Election and inauguration

The crisis worked against McCain, whom many voters associated with the unpopular policies of the administration, and worked for the highly charismatic Obama, whose campaign from its outset had been based on the theme of sweeping political change. Obama defeated McCain, becoming the first African American elected to the presidency. He captured nearly 53 percent of the popular vote and 365 electoral votes—defending those states that had gone Democratic in the 2004 election, taking the lion’s share of battleground states, and winning several states that had been reliably Republican in recent presidential elections.

In the interim between the election and Obama’s inauguration as president on January 20, 2009, the Bush administration’s handling of the distribution of the first half of the TARP funds came under considerable criticism. There were accusations that it had infused too much money into large banks without placing adequate conditions on them, rather than purchasing “toxic” assets as it had promised. In the lead-up to the inauguration, Obama and his transition team, working with Bush, persuaded the Senate to release the last half of the TARP funds, promising that they would be targeted at relief for home owners and at stimulating the credit markets. Because authorization to block the release of the funds required assent by both houses of Congress, a vote by the House of Representatives was unnecessary. (See Emergency Economic Stabilization Act of 2008.)

Tackling the “Great Recession,” the “Party of No,” and the emergence of the Tea Party movement

The economic downturn, widely referred to as the “Great Recession” (which officially dated from December 2007 to June 2009 in the United States), included the most dismal two-quarter period for the U.S. economy in more than 60 years: GDP contracted by 8.9 percent in the fourth quarter of 2008 and by 6.7 percent in the first quarter of 2009. Efforts to stabilize the economy included extending $80 billion to automakers Chrysler and General Motors, with the government assuming ownership of 8 percent and 61 percent of each, respectively; the Federal Reserve pumping well over $1 trillion into the economy by purchasing Treasury bonds; and the passage of a $787 billion stimulus spending measure. In the third quarter of 2009, GDP finally turned positive, gaining 2.2 percent on an annualized basis. However, unemployment, which had stood at 7.2 percent at the beginning of the year, hovered around 10 percent in early 2010. Moreover, the stimulative policies had helped balloon the U.S. federal deficit to $1.42 trillion, earning widespread criticism from Republicans.

Obama had entered office vowing to reduce partisanship in Washington, but he made little progress in that direction in his first year; indeed, the $787 billion stimulus package had been passed in the House of Representatives without a single Republican vote. With Democrats holding substantial majorities in both houses, Obama allowed congressional leaders to shape important legislation, and Republicans, claiming that they were being largely excluded from substantive negotiations on key bills, took what most Democrats saw as an obstructionist approach, earning the nickname the “Party of No” from liberal commentators.

In the meantime, a populist reaction emerged among libertarian-minded conservatives that was generally opposed to what they considered excessive taxation, to illegal immigration, and to government intervention in the private sector. This “Tea Party” movement gained steam during the summer of 2009, when town hall meetings were held across the country to debate proposed health care insurance reform, the signature issue of the Obama presidential campaign.

Negotiating health care reform

Republicans presented a united front in opposition to Democratic proposals for health care reform, branding them a “government takeover” of health care and protesting that the price tag would be devastatingly high. Some Republicans also claimed—falsely—that the Democratic plan would establish “death panels” that would deny coverage to seniors. Although there was also strong opposition to various aspects of the plan within the Democratic Party, the House of Representatives passed a sweeping reform bill in November 2009. The Senate was more circumspect, with Obama seemingly ceding the initiative to the so-called “Group of Six,” a group of three Republican and three Democratic senators led by conservative Democrat Sen. Max Baucus. The bill that was ultimately passed in the Senate called for considerably less change than the House bill (most notably excluding the “public option” through which a government-run program would have provided lower-cost competition for private insurance companies). It just barely survived a filibuster attempt by Republicans, holding all 58 Democrats plus the Senate’s two independents, Bernie Sanders of Vermont and Joe Lieberman of Connecticut.

Before the two houses could attempt to bridge the differences in their bills, the Democrats lost their filibuster-proof majority in the Senate as a result of the victory of Republican Scott Brown in January 2010 in the special election in Massachusetts held to replace interim senator Paul Kirk (a Democrat), who had been appointed to the seat following the death of Sen. Ted Kennedy—who, ironically, had committed much of his career in government to health care reform. Although the prospects for passage dimmed, the president and the Democratic leadership, especially Speaker of the House Nancy Pelosi, pushed on, with Obama convening a special summit of Democrats and Republicans to debate the merits of the bills.

