Excerpts of Interview with Peter Baker of the New York Times

[On his first two years in office]

When I announced for president, it was based on a deeply held belief that for far too long we had put off some very fundamental choices about how we move the country forward.

We had not addressed a middle class that was not just treading water but actually losing ground — I don't like mixing metaphors, let's start that over — that wasn't just treading water but was starting to drown. We had seen incomes flatline or decline in real terms. In fact, we just found out between 2001 and 2009, wages had gone down 5 percent in real terms. The costs of things like health care and going to college had skyrocketed.

So middle-class families were feeling profoundly squeezed. It had been a long time since we'd had a serious effort to deal with some of those structural problems that were holding the middle class back — whether that was a health care system that was fundamentally broken; whether it was an education that was seeing our young people's performance in math and science, critical skills, fall behind other countries; whether that was the absence of an energy policy that could not only deal with the opportunities of a clean energy future but would also address climate change and the disruptions that came about as a consequence of the spot oil market.

So there were — and it included a foreign policy in which, post-9/11, we had embarked on a series of decisions, particularly the Iraq War, that had reduced our influence around the world and alienated a lot of people, including traditional allies of ours.

So what I pledged to myself was that if I was running for president, it would be because I was willing to take some of these issues head-on. And all that took place before the financial crisis.

By the time I won, I think not only had all these accumulated problems culminated in a crisis situation, but I realized ... that I was not going to have the luxury of taking each of these problems one at a time and working through a normal legislative and political process.

We had to come in and act very quickly to prevent a financial meltdown, to stabilize the capital markets, to ensure that we didn't tip into a Great Depression, to make sure that the auto industry did not vanish and a million additional jobs vanish with it.

And even as we were dealing with these problems, what I also had to try to see is if we could at least get a down payment and get started on some of these bigger structural problems that I'd campaigned on.

And when I look back over the last two years, I can say with pride that we did stabilize the capital markets, did prevent a Great Depression, did save the U.S. auto industry, and we're still able to move forward on big chunks of that long-term agenda that I campaigned on. We were able to get health reform done. We've initiated the most significant education-reform agenda that we've seen in a generation. We've been able to put a lot more resources into higher education. And we were able to pass the kind of financial regulatory reform agenda that can prevent these kinds of crises in the future, while at the same time protecting consumers.

And so what I feel good about is the fact that even as we were in the midst of crisis, we were still able to keep our eye on some of these bigger long-term problems and have started moving the country in the right direction.

Now, there was a price to pay for that, and that price was primarily political. If I had not had a crisis before me, we wouldn't have started with a stimulus bill, which was easy to caricature as a big-spending liberal agenda. I certainly would not have had to shore up the banking system in a way that rightly generated a lot of frustration among people who wondered why it was that the very folks who caused the financial crisis seemed to be landing on their feet and getting help from the government.

I think the ability for us to move forward in a way that showed we were changing the ways that business got done in this town would have been more at the forefront, and I think would have caused less agitation.

That would have probably helped us politically over the last two years, but we didn't have that luxury. And so now, at the end of two years, I can look back and I can say we've gotten through the worst of the crisis. We have put in place some of the foundation stones to move this country forward. But we've still got some more work to do, and we still don't have an energy policy that I think served us well over the long term. We're going to have to implement a lot of the legislation that we passed, and the fiscal picture, the fiscal outlook, is one that is going to require some very tough choices, even tougher than the choices I anticipated before I took office.

We have to do that now in a climate in which a stabilized economy is still a very weak economy with 9.5 percent unemployment. And in a political environment in which the other side has been emboldened not because they've got better ideas but because they've been able to stand on the sidelines and just say this is Obama's problem, this is not our problem.

[On what he would tell the Barack Obama of December 2008]

You know, there are small tactical lessons learned, and I'll give you a specific example. The way we structured the Recovery Act was based on conversations with a wide range of economists and a recognition that there wasn't going to be a single silver bullet to restart the economy; that we were going to have to have a mix of strategies.

So, for example, because each strategy had its strengths and its weaknesses, tax cuts had the advantage of speed. You can get tax cuts out pretty quickly; people have money in their pockets; hopefully they're spending it. They have the disadvantage that for every dollar you give out in tax cuts, you may only get a little less than a dollar in actual stimulus because people aren't going to spend all that they receive.

