During the first term, Sperling was lionized by liberals for fighting to preserve a crucial anti-poverty program as the Clinton vision was scaled back. In the second term, after Rubin took the helm at Treasury and Sperling became NEC director, he was seen as betraying the liberal cause for insisting that newfound budget surpluses be used to shore up Social Security rather than to fund new social programs.
In the last months of the Clinton administration, Sperling sat on Air Force One chatting with a relatively little known member of the administration, Timothy F. Geithner, who was in charge of international affairs at Treasury. They talked about what they’d do next in life. Despite encouragement to take jobs on Wall Street, both were planning to go in a different direction.
Sperling ran several nonprofit education organizations focused on girls and women in developing countries (one sponsored by Goldman Sachs, which paid him handsomely for his services), and he worked at a liberal think tank. Geithner worked at the International Monetary Fund and then took the helm at the Federal Reserve Bank of New York.
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In August 2008, the two men were playing tennis at an economic conference and talking about what might happen if Barack Obama became president. Sperling, who had advised Hillary Rodham Clinton, didn’t expect to play a major role, but he said Geithner had to take seriously the possibility that he would be asked to run Treasury. Geithner told him: No way.
When Obama tapped him as Treasury secretary, Geithner asked Sperling to join as a no-title adviser. “The great thing about him was he was willing to come help do anything,” Geithner said. Sperling asked to be Treasury’s top adviser on fiscal policy. But he also encouraged Geithner — who was focused on stabilizing the financial system and faced critics who accused him of being too sympathetic to Wall Street — to pay more attention to populist ideas such as curbing executive pay.
Geithner gave Sperling an unusual degree of freedom to share his opinion in White House fiscal policy meetings. But there were some differences between the men. Geithner placed a premium on the country making a clear commitment to reducing its debt over time. Sperling agreed with the need for fiscal discipline, but often argued for somewhat greater flexibility to guard against cuts in social programs such as Medicare. Geithner allowed Sperling to speak his mind at the White House, though he was insistent on this: There must be a strict target for the ratio of the annual budget deficit to the size of the overall economy.
As the year dragged on, many economists complained that the stimulus passed at the beginning of Obama’s term was insufficient. In particular, Obama’s aides were horrified by the steep budget cuts that emerged at the state and local level — and that teachers were being laid off. They needed to be offset, and it would require tens of billions of dollars in federal funding.
But Obama’s legislative aides predicted a losing battle, and the president didn’t fight for it.
In summer 2010, Sperling and Geithner decided that the administration should set the stage to fight the extension of the upper-income Bush tax cuts due to expire at the end of the year. But when it became clear that Republicans would take the House and that Obama would be unable to stop the extension, Sperling set his sights on something the administration could get in return: a cut in payroll taxes, which many Republicans previously had said they would support, as well as an extension of other measures.
When Obama supported the deal, liberals savaged the president. Sperling was dispatched to talk to House Democrats, who accused him of being a sellout. But Sperling and the White House felt they had received a lot in return for extending the tax cuts.
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In May of last year, Rep. Paul Ryan (R-Wis.) was concluding his remarks at a conference on fiscal policy hosted by the Peter G. Peterson Foundation when the moderator asked him what he wanted to say to the next speaker, Gene Sperling.
Ryan had been the architect of an ambitious deficit-reduction plan to cut more than $4 trillion from the federal debt over 10 years. His work, along with the rise of tea party Republicans, had helped propel the national debt to the forefront in Washington. The White House responded with a plan — partly designed by Sperling — to cut $4 trillion over 12 years, in part by raising taxes on the rich, a step the Republicans opposed.
“What is wrong with the president’s plan is it doesn’t fix the problem,” Ryan said. “The problem is a debt crisis. It doesn’t do anything to address the drivers of our debt: our entitlement programs. . . . Even with all the tax increases in the president’s plan, which I think chills economic growth, it still chases higher spending.”
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