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May 2022 Issue [Letter from Washington]

Power Failure

The unseen obstacles to progressive reform
The White House, January 20, 2021 © David Burnett/Contact Press Images

The White House, January 20, 2021 © David Burnett/Contact Press Images

[Letter from Washington]

Power Failure

The unseen obstacles to progressive reform

On December 19, Senator Joe Manchin appeared on Fox News Sunday to discuss the Build Back Better Act, having given the White House half an hour’s notice of the verdict he would solemnly render. “I’ve tried everything humanly possible” to find a way to support the bill, the yacht-dwelling West Virginia coal baron insisted, but “this is a no.” He could not explain “this mammoth piece of legislation” to his voters, he added later. It would “dramatically reshape our society in a way that leaves our country even more vulnerable to the threats we face,” by which he meant inflation and the mounting federal debt, which would somehow hamper our ability to face down Russia, China, and the Omicron variant.

It was a major blow to the New Deal–scale transformation that Joe Biden had promised during the 2020 campaign, when the prospects of a revived Cold War still seemed remote. By the fall of 2021, the remnants of that lofty aspiration had found legislative expression in the Build Back Better Act, replete with provisions such as billions of dollars for poor children, curbs on drug company price gouging, health-insurance subsidies, and other measures cherished by progressive Democrats, and in many cases a majority of voters overall. A month earlier, House Democrats had managed to pass a version of the act, though it was shrunken in scope thanks to withering assaults by corporate interests and their congressional allies. Now it was effectively dead.

Publicly, Democrats vented fury at Manchin and his fellow naysayer, Senator Kyrsten Sinema, the eccentric opportunist from Arizona. Their flaunted power in frustrating major Democratic legislation has become familiar. The pair may have held ultimate veto power, but behind the headlines chronicling the bill’s demise was an instructive exercise in inconspicuous power.

Planned spending under the act, which by November 2021 had been reduced to $1.9 trillion over ten years, was supposed to be fully funded by increased tax revenues, a significant portion of which, $320 billion, would be generated by recruiting eighty-seven thousand new IRS agents. Unfortunately, this hopeful scenario had to pass muster with Phillip Swagel, the head of the Congressional Budget Office, which scores legislation on its projected cost to the government. The CBO describes itself as “strictly bipartisan,” dedicated to producing “independent analyses of budgetary and economic issues to support the Congressional budget process,” and in no way involved in matters of policy. Swagel, a former economics professor who was assistant secretary for economic policy in the George W. Bush Administration, and previously a fellow at the right-wing American Enterprise Institute, took a dim view of the prospects for a $320 billion bonanza. Given the likelihood that artful tax accountants would rapidly find new ways to shave clients’ tax payments, he concluded, the best that could be hoped for would be a comparatively paltry $200 billion. Biden appointees, perceiving a mortal threat to their agenda, were indignant. “In this one case, I think we’ve made a very strong empirical case for CBO not having an accurate score,” Ben Harris, the current occupant of Swagel’s old post at the Treasury, told the New York Times, urging lawmakers to ignore the assessment of their own office. Such public criticism is unusual; bureaucratic battles are customarily waged more discreetly. Jon Lieber, a managing director of the Eurasia Group and a former adviser to Mitch McConnell, explained the stakes. “If the CBO had come closer to the preferred White House scoring,” he told me, “it would have fundamentally altered the structure of the bill by reducing the need to rely on other funding sources like the pharmaceutical industry or multinational companies”—interests dear to the hearts of Manchin and Sinema. Despite Swagel’s objections, the measure passed the House with the reluctant support of Democratic moderates. But at the behest of Republicans he struck again once it reached the Senate, reporting that the act could add $3 trillion to the deficit over ten years, which was all the ammunition Manchin needed to finish off the new New Deal once and for all.