So then we said to ourselves, Well, are there ways to increase the efficacy of tax cuts? And economists told us that if you give these tax cuts out in small increments as opposed to in a lump sum, that people are more likely to spend them than if they just get a single check.

Infrastructure has the benefit of for every dollar you spend on infrastructure, you get a dollar and a half in stimulus because there are ripple effects from building roads or bridges or sewer lines. But the problem is, is that spending it out takes a long time, because there's really nothing -- there's no such thing as shovel-ready projects.

And help to the states is one of the most efficient things that you can provide, but politically you get very little benefit from it because nobody notices that you've prevented teachers or firefighters or police officers from being laid off.

So what we did was we put together the best possible package, given that we had to do it very quickly, and we presented it to Congress as a package without much thought to the politics of it.

Now in retrospect, I could have told Barack Obama in December of 2009 that if you already have a third of the package as tax cuts, then the Republicans, who traditionally are more comfortable with tax cuts, may just pocket that and attack the other components of the program. And it might have been better for us not to include tax cuts in the original package, let the Republicans insist on the tax cuts, and then say, O.K., you know, we'll compromise and give you your tax cuts, even though we had already proposed them.

And if you recall, when we initially unveiled what the Recovery Act would look like — in fact, that a third of it was tax cuts — Mitch McConnell actually was, as he phrased it, pleasantly surprised that sort of traditional Republican idea had been included. But very quickly that pleasant surprise turned into attacks on the infrastructure or the aid to the states or what have you.

I would have told Barack Obama back in 2009 that just be warned, structuring the tax cut the way we did, where people basically got a small bump in their paycheck every two weeks, was the right thing to do economically, but politically it meant that nobody knew that they were getting a tax cut. And in fact what ended up happening was six months into it or nine months into it, people had thought we had raised their taxes instead of cutting their taxes.

So there are a bunch of tactical things that I could have told myself back in 2009, and the truth of the matter is we knew a lot of this stuff. I made a decision that given the severity of the problem, I couldn't think in terms of short-term politics. I had to go ahead and make the best decisions that I could based on the information available to me. And I actually think that we made the right decisions, and they were the ones that were the best for the country, but they weren't necessarily the best for our politics.

[On whether he has a communication problem or a policy problem]

I think a lot of the theories that are bandied about by the pundits here in Washington don't stand up to scrutiny. And I think we can engage in a pretty easy thought experiment here. If unemployment right now was 6.5 percent, I don't think that anybody doubts that my poll numbers would be strong and a lot of the policies we've put in place would poll a lot better.

When you've got historic unemployment and underemployment, and you are digging yourself out of a economic crisis that very few people who are living today have ever been through before, then that's going to color everything that you do.

And everybody who studied this problem agrees that ... recessions that are the result of financial crises are deeper, longer-lasting, tougher than the usual recessions as a consequence of the business cycle or interest rates being too high or the Fed trying to figure out the balance between inflation and unemployment.

And so I put a great deal of weight on the fact that the economy is not where it should be. That is frustrating to people, and it should be frustrating to people. It's frustrating to me. And I do think that has an impact on how people view all our other policies, because their attitude is, You know what, if I can't find a job, if my house is $100,000 underwater, and I haven't seen a raise in two years, and my 401(k) has gone down by 20 percent, it's nice that you've passed a financial-reform bill that'll maybe prevent this from happening again, but it doesn't help me right now; what I need is help right now. And the tools available to us to help people right now aren't as big as the hole that we're in. So I think that's part of it.

Now, having said that, I also think that some of the policies that we instituted were the right thing to do, but you're not going to convince people that it helped them personally, because it really had to do with what was good for the economy as a whole.

When you look at the auto-rescue package that we put into place, I can explain to people that the previous administration had put billions into the auto industry without asking anything in return, and that what we instituted was actually a much more responsible approach; that we forced their restructuring that was long overdue in the auto industry that promises a brighter future for the Big Three automakers; that if we hadn't acted, we would've lost a million more jobs than we lost and would've just had a devastating depression-level effect in a big chunk of this country, and that would've had ramifications for everybody; that this is going to end up costing us much, much less than anybody ever anticipated — we may end up making a profit on it.

