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What? The stimulus worked

A few days ago Michael Grunwald, a Time magazine correspondent who lives in Florida, published The New New Deal: The Hidden Story of Change in the Obama Era, an account of President Barack Obama's stimulus bill. Grunwald asserts that the stimulus has transformed America.— Slate: What possessed you to write this book?

Grunwald: I fled Washington for the public policy paradise of South Beach while writing my last book, about the Everglades and Florida, so in 2010 I was only vaguely aware of the Beltway consensus that President Obama's stimulus was an $800 billion joke. But because I write a lot about the environment, I was very aware that the stimulus included about $90 billion for clean energy, which was astonishing, because the feds were only spending a few billion dollars a year before.

It was clearly a huge deal. And it got me curious about what else was in the stimulus. I remember doing some dogged investigative reporting — okay, a Google search — and learning that the stimulus also launched Race to the Top, which was a real aha moment. I knew Race to the Top was a huge deal in the education reform world, but I had no idea it was a stimulus program. It quickly became obvious that the American Recovery and Reinvestment Act (the formal name of the stimulus) was also a huge deal for health care, transportation, scientific research and the safety net as well as the flailing economy. It was about Reinvestment as well as Recovery, and it was hidden in plain view.

In what ways has the stimulus been like and unlike Roosevelt's New Deal?

The stimulus isn't the New Deal. But they were both massive exercises in government activism in response to epic economic collapses.

The Obama team thought a lot about the New Deal while they were putting the stimulus together, but times have changed since the New Deal. The Hoover Dam put 5,000 Americans to work with shovels. A comparable project today would only require a few hundred workers with heavy equipment.

Christy Romer, the Depression scholar who led Obama's Council of Economic Advisers, kept reminding colleagues that the Roosevelt administration hired 4 million Americans in the winter of 1934. At one point she started calling Cabinet departments to see how many employees they could hire with unlimited funds: They'd say oh, a lot, maybe 20,000! So the stimulus didn't create giant new alphabet agencies like the WPA or CCC.

People forget that the CCC herded unemployed urban youths into militarized rural work camps — often known as "concentration camps," before that phrase became uncool — for less than a dollar a day. That kind of thing wouldn't fly today. The New Deal basically created Big Government, but it's still here. There was no need to recreate Big Government, and no political desire to expand Big Government.

So the stimulus didn't establish new entitlements like Social Security or deposit insurance, or new federal responsibilities like securities regulation or labor relations, or new workfare programs for the creative class like the Federal Art Project, Federal Music Project, or Federal Writers Project. The New Deal was a barrage of contradictory initiatives enacted and adjusted over several years. The stimulus was one piece of legislation cobbled together and squeezed through Congress during Obama's first month in office. The New Deal was a journey, an era, an aura. The Recovery Act was just a bill on Capitol Hill.

Yet its aid to victims of the Great Recession lifted at least 7 million people out of poverty and made 32 million poor people less poor. It built power lines and sewage plants and fire stations, just like the New Deal. It refurbished a lot of New Deal parks and train stations and libraries. And Republicans have trashed the stimulus as a radical exercise in socialism, just as some Republicans — but not all Republicans — trashed the New Deal.

The most significant difference is that the New Deal was wildly popular, while the stimulus has been a political bust. There are many reasons for this, but the most important is that FDR launched the New Deal after the United States had suffered through more than two years of depression under Hoover, while Obama launched the stimulus when the economy was nowhere near rock bottom. Everyone knew about the financial earthquake, but the economic tsunami hadn't yet hit the shore.

The New Deal produced tangible, monumental physical achievements — dams, trails, works of art, buildings. The stimulus produced none of that. There were no new bridges — instead they repaved old ones. Why? Why didn't the Obama administration look for physical structures to build and celebrate?

I wouldn't say "none of that." But I take your point. Most of the money in the stimulus went to unsexy stuff designed to prevent a depression and ease the pain of the recession: aid to help states avoid drastic cuts in public services and public employees; unemployment benefits, food stamps, and other assistance for victims of the downturn; and tax cuts for 95 percent of American workers. And the money that did flow into public works went more toward fixing stuff that needed fixing — aging pipes, dilapidated train stations, my beloved Everglades — than building new stuff.

