gator Aid”). The 60th vote came from former Nebraska Senator Ben Nelson, whose “Cornhusker Kickback” tanked his political career.

Sentiment ran so deeply against the law and the partisan process that produced it that Massachusetts voters did the unthinkable in January 2010, awarding the late Ted Kennedy’s seat to a Republican, Scott Brown.  When Brown took the oath of office in February, he closed a 7-month window during which Democrats controlled 60 Senate seats.

With just 59 Senators and having irretrievably alienated their GOP colleagues, House Democrats were forced to approve the Senate bill without changes, forfeiting any chance to repair it in a House-Senate conference. Stuck with making a poorly-drafted, “as is” law workable, the Administration subsequently approved various waivers, exemptions and delays, sometimes ignoring or contradicting the law’s clear stipulations. The special deals it made for Members of Congress, big corporations, labor unions, insurance companies, and others with influential lobbies contributed to popular distaste for the product.

Obamacare will go forward despite that popular distaste. Over time, people may come to accept it even if they never fully embrace it – just as they did with TARP, the law that made Obamacare possible.