I can say all those things, but unless you're an autoworker in one of those plants that didn't close down because of the steps we took, everybody else is thinking, Well, this is just some bailout for somebody else, and this had no impact on me.

So there's an example of a policy that — anybody who's studying it would say — was absolutely the right call to make, has worked out better than anybody anticipated; but if you are somebody living in Nevada right now, where unemployment is well into the double-digits, and you've lost your home, that's not particularly persuasive.

The last point I would make is in terms of communications, I think that, when I reflect back on the last two years, I do think that given how much stuff was coming at us, we probably spent much more time trying to get the policy right than trying to get the politics right.

There is probably a perverse pride in my administration — and I take responsibility for this; this was blowing from the top — that we were going to do the right thing, even if short-term it was unpopular.

And I think anybody who's occupied this office has to remember that success is determined by an intersection in policy and politics, and that you can't be neglecting of marketing and P.R. and public opinion. And so there are probably areas where we could have been more effective than we've been.

But it's interesting: I was looking over some chronicles of the Clinton years and was reminded that in ‘94 when President Clinton's poll numbers were lower than mine, and obviously the election ended up being bad for Democrats, unemployment was only 6.6 percent — and I don't think anybody would suggest that Bill Clinton wasn't a good communicator or was somebody who couldn't connect with the American people or didn't show empathy. But at that period of time, people thought the economy wasn't working, and there was only so much you were going to be able to do. And that, I think, would undermine the argument that somehow this is purely a communications issue on our part.

[On how campaign rhetoric sounds today, like his 2008 line that future generations would look at his election as "the moment when we began to provide care for the sick, good jobs for the jobless" and "the moment when the rise of the oceans began to slow and our planet began to heal."]

It sounds ambitious. But you know what? We've made progress on each of those fronts. We have begun to give care to those who are sick. We did end combat missions in Iraq. We have seen eight months straight of private-sector job growth when we had lost 8 million jobs previously. We haven't been able to deal with climate change so far, but we did make the largest investment in clean energy in our history over the last two years. And we've seen entire industries in advanced battery manufacturing or in solar power or wind power develop all across the country.

And so the language may be lofty, because I was speaking to folks who had been excited and inspired by the possibilities of moving the country forward. That's the poetry of politics. And obviously governing, as Governor Cuomo once said, is mostly prose.

But the prose and the poetry match up. ... I think it would be very hard for people to look back and say, You know what, Obama didn't do what he's promised. I think they could say, On a bunch of fronts, he still has an incomplete. But I keep a checklist of what we committed to doing. And we've probably accomplished 70 percent of the things that we talked about during the campaign. And I hope as long as I'm president I've got a chance to work on the other 30 percent.

[On whether he raised expectations too much]

You know, look, our political life is like our individual lives. There are ups and downs. There are peaks and valleys. Everybody remembers all the high points of the campaign. Nobody remembers us trudging through Pennsylvania in the midst of Jeremiah Wright and me being down 15 points in the polls. Nobody remembers us for six months in Iowa in which everybody in this town had completely written us off.

So what is interesting to me is the degree to which the mythology has emerged somehow that we ran this flawless campaign, I never made a mistake, that we were master communicators, everything worked in lock step. And somehow now as president things are messy and they don't always work exactly as planned and people are mad at us. That's not how I look at stuff, because I remember what the campaign was like.

And it was just as messy and just as difficult. And there were all sorts of moments when our supporters lost hope and it looked like we weren't going to win. And we're going through that same period here.

But what I don't make any apologies for is raising people's sights about what America is and can be. We're not there right now, but I think we should expect that people in this country — as wealthy as we are — aren't going bankrupt because they get sick.

We should expect that we don't have 2,000 schools in which half the kids are dropping out and another third of them can't read beyond an eighth-grade level. We should expect a foreign policy that treats our young men and women in uniform as precious. And so when we are engaged in armed conflict that it's based on some very tough, hard decision-making and that we don't take it lightly.

I make no apologies for having set high expectations for myself and for the country, because I think we can meet those expectations.

Now, the one thing that I will say — which I anticipated and can be tough — is the fact that in a big, messy democracy like this, everything takes time. And we're not a culture that's built on patience.