In its first year, the stimulus financed 22,000 miles of road improvements, and only 230 miles of new roads. There were good reasons for that. Repairs tend to be more shovel-ready than new projects, so they pump money into the economy faster. They also pass the do-no-harm test. (New sprawl roads make all kind of problems worse.) And they are fiscally responsible. Repairing roads reduces maintenance backlogs and future deficits; building roads add to maintenance backlogs and future deficits.

Your subtitle is: "The Hidden Story of Change in the Obama Era." Why hidden? What are the great hidden accomplishments?

There are two reasons this story has been hidden, one understandable, one less so. First, the stimulus was supposed to create jobs at a time when jobs were vanishing at a terrifying rate. Nonpartisan economists agree that it helped stop the free fall; job losses peaked the month before it passed, and the economy dramatically improved once it kicked into gear. But even after the dramatic improvements, the unemployment rate was still sky-high and rising; an economy can do a lot better than losing 800,000 jobs a month without doing well.

Ultimately, the stimulus was a 2.5 million-job solution to an 8 million-job problem. And the Obama transition team put out a tragically dumb forecast suggesting it would keep the unemployment rate below 8 percent. Recoveries after financial cataclysms are always ugly. But when you spend $800 billion on an economic recovery package, and the recovery stinks, people don't tend to look past that.

That said, the national media should have tried to look past that, but it didn't. The stimulus included $27 billion to computerize our pen-and-paper health care system, which should reduce redundant tests, dangerous drug interactions and fatalities caused by doctors with chicken-scratch handwriting. It doubled our renewable power generation; it essentially launched our transition to a low-carbon economy. It provided a new model for government spending — with unprecedented transparency, unprecedented scrutiny, and unprecedented competition for the cash.

Experts predicted that as much as 5 percent of it would be lost to fraud, but so far, investigators have documented less than $10 million in losses, about 0.001 percent. Despite all the controversy over the lack of shovel-ready projects, the Obama administration has met every spending deadline, and it's kept costs so far under budget that it's been able to finance over 3,000 additional projects with the savings. But the media coverage of the stimulus was almost exclusively gotcha stuff, usually without a real gotcha. And when the media did notice long-term investments in the stimulus, like Race to the Top or clean-energy research, it rarely mentioned the stimulus connection.

Except, of course, when it was noticing Solyndra. After a year of screaming headlines about crony capitalism and shady deals, even Republican investigators have admitted there's no evidence of any political interference or other wrongdoing. A slew of independent reviews — including one led by John McCain's finance chairman — have concluded that the clean-energy loan program is working well. Everyone knew that some of its loans would go bad. But the Solyndra scandal — which isn't even a scandal — is probably the best-known product of the stimulus.

The complaint from the left about the stimulus has long been: It was too small. According to your reporting, that's an unrealistic claim. Why?

Well, it was too small. More aid to states would have prevented more layoffs of public employees. More infrastructure projects would have put more unemployed laborers to work. More tax cuts would have put more money into the hands of consumers. What my reporting shows is that the disillusionment addicts of the left are wrong to blame President Obama for the se size of the stimulus.

People forget that after Lehman Bros. collapsed in September 2008, Democrats couldn't even get 60 votes in the Senate for a $50 billion stimulus; in fact, two Democrats voted against it. The $800 billion stimulus was over four times larger than Obama's campaign proposal in October 2008. It was over twice as large as the package that 387 liberal economists urged Congress to pass in late November. It's only in retrospect that $800 billion seems wimpy. And Obama couldn't have gotten a dime more through the Senate.

This is an adulatory story about the Obama administration, depicting a subtle, engaged, brilliant president working for the long-term good of the nation, surrounded by brilliant, self- sacrificing scientists and thinkers who are looking for sweeping change, and opposed by venal, selfish, viciously partisan Republicans willing to sacrifice the health of the nation for political gain. That's a portrait that will surely delight Democrats and irritate Republicans. Why should the average reader trust it? Why shouldn't they see this as partisan hackwork in the service of the Obama re-election campaign?

Wow! Maybe you're so accustomed to reading breathless tell-alls about the fumbling, bumbling hacks in the White House — by right-wingers, left-wingers, and even Obama supporters who basically approve of his agenda but want to show how independent and tough-minded they are — that my story sounds adulatory. The guy doesn't walk on water. I write about his missteps and miscalculations as well as his achievements, and I reveal a lot of internal dissension on his team.

That said, I realize The New New Deal tells a story that, for the most part, Obama lovers are going to like and Obama haters on the left and the right are going to hate. I'd say that readers shouldn't see this as partisan hackwork because I'm not a partisan hack. I've been a reporter for 20 years, and my reporting is accurate.