Swagel’s intervention was not the first hit to Biden’s agenda at the hands of a hitherto obscure functionary. His economic stimulus bill, the American Rescue Plan, introduced shortly after his inauguration, included a provision to increase the minimum wage to $15 an hour. But the decision as to whether the widely popular pay raise, a Biden campaign promise, would ever come to a vote was in the hands of another unelected official, Elizabeth MacDonough, the Senate parliamentarian. Her role is to tender advice on Senate rules of procedure, and what they do and do not permit. According to an arcane rule, Senate approval of the measure by a simple majority depended on whether the wage provision could be linked to federal spending, and that decision was up to MacDonough, a Vermont Law School graduate who, apart from a stint as an immigration lawyer with the Justice Department, has spent almost her entire career in the congressional bureaucracy. She has been in her present job since 2012, and served as a senior assistant to her predecessor for ten years before that. When she decreed that the Democratic majority could not include the $15 minimum wage provision in their stimulus bill, let alone vote on it, that was that. Democrats also tried to include immigration reform in the Build Back Better bill, and she nixed that, too. Despite outrage among many in the party, the majority leader, Chuck Schumer, shrank from taking remedial action, so two significant Biden campaign pledges were henceforth dead in the water.

Swagel and MacDonough are fine examples of what Colombians call “men of always,” individuals who maintain their grip on power while public attention focuses on transitory figures. In recent times, the power of such people has only grown, thanks to the increasing dysfunction of our democratic institutions, notably Congress. But the vast hive of the government apparatus has long nurtured them, and the rest of us live with the effects of policies without ever knowing who shaped them.

Thus, for example, while our elected politicians on either end of Pennsylvania Avenue take credit and blame rivals for national prosperity or lack of same, economic policy has long been dominated by the Federal Reserve. It played a decisive role in fueling the housing boom of the early Aughts through low interest rates and in refloating the economy after the 2008 crash via secret loans to major banks, as well as the ongoing multitrillion-dollar stimulus program known as quantitative easing. Though Fed chairmen have been the public face of these momentous initiatives, they were conceived and implemented in the bowels of the bureaucracy. “The staff of the Fed make policy,” the bank analyst and former Federal Reserve Bank of New York official Christopher Whalen told me flatly, pointing to the role of obscure but powerful officials such as the director of the division of supervision and regulation. Pat Parkinson, a former director of that office and a Fed functionary for thirty-one years, serves to underline Whalen’s point. According to a former official at the U.S. Treasury, he was the real architect of the process that ended Glass–Steagall, the New Deal–era law separating speculative investment banks from the commercial banks that hold our money. Many argue that this was a major cause of the 2008 financial meltdown, which led to the 2010 Dodd–Frank financial reform act, also partly crafted by Parkinson. (Parkinson denies playing any role in ending Glass–Steagall.) He retired in 2012 and is now a senior fellow at the Bank Policy Institute, a supposedly nonpartisan trade group representing major banks and dedicated to weakening regulation. “Pat was always viewed as a Republican,” the former treasury official, who worked closely with him, told me.

While anonymous officials in the Fed’s headquarters on Constitution Avenue impact the livelihoods of hundreds of millions of Americans, another bureaucracy housed a twenty-minute walk away in an inconspicuous building on Lafayette Square holds sway not only over livelihoods, but actual lives. The Office of Foreign Assets Control, part of the U.S. Treasury, oversees and enforces the ever-expanding web of U.S. sanctions against organizations and individuals worldwide. Anyone landing on OFAC’s Specially Designated Nationals and Blocked Persons list finds themselves locked out of the dollar economy, their bank accounts frozen, and able only with difficulty to access enough money to pay a lawyer to contest the charges. “It’s a pretty low bar” to get on the list, according to Michael Parker, a former OFAC official now with Ferrari & Associates, which represents clients on the receiving end of OFAC’s attentions. “The director has yea or nay as to who gets designated.” Currently, that’s Andrea Gacki, a former Justice Department prosecutor who has worked with and for OFAC in various capacities since the George W. Bush Administration.