When we go through difficult periods, people tend to forget the previous difficult periods that we went through. And we say to ourselves, why haven't we fixed it yet? And the way that our media is structured means that that impatience is amplified every minute of every hour of every day.

But something that I have learned over the last couple of years is that I have to make decisions based on the long view. And I have to suppress my own desire for a short-term fix if I'm going to be able to lead the country effectively over the long term.

[On whether the experiences of past presidents offer him any lessons]

Look, history never precisely repeats itself. But there is a pattern in American presidencies — at least modern presidencies. You come in with excitement and fanfare. The other party initially, having been beaten, says it wants to cooperate with you. You start implementing your program as you promised during the campaign. The other party pushes back very hard. It causes a lot of consternation and drama in Washington.

People who are already cynical and skeptical about Washington generally look at it and say, This is the same old mess as we've seen before. The president's poll numbers drop. And you have to then sort of wrestle back the confidence of the people as the programs that you've put in place start bearing fruit and people can suddenly start seeing, Hey, you know what, this health care bill means my kid isn't losing her health insurance once she leaves college even though she doesn't have a job yet. Or you know what, the credit-card company can't jack up my interest rate suddenly, and this is actually saving me some money. Or I'm a small business, and lo and behold, I don't have to pay capital gains on my start-up, and I can plow that money back into my business.

And what you hope is that over time, despite all the rhetoric, people start seeing concrete benefits from what you're doing and what was a valley goes back into a peak.

Now what you also hope is that sort of the ups and downs, the highs and lows start evening out a little bit so that people don't have unrealistic expectations about how quickly we can move on big issues in a democracy but people don't also plunge into despair when it takes more than six months to transform the world.

[On what he anticipates for the next two years]

Well, let me first of all say we've got five weeks to go in this election. And I am going to be out there actively making the case that the policies we put in place are moving this country forward and that the other side does not have a serious set of ideas that will solve our problems. I mean, when I look at this Pledge to America, and I've got the Republican leadership proposing $4 trillion in tax cuts, they're going to balance the budget, and they can only come up with $16 billion worth of specific savings, that tells me they're not serious.

When they're willing to hold hostage middle-class tax cuts, which makes sense for an economy that is still in a weak recovery, because they want to give $700 billion to folks like me who aren't going to increase our consumption or our spending one dime because of these tax cuts, since we already have enough, and we're going to have to borrow that $700 billion and there's not an expert out there who thinks that's the best way to spend $700 billion even if you had it to stimulate the economy, that tells me these folks aren't serious.

When you've got a Republican Party that has made as their primary centerpiece rolling back a health care bill that the Congressional Budget Office says will actually reduce our deficit by $140 billion in the first 10 years and a trillion dollars after that, and are claiming that they can make sure people with pre-existing conditions get health care but offer no way of doing it, that tells me they're not serious.

And so I do think that this election is going to be a gut check for all of us about how serious are we about solving these problems, or are we going to simply fall back into the same tit for tat, back and forth that had led us to put off all these problems over the last 30 to 40 years, while China and Brazil and Germany are moving forward — educating their kids, building their infrastructure and taking a lead on clean energy.

I will keep on making that case, and I think that to point — to quote my vice president — I believe that voters are going to stop comparing me to the Almighty and compare me to the alternative. And when that choice is clear, I think that we'll do better than people expect.

Now having said that, even if I had the exact same Congress, even if we don't lose a seat in the Senate and we don't lose a seat in the House, I think the rhythms of the next two years would inevitably be different from the rhythms of the first two years; first of all because the two biggest legislative battles that we took on — health care and financial regulatory reform — are inherently complicated, contentious, unwieldy, hard to explain to the public, take up a lot of oxygen and generate fierce opposition from very well-funded special interests, whether it's the insurance lobby, the banking lobby. Those folks can spend millions of dollars not just here in Washington but on the air waves.

The kinds of issues that we're going to be working on legislatively going forward, I think there's more potential for bipartisan cooperation because they're less ideologically divisive. Like education. I mean, we have to do a reauthorization of the education laws in this country. And we haven't gotten a lot of attention over the last two years to the education-reform efforts that we've put in place. We're getting some attention now because people are noticing, You know what, Obama is actually not carrying the usual liberal party line on this thing; he's said we need more money, but he has also said we need more reform, and he's been willing to take on some of his own constituencies. And I think that this is one of those rare areas where I've even gotten some compliments from Republicans. And so I think that there's a possibility of getting a reauthorization bill that builds more consensus rather than becomes just a test of wills.

