Act of Recovery

Only one national reporter, Michael Grunwald, bothered to take a detailed look at how well the $787 billion stimulus was spent. What he discovered confounds the Beltway conventional wisdom.

Twenty-eight days after taking the oath of office, Barack Obama signed the American Recovery and Reinvestment Act, otherwise known as the stimulus, a $787 billion measure to combat the economic cataclysm then engulfing the American economy. Soon, the main stream narrative coalesced into two opposing camps. Conservatives, denying economic consensus and their own previous beliefs (Mitt Romney proposed the largest stimulus of 2008 campaign), settled on a message that the Recovery Act was a colossal waste of money that would create no jobs and do no good. Liberals, led by economist-pundits like Paul Krugman, insisted that the stimulus was far too small and that the Obama administration had committed high-order negligence in not securing a bigger one.

The New New Deal:
The Hidden Story of
Change in the Obama Era

by Michael Grunwald
Simon and Schuster, 528 pp.

A number of books by journalists have subsequently been based on the latter point, including Escape Artists: How Obama’s Team Fumbled the Recovery, by Noam Scheiber, and Confidence Men: Wall Street, Washington, and the Education of a President, by Ron Suskind, both written in the principals-in-the-room style used so successfully by Bob Woodward. They start from a similar premise—the economy remains weak, and therefore the stimulus failed in its stated goal to restore robust employment—and attempt to explain what went wrong in the negotiation of the stimulus. But—incredibly—very few journalists have taken a deep, sustained look at the stimulus itself to see what is in it and how it’s been working.

That is part of what makes Michael Grunwald’s The New New Deal: The Hidden Story of Change in the Obama Era such an achievement. An award-winning senior national correspondent for Time magazine, Grunwald is the only reporter in America who has invested the time and shoe leather necessary to really understand the stimulus as a program—not just how the legislation came together, but how the money was allocated and overseen and whether the projects and programs it has funded were worthwhile. In doing so he debunks much of the received Beltway wisdom about the program. It is the rare book that finds an enormous untold story hiding in plain sight, like a coworker discovering there has been a rhinoceros standing in your building’s lobby for the past four years.

After all, the stimulus was not some piddling appropriation for the Department of Commerce. It was a bill of stupendous size—it made up 4 percent of annual GDP, 50 percent bigger than the entire New Deal in constant dollars—designed to confront head-on the largest economic crash since the Depression. With the possible exception of Obamacare, it is the president’s signature achievement (though, due to its unpopularity, not one he talks about).

The drama of its passage gripped the country for weeks. It offered the largest tax cuts in U.S. history, heavily weighted toward the poor and middle class. It provided badly needed extensions of unemployment insurance, food stamps, and aid to states, which were set to cut their budgets at the worst possible time. It created a $90 billion clean energy fund, which bought, for starters, the world’s largest wind farm, largest photovoltaic array, and largest solar thermal power plant, and jump-started the advanced battery manufacturing industry. It contained the $4.5 billion “Race to the Top” education reform program that has generated at least as much change in state and local education policies as George W. Bush’s No Child Left Behind law. It put $20 billion toward digitizing our medical records, a precondition for bringing down health care costs, the number one driver of long-term federal budget deficits. And for the most part it has worked—according to the Congressional Budget Office, the Recovery Act saved up to 3.3 million jobs. Had it not passed, the economy could well have fallen into full-blown depression.

Yet the mainstream narrative quickly lost sight of these gigantic facts. Grunwald is frustrated by this, and much of the book is taken up trying to explain how in heaven’s name public understanding of the stimulus became so badly garbled. At least part of the blame goes to the Obama team, which lost the propaganda war. While the Republicans were busily engaged in a relentless, nihilistic, scorched-earth opposition, portraying the stimulus as a vast waste of money and a socialist plot, endlessly repeating lies or debunked distortions, the Obama team simply didn’t fight back. (In fairness, Grunwald notes, the administration did have other things on its plate—two ground wars, a collapsing auto industry and banking system, and efforts to pass health care and financial reform, to name a few. And it was always going to be tough to convince voters experiencing disastrous economic times that without the stimulus things would have been worse.)

