Similarly, as long as Obama was creating jobs for construction workers, it made sense to have them advance his education agenda by modernizing schools, or his research agenda by renovating labs at science agencies like the National Institute of Standards and Technology, or his health agenda by building new community medical clinics that would expand access to low-cost care. Upgrading decrepit electrical substations, Amtrak trains, and public housing would promote his priorities, too. He didn’t want to pour more money into weapons systems, but building wounded-warrior complexes and child-care centers at military bases would be solid stimulus. He didn’t want to boost agricultural subsidies either, but paying farmers to restore flood-prone land to its natural state, while only mediocre stimulus, would at least create wetlands and reduce crop insurance payouts. And as long as he was spending more, why not keep his promises to spend more on things like early childhood education, preventive medicine, and the Americorps national service program? These were all opportunistic ways to use dollars to drive incremental change—and nursery school teachers, physician’s assistants, and even community organizers needed jobs, too.
But the Obama team was also looking for openings to drive more lasting change. Summers was concerned that the desire to exploit “the Democratic moment” could overshadow the need for timely stimulus, but he thought this was an ideal time to invest in research and critical infrastructure that could build long-term prosperity. Borrowing was cheap, and there was only so much money that could be spent both quickly and effectively. A wind farm that was approved now and created jobs for a U.S. turbine manufacturer later in the year but didn’t begin construction until 2010 would still help fill the output gap.
“No matter how you structured it, you couldn’t get too much out the door in 2009,” Orszag says. “It was okay if some of it wasn’t so fast. You couldn’t let the perfect be the enemy of the good.”
Anyway, this was, in fact, a Democratic moment. Republicans had already exploited their moment. Obama thought he had been hired to do better.
“He wanted to break through the conventional wisdom right away and do some big things that people had never been able to get done,” press secretary Robert Gibbs told me. Then his voice trailed off. “Arrgh. Washington. It’s not used to doing big things.”
The Entire Food Chain
Of all his exploitations of the Democratic moment, the biggest was Obama’s effort to launch America’s transition to a low-carbon economy.
Clean-energy investments were win-win-win-wins: reducing our thug-empowering oil dependence, our planet-broiling emissions, and our wallet-straining exposure to oil shocks, while replacing the unsustainable housing jobs of the bubble years with the green jobs of the future. A permanent transition to clean energy would still require government to impose costs on dirty energy; as Summers put it, stimulus would be one blade of the scissors, cap-and-trade the other.172 Still, the Recovery Act would be a hell of a start.
“You talk about this stuff all your life, then suddenly, it’s: Wow. We can actually do it. Like, now,” marvels Obama energy adviser Heather Zichal.
The stimulus allowed Obama to make inroads on all his energy promises at once, to start transforming the entire food chain—reducing energy use through efficiency; shifting from fossil energy toward renewables; accommodating those renewables with a smarter grid; financing cutting-edge green research; and building a manufacturing base for a green economy. “We didn’t want to put our thumb on the scale for any one sector or one technology,” Carol Browner explains. “We wanted to do everything.” Any proposal that could reduce fossil fuel dependence on the electricity side or the transportation side while at least passing the laugh test when it came to the three T’s and job creation was fair game. And Rahm’s Rule was in full effect. When a former Clinton budget aide on the transition reviewed the green team’s initial proposals, his reaction was: You’re not spending enough.
“That was probably the first time in history an OMB guy said that to anyone,” says Joe Aldy, the environmental economist for the green team and later the White House.
Even clean-energy advocates were flabbergasted by the magnitude of the money. State energy offices that had expected a total of $50 million in 2009 would get $3.1 billion. The stimulus would pour another $3.2 billion into energy-efficiency grants for cities and towns, most of which didn’t even have energy offices yet, and $4.5 billion into smart grid programs that had never received a dime. It would also include $3.4 billion for clean coal, more than Bush had managed to spend in eight years of devotion to the extraction industries, and $5 billion for low-income home weatherization, almost as much as the program had spent in over three decades.173
Now it was Obama’s turn to produce numbers that seemed to have the decimal point in the wrong place. For example, in 2007, Congress had authorized a $100 million grant program to finance advanced battery factories for electric vehicles, but had yet to provide any funding. The Recovery Act flooded the zone with $2 billion. “It was such an extraordinary time,” says the green team’s David Sandalow, a Michigan native and the author of Freedom from Oil. “It was like, okay, let’s see if we can create a new American manufacturing industry that can make a real difference in the Midwestern economy. And yeah, it turned out that we could.”