The second thing that happens is that we've got to focus on implementation. I mean, I didn't pass a law just to have a feather in my cap. I passed a law so that it was actually helping people.

So on financial regulatory reform, I want to make sure that this consumer-finance-protection agency is out there changing how your credit-card companies are treating you, changing in very specific ways how mortgage documents are written so you don't get tricked into buying a house you can't afford or at an interest rate that's higher than you could have gotten otherwise. I want to make sure that health care reform works for all the families I meet out there who desperately need some help and that it actually bends the cost curves.

So there's going to be a lot of work in this administration just doing things right and making sure that new laws are stood up in the ways that they're intended.

[On what issues he would be willing to tackle even if it meant being a one-term president]

I'll give you an example of something that I think we've got to tackle and is not going to be easy politics. I mentioned some things that where I think we can build easier consensus — not easy, but easier. I think something that's going to be hard is immigration reform, but I still think it needs to be done.

Now I'm banking on the fact that when you look at the attitudes of the American people, they absolutely want stricter border control. They are very frustrated with the large numbers of undocumented workers that are in this country. But when you ask them does it make sense to give a pathway to citizenship for those folks who are here, as long as we're actually making sure that we're stopping the influx and we're holding them responsible and they're having to pay their taxes and pay a fine and learn English, it turns out that the majority of people agree with that.

And there is going to be a contest there — folks who want to demagogue the issue and turn this into a "us versus them" proposition and those of us who I think see the possibility of creating both a nation of laws and a nation of immigrants, continuing that tradition. That's going to be a difficult fight, but it's one that I think ... we have to take on.

So I guess if the question is, Over the next two years do I take a pass on tough stuff, the answer is no.

One last issue that obviously is going to be overriding is going to be debt and deficits, which I think — you were asking earlier about sort of how I see what's happened over the last two years. The most frustrating aspect of the last two years is that the things I had to do to save the economy in essentially the first six months of my presidency all involved spending money and adding to our deficit.

Now, you know, I can give you chapter and verse, and you're familiar with all the data that indicates that what we did in the first six months is not the major driver of our long-term deficits; that that's actually Medicare and Medicaid, Social Security, our tax structures, and even if we hadn't done the Recovery Act and we hadn't done auto bailout, we hadn't done TARP, that we'd have basically the same problem. It's a structural problem that dates back to the two Bush tax cuts and two wars that weren't paid for and a prescription-drug plan that wasn't paid for and the fact that we just are getting older and putting more demands on our entitlements.

Having said that, by just one after the other, having to do things — $800 billion, another $100 billion here, a $700 billion TARP program that wasn't started by me but the Republicans definitely sort of denied authorship of, and was managed by us and is going to end up costing us $100 billion or less, which is probably the smallest cost to taxpayers of any financial crisis, including the S&L bailout — despite all that, that accumulation of numbers on the TV screen night in and night out in those first six months I think deeply and legitimately troubled people.

They started feeling like, Gosh, here we are tightening our belts, we're cutting out restaurants, we're cutting out our gym membership, in some cases we're not buying new clothes for the kids. And here we've got these folks in Washington who just seem to be printing money and spending it like nobody's business. And it reinforced the narrative that the Republicans wanted to promote anyway, which was Obama is not a different kind of Democrat — he's the same old tax-and-spend liberal Democrat.

I don't regret having done all those things, because they were absolutely necessary to do. But I also completely understand why not just Republicans but independents and some Democrats got troubled by it. I'm troubled by it. And that means that over the next two years we're going to have to have a much more serious debate about the budget.

Now, I'm going to feel obliged to continue to make the argument, because I believe it is true, it is right, that the problem we have in our budget, with our debt and deficit, is a medium- and long-term problem; and if we are snapping back too quickly over the next year or two a time when the recovery is weak, then that can actually be bad for the deficit because the single-most important thing we can do for the deficit is start growing the economy at a more robust rate.