The national media comes off badly in Grunwald’s telling, and rightly so. Practically all the reporters who bothered to look into the Recovery Act at all have spent most of their time chasing down phantom boondoggles (and Grunwald conclusively demonstrates that there has been vanishingly little fraud or abuse in the implementation of the act). The press poured its effort into covering Solyndra, one of a handful of stimulus projects that haven’t panned out (though the charge that political favoritism was involved is bunk, as Grunwald convincingly shows). But it has given almost no attention to thousands of other stimulus expenditures, thereby missing some amazing success stories.

For example, the administration dusted off a tiny Bush-era experiment in preventing homelessness and ramped it up sixtyfold using stimulus dollars, ultimately helping 1.2 million Americans on the verge of being evicted from their homes. If even half of them had ended up on the street, the nation’s homeless rate would have doubled. Instead, in the midst of the Great Recession, the rate actually declined slightly. Or consider that the stimulus financed the largest dam removal in U.S. history, to restore salmon runs on the Elwha River, as well as three huge infrastructure projects in Manhattan alone. There have been plenty of stories about the administration’s ill-fated efforts to fund high-speed-rail projects in Florida and Wisconsin, where Republican governors turned down the money. But there’s been almost no national coverage of stimulus-funded projects now under way in Illinois and Missouri that will shave an hour off Amtrak travel times between Chicago and St. Louis and St. Louis and Kansas City—not quite high-speed-rail-level improvements but possibly enough to make passenger rail a viable alternative to flying on those routes. And there are other stimulus investments that could have more dramatic long-term impacts. For instance, the Department of Energy agency ARPA-E has funded some truly bold green energy research, including a company that developed the most energy-dense lithium battery in the world, an innovation that could trim $5,000 from the price of the next generation of electric cars.

One would think these kinds of stories, available to anyone with a phone and a computer, would be catnip to the press. But whatever the reason, they haven’t been; absent this book, there has been no serious journalistic accounting of a breathtakingly huge and groundbreaking bill. (Personally, I find it unsurprising that Grunwald chooses to live in Miami Beach—well outside the reach of Beltway groupthink.)

The book also contains a well-crafted Woodwardian story of how the stimulus was negotiated and passed. Grunwald puts paid to the idea that the Obama team could have somehow wrung more stimulus money out of Congress. With nearly all GOP senators implacably opposed, a handful of persuadable moderates—Arlen Specter, Olympia Snowe, Susan Collins, and Ben Nelson—had all the leverage. They used it to set a completely arbitrary, non-negotiable $800 billion upper limit on the stimulus, a number far below the $1.2 trillion recommended by Christine Romer, chairman of the president’s Council of Economic Advisers. The only plausible way of obtaining more funds would have been a quick evisceration of the filibuster right at the start of the 2009 Congress, something Majority Leader Harry Reid ruled out even in 2010. The original stimulus should have been bigger, and the administration miscalculated in thinking that it could persuade Congress to pass a second big one later if needed (Larry Summers, in an on-the-record interview with Grunwald, even credits Paul Krugman for correctly predicting this effect). Still, Obama did manage to squeeze out a few mini stimuli in the form of extensions of the payroll tax cut and unemployment benefits, which put total stimulus spending closer to Romer’s estimate.

Grunwald does sometimes get a bit overexcited about the scale of the Recovery Act’s transformation of the economy; the medium- to long-term effects of the act have obviously not yet been firmly established. But slightly overselling the stimulus’s longer-term impact doesn’t negate the importance of what Grunwald has delivered. The depth of his reporting and his understanding of the enormity of the Recovery Act’s accomplishments are both impressive. One of the most telling moments in the book comes when several Obama aides, veterans of the Clinton administration, pause their frantic work on the act to recall the knock-down, drag-out fight the Clinton administration had in 1993 over a relatively piddling $19 billion stimulus— a fight the administration lost. They note how strange it feels to remember the bitter arguments over line items of a few million dollars—the kinds of things that were inserted and deleted by the hundreds in the process of negotiating the Recovery Act. By American governance standards, the stimulus was colossal on a scale very difficult to grasp. We should be grateful that Michael Grunwald, at least, has gotten out his tape measure.

Ryan Cooper

Ryan Cooper, a contributing editor of the Washington Monthly, is currently the Washington correspondent for The Week.