Obama aides joked about Brewster’s Millions, the movie where Richard Pryor’s character rushes to spend a vast inheritance in a month. Congressional staffers began quoting the late senator Everett Dirksen’s famous line: A billion here, a billion there, pretty soon you’re talking about real money. Still, they accepted almost all of Obama’s proposals, and added some of their own.
“Some people think we were just trying to spend as much as possible. Well, they’re right!” recalls one transition aide. “You’d find this great program that needed $1 billion. Then someone would ask: Can you do it for $10 billion?”
Obama’s energy experts and the Hill’s veteran energy staffers didn’t have much time to plan how to reinvent a multitrillion-dollar slice of the economy. But they had been thinking about this stuff for years. They had reams of reports about cost curves and supply chains at their fingertips. They were ready for their Democratic moment.
It’s often forgotten that in early 2009, green energy was not just a tiny industrial sector. It was a tiny dying industrial sector. Renewable electricity projects were financed with tax credits, and after the financial meltdown, investors didn’t need tax credits, because they had lost so much money they didn’t have tax liabilities. The credit crunch had ravaged project finance in general, but funding for wind farms and solar installations in particular had totally dried up, and U.S. manufacturers of wind turbines and solar panels were rapidly shutting down.
“Renewables were dead in the water,” recalls Denise Bode, a former natural gas lobbyist who had just taken over the American Wind Energy Association.
The Recovery Act’s solution, forged over several meetings between Obama’s aides and Democratic congressional staffers, was to replace the tax credits with equivalent cash grants. “Monetizing” the credits was not, perhaps, the most exciting public policy, but it was exactly what wind, solar, and geothermal developers needed to resurrect their industries. Joe Aldy was assigned to inform the clean-energy advocates, and he still remembers their tense faces when he arrived a bit late.
“Once I explained what we were doing, you could just see the daggers turn to joy,” he says. “Those guys were really desperate.”
Unfortunately for literary purposes, that’s about as dramatic as the energy discussions got. Again, the Obama team pushed for flexibility, while congressional Democrats preferred specifics. And the Hill’s energy staff did question some of Obama’s more audacious requests. Were there really $2 billion worth of shovel-ready battery factories? How did he expect to ramp up weatherization more than 1,000 percent in a stimulus time frame? How on earth would state energy offices handle even bigger windfalls when governors were slashing their administrative budgets?
“We said, ‘Hey!’” recalls one Senate aide. “There’s no capacity out there!”
In general, though, the discussions were collegial, wonky, earnest efforts to achieve Obama’s goals. A fly on the wall would have gotten extremely bored, unless the fly had an abiding interest in diesel retrofits or smart grid network protocols or EISA Title V Subtitle E. Nothing sexy happened, except the wardrobe malfunction that Zichal suffered while getting out of a cab on her way to a January session on the Hill. (It forced her to wear her overcoat for two hours in a sweltering basement meeting room.) Some participants graciously gave me binders full of spreadsheets, notes, legislative text, and other documents from these meetings, and I hope I don’t sound ungrateful when I say that Hollywood is unlikely to option the rights.
The drama was in the substance, the promise of change. Behind all those dry spreadsheets lurked a new approach to powering and fueling America.
“For eight years, unless you mined coal or drilled oil, you couldn’t get the time of day,” says Chris Miller, Harry Reid’s energy staffer. “And suddenly there we were, planning a low-carbon future.”
Obama set the agenda, but Congress added several of its own twists. For instance, Majority Leader Reid, who envisioned Nevada as the Saudi Arabia of geothermal power, secured $400 million for advanced geothermal technologies, twenty times the program’s 2008 budget. Hill Democrats not only adopted Obama’s ambitious energy efficiency proposals for retrofitting government buildings, schools, and homes, they added programs to retrofit factories and hospitals. Overall, the Recovery Act would include over $25 billion for efficiency, far more than the most optimistic advocates had requested.
“We’re used to asking for pennies,” says Kateri Callahan, head of the Alliance to Save Energy. “And then: Whoa! The numbers kept going up and up and up.”
Even the congressional fine print could be transformative. For example, Reid stuck $80 million into the Recovery Act for regional transmission planning, an unprecedented effort to address some of the siting problems that Carol Browner had explained to Obama in Chicago. House Energy chairman Henry Waxman of California also attached some eyes-glaze-over policy strings to the state energy grants that could significantly reduce U.S. electricity use. Before governors could get their money, they would have to sign a pledge to enact strict green building codes, and to pursue regulations giving utilities incentives to help customers save energy—that holy grail of efficiency that Obama discussed during the campaign. House energy staffer John Jimison hashed out the arcane provision at a late night negotiating session, then read it aloud to colleagues. Total silence. “Sheer poetry,” he joked.