But in order to be able to make that argument so that we can still do things like the infrastructure program that I've talked about, so that we can still do things like providing tax breaks for companies that are investing in research and development here as opposed to overseas — all of which has an impact on the budget — then I'm going to have to present a credible plan for dealing with the medium- and long-term budget problems. And that's going to require some bipartisan cooperation.

So I'm going to need the bipartisan commission to put out its report, and we're going to study that very carefully. And I am going to I think at the beginning of next year be presenting the American people with some clarity about what our choices are here. And it's a tough job because people's eyes glaze over when you start talking about these huge numbers.

But I think it is very important for people to understand that reducing the debt and deficits in a serious way on behalf of the next generation is not a matter of eliminating foreign aid, which accounts for about 1 percent of our budget; it's not a matter of eliminating earmarks, which is maybe another percent of our budget; it's not a matter of us somehow being able to trim out waste and fat in the system, because although there are definitely programs that we've already identified that don't work and we can save tens of billions of dollars by eliminating those programs and I'm committed to doing that, that's still a fraction of our overall spending. It's going to require us making tough decisions about things that are important to us.

And the big debate that we're going to have to have as a country is what is important enough to us that we're willing to pay for it — and then who pays for it? I think Social Security is important and we have to pay for it. I think Medicare is important and we have to pay for it. I think both programs can be more efficient, but I think those provide a core safety net to the American people. I think that our investments in education are absolutely critical to our long-term economic health.

I think we have to have infrastructure that keeps up with the demands of the 21st century. We can't have a China that has the best airports, the best railways, the best roads, and we are still relying on infrastructure that was built 200 years ago or 100 years ago or even 50 years ago when it comes to things like broadband lines.

I'm going to have to make an argument that if we say we revere our veterans, then when our veterans come home, we've got to pay for treatment for post-traumatic stress disorder. We've got to pay for traumatic brain injury. And we've got to care for families who have lost a loved one. And all that stuff costs money.

And when you tally it all up, then it turns out that there's no such thing as a free lunch. And one of the most frustrating things that I see in the political environment right now is the Republican Party is still selling this notion somehow that they can cut taxes for millionaires and billionaires and preserve things that they know poll well like Social Security and Medicare and veterans affairs and this and that and the other, and somehow they're going to balance the budget.

We have not had a serious conversation about that since Bill Clinton was in office. It was a huge accomplishment of President Clinton's. It required enormous courage. And I still don't think he gets enough credit for that.

Now what's going to make it even more difficult is the fact that he was able to balance the budget and achieve a surplus in the context of an economy that was growing fairly rapidly and that was coming out of a recession that was fairly shallow.

Trying to do this when the economy is still very weak and we lost 8 million jobs means that you've got to apply the brake and the accelerator at the same time, and that's a tricky thing to pull off.

[On whether there are any Republicans he trusts enough to work together on economic issues]

You know, I think we're going to have to see how the election shakes out, because there are people like Judd Gregg, who I think are serious about this issue, but Judd's retiring.

And I don't know who is going to step into that role of somebody who is fiscally conservative, probably has different priorities than mine, but is still fundamentally serious about these issues.

I will say that the reports I'm getting back from the fiscal commission are that they are working more seriously than maybe they had anticipated. I think somebody like a Paul Ryan who has got a lot of attention is absolutely sincere about wanting to reduce the deficit. The problem is, is that the plan he's put forward so far is about a trillion dollars short. The numbers don't add up.

And even with those numbers being fudged, most of his Republican colleagues in the House have not been willing to sign on to what he's suggesting, in part because he does significantly cut benefits in things like Medicare, which are politically difficult to do.

I give him credit for at least being willing to put out there some tough choices, although, as I said, even there, the numbers don't quite match up the way they should.

So look, it may be that regardless of what happens after this election, they feel more responsible, either because they didn't do as well as they anticipated, and so the strategy of just saying no to everything and sitting on the sidelines and throwing bombs didn't work for them; or they did reasonably well, in which case the American people are going to be looking to them to offer serious proposals and work with me in a serious way.

[On what he is reading]

During the holidays I had a chance to do a little bit of reading, read a couple of novels, as well as a couple of pieces of history. And right now at the moment, as I said, I'm finding reading presidential biographies to be useful.

Well, I'm actually looking at "The Clinton Tapes," which is Taylor Branch's chronicle of certain conversations he had with Clinton. It is fascinating.