Patient Protection and Affordable Care Act (Obamacare)

In March 2010, having secured the support of a sufficient number of House Democrats who had been opposed to aspects of the Senate plan (most notably pro-life advocates led by Rep. Bart Stupak, whose fears that the plan would loosen limits on abortion funding were allayed by Obama’s promise of an executive order), Pelosi engineered passage of the Senate bill in a 219–212 vote (with all Republicans and 34 Democrats in opposition) on Sunday night March 21. A subsequent bill, proposing “fixes” to the Senate bill, was then passed and sent to the Senate, where Democrats hoped to obtain passage through the use of a relatively seldom-used procedure known as reconciliation, which requires a simple majority for passage. With the outcome of reconciliation still in the balance, on March 23 Obama signed into law the historic legislation, the Patient Protection and Affordable Care Act. Senate passage of the bill of proposed fixes proved arduous, as Republicans introduced more than 40 amendments in an attempt to force another vote in the House. All those amendments were defeated in votes along party lines, and on March 25 the bill was passed by a 56–43 vote; however, because of procedural violations in some of its language, the bill went back to the House. There it passed by a 220–207 vote. No Republicans in either house voted for the bill.

In its final form, the Patient Protection and Affordable Care Act would—once all its elements had taken effect over the next nine years—extend health care to some 32 million previously uninsured Americans and prohibit insurers from denying coverage to those with preexisting conditions. The bill, which required that all citizens obtain health care insurance, also provided subsidies for premium payments for families earning less than $88,000 per year, with the funding to come largely from a tax increase for the wealthiest Americans. It also promised a tax credit to small businesses that provide coverage for their employees.

Deepwater Horizon oil spill

In the spring of 2010, one of the Obama administration’s big economic initiatives, the financial rescue of General Motors, bore fruit as the automaker recorded its first profits in three years. In general, the U.S. economy seemed to be rebounding—if slowly. However, as the summer approached, unemployment stagnated at near 10 percent. Although the Republicans and some economists criticized the economic stimulus as ineffective and predicted the onset of another recession, others argued that it may have added more than three million new jobs.

Responding to the banking and finance meltdown that had precipitated the economic downturn, Congress in July enacted comprehensive financial regulations. However, the headlines in spring and summer were dominated by another event, a massive oil spill some 40 miles (60 km) off the coast of Louisiana in the Gulf of Mexico (see Deepwater Horizon oil spill of 2010). The spill, which dragged on for months, began in April with an explosion and fire on a deepwater drilling platform that then collapsed, spewing oil that endangered marine life, fouled beaches, and brought a halt to fishing in a huge area. Something of a national malaise set in as the ongoing efforts by BP, the well’s owner, to contain the spill proved largely futile, and the disaster escalated to become the worst marine oil spill on record. By the time the well was capped and the spill brought under control in July 2010, an estimated 4.9 million barrels of oil had been released into the water.

Military de-escalation in Iraq and escalation in Afghanistan

A hallmark of Obama’s campaign had been his contention that the Bush administration’s preoccupation with Iraq had been to the detriment of the situation in Afghanistan; Obama argued that Afghanistan should have been the focus of U.S. military efforts. As security conditions in Iraq continued to improve, the new administration began slowly removing U.S. military personnel, with an announced goal of ending U.S. combat operations by mid-2010 and exiting the country entirely by late 2011. Meanwhile, in response to the resurgence of the Taliban in Afghanistan, in February 2009 Obama raised the total troop commitment there to 68,000 and began three months of deliberations on the military’s request for another 40,000 troops, ultimately deciding to deploy an additional 30,000 troops over the objections of many Democrats. The issue of national security took center stage on Christmas Day, 2009, when a bombing was thwarted on an airliner bound for Detroit. The perpetrator, a young Nigerian, had been trained for his mission by extremists in Yemen.

In June 2010 Obama confronted a different kind of criticism when the commander of NATO-U.S. forces in Afghanistan, Gen. Stanley McChrystal, and members of his staff impugned top Obama administration officials in interviews with a reporter from Rolling Stone magazine. Obama relieved McChrystal of command and replaced him with Gen. David Petraeus, the architect of the surge strategy in Iraq. Although the bulk of U.S. forces were withdrawn from Iraq in August with the official on-time end of the combat mission in the country, some 50,000 U.S. troops remained on duty there.