Assembling the dossiers on candidates for designation are more than a hundred investigators, often young law school graduates. In theory, humanitarian efforts are exempt from sanctions, which should be a relief for those trying to feed millions of Afghans facing imminent starvation thanks to measures imposed by the Biden Administration following the Taliban victory. “OFAC has issued special licenses allowing money transfers for aid,” explained Vicki Aken, who serves in Kabul as Afghanistan country director for the International Rescue Committee, “but most banks are still too terrified to touch any money transfer for fear of somehow getting on the OFAC list. European banks are even worse.” (OFAC belatedly added a new type of license in February meant to facilitate commerce and aid in Afghanistan, but the effect is not yet clear.) Meanwhile, she reported in a phone call in February, the going rate for child brides being sold by desperate families to buy food had in some areas dropped sevenfold to the equivalent of $300, because of oversupply. “The OFAC staff really have no idea of what sanctions really do,” said Tyler Cullis, an attorney who deals with them on a regular basis. Officials, he felt, seemed to treat those affected by sanctions as mere bureaucratic abstractions. Thus, when many Iranian sanctions were officially lifted following the 2015 nuclear agreement, there was in fact little relief, since OFAC failed to make it clear to all interested parties, especially banks, that they were free to trade. Efforts to do so by Secretary of State John Kerry, who negotiated the agreement, faced pushback from Treasury sanctioneers. “Kerry didn’t understand the hold Treasury had over those sanctions,” a source close to the negotiations told me. They “were determined to execute them to the letter. He had a very tough time with them.” The sanctions imposed on Russia over the invasion of Ukraine will also surely prove difficult to untangle for years to come, vesting power in the economic warriors at Treasury.

Officials like Swagel, Parkinson, and Gacki at least carry titles that convey some sense of their role. But there are others whose influence is masked by an apparently mundane job description. For almost half a century, for example, David “Doc” Cooke was officially an administrator at the Pentagon, serving under a variety of titles from 1957 until his death in 2002. As such, he was responsible for allocating office space and slots in the vast parking lots surrounding the building. Such a description makes his role appear little more than a routine bureaucratic function. But the authority to assign where people worked, when wielded by someone endowed with deep institutional memory, gradually translated into an instrument of staggering potency. Officials with far more imposing titles quailed at the threat of his disfavor, not least because he oversaw what amounted to an in-house intelligence operation on behalf of whoever happened to be secretary of defense. As one former Pentagon official, who had served as an executive assistant to Donald Rumsfeld, explained to me, “If you were lying, cheating, fucking, he’d find out.” Tom Christie, who held various posts including director of operational test and evaluation, recalled: “You definitely did not want to cross him. There may have been secretaries of defense who had more control over what went on in the building, but not many.”

In theory, officials appointed by elected politicians exercise control over civil servants. As we have seen, this is not necessarily the case, particularly when an administration lacks the ability to assert control. The contrasting career trajectories of Leonor Tomero and Drew Walter at the Pentagon provide another instructive example. Tomero, an expert on nuclear strategy and arms control, was chosen by Biden to be the deputy assistant secretary of defense for nuclear and missile defense programs, and was duly sworn in the day Biden took office. Given that we are in the midst of a massive nuclear weapons upgrade spree that was launched by Barack Obama, this is an important position, especially as she would be closely involved in composing a nuclear-strategy review due for completion this spring. Arriving at the Pentagon, Tomero found another official with a similar title: Drew Walter, the deputy assistant secretary of defense for nuclear matters (a position involved in buying weapons), who had previously served as a staffer on the House Armed Services Committee before moving to the Pentagon in 2018, courtesy of the Trump Administration. In the process he had joined the notionally nonpartisan Senior Executive Service, with full civil service protection—a clear example of a partisan appointee burrowing into a permanent position, thereby surviving the departure of his sponsor. Whereas Tomero’s views on nuclear strategy reflected Biden’s doubts about the need for new weapons, Walter has long been known to support boosting the arsenal. Eight months after her arrival, Tomero was summarily dismissed on grounds that her position was being eliminated in an ostensible reorganization. “She was viewed as ‘too progressive’ by the nuclear weapons bureaucracy,” Stephen Young, an arms control expert with the Union of Concerned Scientists, told me. “It’s shocking.” Walter, meanwhile, secure in the civil service, retains a central role in the weapons buildup. The White House, it seems, made no effort to save their appointee.

