WASHINGTON -- In the fall of 2008, an unlikely alliance of lawmakers, regulators and Bush administration officials banded together to rescue an economy they feared was hours away from collapse. They also unwittingly reshaped American politics, unleashing a populist furor that lingers in both parties to this day.
More than a decade later, those same political forces are shadowing a new debate over emergency government spending — only with far more taxpayer money at stake and even greater uncertainty over Americans’ futures.
On the table: a nearly $2 trillion rescue package for major industries, small businesses and individuals impacted by the fast-moving coronavirus.
Though more emergency money could be needed, this package is already larger than the $700 billion bank bailout President George W. Bush requested in 2008 and the almost $800 billion his successor, President Barack Obama, sought in stimulus in 2009. That response stabilized the economy, but upended politics and helped fuel President Donald Trump's path to power.
The circumstances that led to each extraordinary moment are different, one a financial crisis prompted by risky Wall Street investments, the other a pandemic that has crippled airlines, restaurants and scores of other businesses. But they both put the onus on Washington to act quickly to address complex matters, leaving leaders with decisions that could define their careers.
“Heads snap up pretty quickly when they remember how deeply angry the American people were about a no-strings bailout that rewarded executives and shareholders while families continued to suffer,” Massachusetts Sen. Elizabeth Warren, one of the most prominent political figures to emerge from the progressive awakening that followed the Wall Street bailout, said in an interview.
Warren is among the Democrats pushing for restrictions on big businesses that receive a government bailout and for pledges to keep workers on payroll. She joined other Senate Democrats on Sunday night in blocking the $2 trillion measure, arguing that there would be little oversight of the companies propped up with taxpayer money.
There's also worry about the scope — and political cost — of the pending bailouts among some on the right as the Trump administration and lawmakers continue negotiations.
Trump said Sunday he wanted to ensure that any company that received public money couldn't use it to buy back their stock and raise its value. The Senate bill, written by Republicans, includes a ban on stock buybacks that has been criticized as weak.
“I may be Republican but I don’t like that,” Trump said. But he angered many Democrats by refusing to rule out the possibility that his family's company, which runs hotels and resorts, might receive government funds.
Nikki Haley, the former Trump Cabinet official and a likely GOP presidential hopeful in 2024, announced last week that she was stepping down from the board of Boeing because she was uncomfortable with the company’s decision to seek government help.
“I cannot support a move to lean on the federal government for a stimulus or a bailout that prioritizes our company over others and relies on taxpayers to guarantee our financial position,” Haley wrote in announcing her decision. “I have long held strong convictions that this is not the role of government.”
Warren, Trump and Haley represent the poles of the populist waves that swept through both parties after the Great Recession.
On the left, Warren and Sen. Bernie Sanders argued against a system “rigged” in favor of the wealthy, called for breaking up large companies, and championed proposals to replace private businesses, such as the health insurance industry, with government-run programs. Though their positions are still deemed outside the mainstream by many Democrats — and Sanders could soon follow Warren in ending his presidential campaign — they have succeeded in pushing their party further to the left over the past decade.
Indeed, Sanders was still railing against the 2008 Wall Street bailout last week in his presidential debate with Joe Biden, the likely Democratic nominee who voted for the package while he was in the Senate and helped administer it as Obama’s vice president.
“We need to stabilize the economy, but we can’t repeat what we did in 2008,” said Sanders, who voted against the bailout package.
On the right, the tea party movement tapped into a viscerally anti-government sentiment among some voters after the bailout, helping propel a new crop of political candidates and taking down numerous Republican stalwarts who were deemed too cozy with the same Wall Street banks that benefited from the bailout.
“Back in ‘08 there was an industry to blame,” said Eric Cantor, the former Republican House Majority Leader who lost his 2014 primary to Dave Brat, a little-known economics professor backed by the tea party. “And that’s exactly where the government aid and assistance went — to the industry that was the facilitator of the problem.”
That’s where the coronavirus crisis most starkly differs from the financial collapse. There’s no corporate interest to blame and economic activity has slowed dramatically or halted for virtually every sector.
“We had the financial crisis because people did bad things," said Barney Frank, a former Massachusetts Democratic congressman who helped author a 2010 bill that was the most sweeping overhaul of financial regulation since the Great Depression. “Nobody’s done bad things to get the coronavirus.”
Still, less than eight months before the next presidential election, politicians in both parties are mindful of the potential fallout from plunging nearly $2 trillion into the economy, with much of the money heading toward large companies.
The Senate Republican framework backed by Trump calls for $350 billion to help small businesses make payroll, as well as $1,200 checks for millions of Americans. Trump has also proposed having the government take equity positions in companies that receive bailouts — something that has happened in the past but is still a departure from the GOP's traditional aversion to government intervention in private business.
So far he has stopped short of fully exploiting the Defense Protection Act which gives him the power to compel private businesses to meet government needs.
Yet some Trump allies are still raising concerns.
Stephen Moore, founder of the conservative Club for Growth and an economic adviser to the president, said the White House and Congress need to be careful to avoid the impression that the government is picking winners and losers as it authorizes money to struggling industries.
“Where do you stop with this?” he said. “If you’re going to pick the airlines, what about the oil companies, are you going to pick them? What about the movie theaters? What about the corner shop that’s closed down?”
Warren said lawmakers would be wise to proceed with caution before allocating massive sums of taxpayer money to private businesses, arguing that many Americans are still stung by Washington’s actions more than a decade ago.
“The anger is real still,” she said, recounting conversations she had with voters during her recent presidential campaign. "I would have people come through the selfie line and say, ‘I was in high school when my family lost their home during the 2008 crash and there was nobody there to help us.’”
“People still live it in a very real way,” she said.