In case people are curious, I'm a registered independent, socially liberal, otherwise pretty unpredictable. I voted for Obama in 2008, but I voted for Charlie Crist for governor over a generic Democrat in 2006, back when he was a rising Republican star. I do tend to be a contrarian.

I think I was the first non-oil-stooge to write that the BP spill was not that awful an ecological disaster. But I was just following my reporting; I know a lot of scientists in Louisiana, and I got to see a lot of persuasive data. I feel the same way about the stimulus; the data tell a very different story than the prevailing narrative.

I don't think my book portrays the Republicans as "vicious," but I do show — thanks to a lot of in-depth interviews with GOP sources — how they plotted to obstruct Obama before he even took office. I show how the stimulus was chock full of stuff they claimed to support until Jan. 20, 2009.

I think there ought to be a great debate about the stimulus and its interventions in various sectors of the economy. But we haven't had that debate. We've debated a bizarro-world stimulus that does not exist.

And I think that's true about Obama, too. I don't think he comes across as "brilliant." I think he comes across as a pragmatic left-of-center technocrat who wasn't interested in pursuing lost causes, but basically tried to do what he said he would do during the campaign. He wasn't a policy entrepreneur with new policy ideas, but he did his best to get 60 votes for old policy ideas that made sense, and then pushed his administration to put them into action as cleanly and competently as possible. And I did a lot of reporting in the bowels of the bureaucracy and around the country to show how change has been playing out.

I tried to tell the story as fairly and honestly as I could. But I didn't try to be balanced for the sake of balance.

Why was the GOP's message of opposition so much more effective than the administration's message of spending? Was Obama's failure fundamentally a communications failure, as Ed Rendell told you?

I don't claim to be an expert in political strategy and messaging. I tried to tell the story and let readers decide for themselves where the politics went wrong. But I'll make a few observations. First, the Obama team's Recovery Act message was highly nuanced. It was short-term jobs along with long-term investments. It was tax cuts along with spending. It was the biggest domestic spending bill in history, but it was also just a first step toward normalcy. The economy needed fiscal stimulus in the short term but fiscal responsibility in the long term.

The Republican message was much simpler: No.

When will Americans be able to look out and recognize measurable gains from the stimulus?

Well, we're already able. For example, 95 percent of us received Making Work Pay tax cuts of up to $800 a year for a family. But they were dribbled out through reduced withholding, because behavioral economics suggests that we're less likely to spend money when it arrives in a big chunk, so fewer than 10 percent of us noticed them. The backstory of that decision will make Obama supporters cringe.

Similarly, anyone who received expanded unemployment benefits or food stamps or Cobra subsidies or Pell Grants in 2009 or 2010 benefited from the stimulus. The stimulus saved more than 300,000 education jobs, and preserved over $100 billion worth of health services for the poor. We're already using more clean energy and less energy overall because of the stimulus. There are over 100,000 stimulus projects that have upgraded our parks, subways, hospitals, food pantries, and so forth.

Also: The stimulus helped prevent a depression, and as Romer says in the book, depressions really, really suck. They create horrible human suffering, and horrible deficits, too. The economy is quite lousy, but it really could've been a lot lousier.

The stimulus will produce more good stuff in the future. By 2015, almost all of us will have an electronic medical record because of the stimulus. The stimulus is also pouring $1 billion into desperately needed "comparative effectiveness research" that will help doctors and patients learn what kind of treatments actually work. There's billions more for data-driven education reforms — Investments in Innovation and School Improvement Grants as well as Race to the Top — that will seek to scale up promising approaches in public schools.

Will Americans associate any of this change with the 2009 stimulus? I doubt it. Maybe they will if my book becomes a runaway bestseller.

© 2012 Slate

Meet the author

Michael Grunwald will speak at USF St. Petersburg's Harbor Hall Gallery (the former Dalí Museum, 1000 Third St. S, St. Petersburg) Aug. 28 from 3:30-5:00 p.m. The event is free and open to the public. He also will be a featured author at the Tampa Bay Times Festival of Reading Oct. 20, also at USF St. Petersburg.

The New New Deal:

The Hidden Story of Change in the Obama Era

By Michael Grunwald

528 pages, $28,

Simon & Schuster

What? The stimulus worked 08/18/12 [Last modified: Saturday, August 18, 2012 5:30am]

    

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