Given their backgrounds, the small group of advisers surrounding Biden should be well equipped to exert his will on the federal bureaucracy. The chief of staff Ron Klain, the senior adviser Mike Donilon, and the counselor to the president Steve Ricchetti have worked together or in close proximity since Biden’s time as vice president, culminating with key roles in his stumble-strewn but successful 2020 campaign. Also close to Biden, though without any official post, is Mike Donilon’s brother Tom, formerly Obama’s national security adviser and currently the chairman of the BlackRock Investment Institute, an offshoot of the investment giant BlackRock. (The firm is well represented in the administration, with three former senior officials, Brian Deese, Michael Pyle, and Wally Adeyemo, serving in the White House and Treasury.)

Klain, often referred to as the prime minister, has been navigating Washington politics since he was a congressional staffer in the Eighties—not always achieving the advertised goals, but nevertheless retaining the trust and affection of fellow senior Democratic apparatchiks. As one former Biden staffer remarked to me, “Ron Klain is super smart and as experienced as anyone at the highest levels of government. [But] it’s been said he’s so smart he doesn’t see when he’s wrong.” After serving as chief of staff to Vice President Al Gore in the Nineties, he oversaw the futile Florida recount effort in 2000. Removed to the private sector in the Bush years, he pursued a remunerative career as a K Street lobbyist with the law firm O’Melveny & Myers, his most important client being Fannie Mae, the government-backed mortgage financing firm. Prior to its implosion in 2008, the multibillion-dollar agency offered cushy rewards to Democratic and Republican insiders. During the George W. Bush Administration, when Fannie Mae faced charges of accounting fraud on a massive scale, Klain lobbied energetically on its behalf (a task also performed, as it so happens, by Tom Donilon).

After serving as chief of staff to Biden in his early years as vice president, Klain was recruited as “Ebola czar” in 2014 during a media-driven panic over a potential epidemic of the deadly disease in the United States. Ebola in fact posed almost zero risk to Americans; a subsequent government report faulted the administration for poor public communication. Klain’s supposed expertise in managing pandemics earned him a central role in crafting Biden’s handling of COVID-19 issues, as well as his selection as chief of staff. The discordant response to COVID-19, including the foolish pursuit of vaccine mandates that have proved impossible to enforce, reveals an inability not only to enforce discipline but also to control its herbivorous sibling, “messaging.” There seems to be no sign of the political acumen that might be expected from a longtime Washington insider. For all their experience in Washington, Biden’s team often seems ham-handed at managing it. Even when they try to be ruthless, they bumble: when Manchin definitively refused to support the Build Back Better Act late last year, but indicated he might support an emasculated version, the White House turned him down and publicly attacked him, only to change course a month later and make new overtures to Manchin, which he contemptuously rejected.

Within Biden’s White House, where positive contribution to the 2020 campaign seems to be the preeminent qualification for influence, little-known officials have nevertheless thwarted the implementation of popular policies. Cedric Richmond is a case in point. A Louisiana Democrat, Richmond was first elected to Congress in 2011, and served as chairman of the Congressional Black Caucus from 2017 to 2019. His endorsement of Biden early in the Democratic primary, after which he became co-chairman of the national campaign, earned him a place close to the forty-sixth president’s heart. Most crucially, Richmond is credited as being the decisive voice in persuading Congressman Jim Clyburn, the most powerful black politician in the country, to deliver his endorsement in time for the South Carolina primary, thus saving the campaign. That contribution has taken Richmond into the White House with the title of senior adviser. According to a source who works on criminal justice issues, he exercises more sway on issues important to the black voters who are a crucial component of Biden’s base than, say, Susan Rice, the head of the domestic policy council. (A spokesperson for Rice denied this.) Richmond has a prior record of championing progressive issues, notably criminal justice reform, a matter of vital concern for the New Orleans voters who sent him to Congress, and for black voters generally. But according to sources in the reform community, Richmond has urged a thoroughly cautious approach to cleaning up the justice system. “I’m really appalled that Cedric is doing this,” Norris Henderson, a New Orleans civil rights activist, told me. Released after twenty-seven years of wrongful incarceration in Louisiana’s infamous Angola prison, Henderson has worked to mobilize black voters and has successfully promoted a number of criminal justice reforms in his home state. “It’s tragic when people you trust, once they get into a position of power, act like this. Because it’s going to come back at them. We were on the ground, working to get them in, to get rid of forty-five, working to elect Warnock. When we don’t have a voice where it counts, we may as well stay home the next time, and then they have no chance.” (Richmond, a spokesperson said, has “worked tirelessly to implement President Biden’s pledge . . . to reform our criminal justice system,” including backing a bill that would end sentencing disparities in some drug crimes.)

For her part, Susan Rice, a former national security adviser under Obama, hardly lacks clout in the administration, as indicated by her firm stand on an issue of great importance to a significant component of Biden’s 2020 base: the $1.5 trillion in federally backed student debt. Unlike efforts on issues such as climate change or drug pricing, student debt relief could potentially be effected with a stroke of the presidential pen. (The 1965 legislation that created the federal program permitted the education department to “compromise, waive, or release any right” to collect the debts.) Students contemplating the resumption of their onerous loan payments (suspended until September as a pandemic relief measure) may have heard of Rice, who reportedly opposes bold measures such as wholesale debt cancellation (a spokesperson denied this and pointed to her support for “targeted debt relief”), but they will almost certainly be unaware of how much they have to thank an education department official, James Kvaal, for their unrelieved burden. Kvaal’s preference is for partial relief of a scale activists call woefully insufficient. Astra Taylor of the Debt Collective, an organization that has been fighting for debt relief since 2014, has met repeatedly with Kvaal. “If he took a bold stance for debt cancellation it would mean something with the White House,” she told me. “Unfortunately, he has not done that, and all indications are that he is doing the opposite.” (Kvaal supports “meaningful relief,” a spokesperson said, and is working with the White House to “review options with respect to debt cancellation.”) As with criminal justice reform, Oval Office support for this position may prove politically costly. According to a 2021 poll conducted by Global Strategy Group, most black voters support eliminating student loan debt, and 40 percent would consider staying home next Election Day if nothing is done.

All administrations have trouble delivering on pledges made to the base that got them elected. But Republicans seem more adept at getting what they want. Consider, for example, their reaction to obstruction from the Senate parliamentarian’s office of the kind that recently terminated important Democratic initiatives. In 2001, the Senate was split fifty-fifty, as it is now. A predecessor of MacDonough’s, Robert Dove, decreed that the Bush Administration’s budget plan could not be passed under reconciliation. Trent Lott, the Republican majority leader, summarily fired Dove and substituted a more acquiescent replacement, and the administration’s agenda proceeded on track.

The effective evisceration of long-standing environmental policies and regulations during the Trump years demonstrates Republicans’ ruthless competence no less vividly. The former treasury official, who has served in several Republican administrations, including Trump’s, suggested to me that his party enjoys an advantage because its appointees tend to come steeped in a corporate culture, and are therefore schooled in managing organizations. “We had people who were extremely knowledgeable about identifying anyone who caused us problems, and dealing with them,” he said. “We maybe couldn’t fire them, but we would relocate them somewhere so they couldn’t get in the way. Also, we would involve the ‘careers’ ”—civil servants—“in implementing our policies, invite them to meetings, and so on. They liked that, even if they didn’t like what we were asking them to do. You heard a lot about ‘chaos’ under Trump, but in fact, we were extremely efficient at getting what we wanted.”

Such Republican dexterity in handling the federal bureaucracy, as compared with the maladroit performance by the Democrats, is ironic. Fevered obloquy against the administrative state—the federal agencies that create and enforce rules that have the force of law, spawned by FDR’s need to implement reforms in the face of an obstructive Congress and judiciary—is a constant theme among right-wing partisans such as Steve Bannon and Justice Samuel Alito. Biden today faces similar obstructions to his new New Deal. The war in Ukraine has pushed the domestic reform agenda out of view. But perhaps our compromise-loving president and those he listens to never really wanted it in the first place, and are content to let “men of always” have their way.

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March 2023

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