The Hill was also responsible for the most controversial program in the stimulus, although it wasn’t controversial at the time. Reid and Senate Energy chairman Jeff Bingaman of New Mexico pushed to extend the Energy Department’s loan guarantee program to a broader swath of clean-tech projects, even though the Bush administration had failed to back a single loan in four years.174 The program had bipartisan support; in fact, Bush’s political appointees scrambled to try to complete their first loan before leaving office, until the department’s career staff concluded in early January that the application—for a California solar start-up called Solyndra—wasn’t quite ready. “The apparent haste in recommending the project meant that certain credit procedures were not adhered to,” the staff wrote.175 Some market economists—including one Lawrence H. Summers—thought governments were lousy lenders, but banks had fled the clean energy space, and the beauty of loans was that a few billion dollars in federal exposure could leverage tens of billions of dollars in eco-friendly private sector activity. “That was the best bang for the buck you could get,” Bingaman says. Everyone understood that some loans would go bust, but economists Aldy and Jeff Liebman figured they’d be happy even if half the loans failed, if the other half helped change the energy game.
That was the whole point of investing in efficiency and renewables instead of hiring workers to dig holes and fill them in: The fossil fuel game was unsustainable. The stimulus was stuffed with potential game-changers—ARPA-E’s research, the first commercial refineries for post-corn biofuels, fast charging stations for electric vehicles, clean-tech manufacturing, green job training, and more. The goal was to help clean-energy businesses reach critical mass, so they could cut their costs enough to compete with dirty energy. “You always say you just need a push,” Browner kept telling them. “This is your push.”
The Recovery Act was not just the biggest clean-energy bill ever. It was the biggest energy bill ever.
“By leaps and bounds,” Browner says.
“I Seen My Opportunities”
Obama’s advisers still resist the notion that the stimulus was a Trojan horse for the president’s agenda. After all, the bulk of the bill was basic stimulus. The transition team cast a wide net for ideas that could satisfy the three-T test and create jobs quickly, vetting thousands of line items that had little to do with his larger vision. The Census Bureau needed to hire extra door knockers? “Hire” was a good word, and there was little danger they would stay beyond the 2010 decennial.176 The Commerce Department was running out of coupons to help Americans convert their analog televisions to digital? Extra coupons might sound like a goofy use of stimulus dollars, but they would stimulate purchases of converter boxes by families who would otherwise lose their signals. Banks had stopped lending to small businesses? Waiving Small Business Administration fees and increasing the federal guarantee for new loans could thaw a frozen credit market. The Labor Department could ramp up a summer jobs program for young people? “Jobs” was a great word.
The transition team also rejected dozens of ideas that would have promoted the Obama agenda, usually because of skepticism of their timeliness or suspicion about their budgetary tails. Browner’s green team wanted to convert the Postal Service fleet to electric vehicles, but concluded it wouldn’t create jobs quickly enough. Operating subsidies for local transit agencies could have helped avert damaging fare increases, but Obama’s aides had a feeling the subsidies would never disappear. One transition official compared the anti-tail ethic to a sign he saw at the Grand Canyon, warning tourists not to feed the squirrels. “It said: You won’t be here in the winter, but the squirrels will, and they’re still going to expect to get fed,” the official recalls. Obama did not want the Recovery Act to create entitled squirrels.
But yes, Obama’s team was looking for line items that could help transform the country. Most of them flew under the radar.
For example, the U.S. unemployment insurance system was an antiquated vestige of the New Deal, designed for a workforce of male breadwinners. It served only about a third of jobless workers, and they had to wait three months to qualify for benefits, a legacy of the pre-computer age when labor data was much tougher to track. So Furman and Bernstein worked with House Democrats like New York’s Charlie Rangel and Jim McDermott of Washington to modernize and expand the system, providing $7 billion in incentives for states to eliminate the time lags and loosen their eligibility rules. Governors would be rewarded for extending benefits to part-time workers, as well as workers who quit jobs to care for a family member, follow a spouse who had to relocate, or escape domestic violence. These reforms wouldn’t attract much attention, but they would extend the New Deal safety net to new cohorts of deserving workers while providing an automatic Keynesian stabilizer in times of high unemployment.
“My view of legislation is, you should always have ideas ready,” says McDermott, who first proposed the reforms in 2002. “Like George Washington Plunkitt said: I seen my opportunities and I took ’em.”
That would be a good slogan for the whole Recovery Act—not in Plunkitt’s original Tammany Hall graft sense, but in the Rahm’s Rule sense of taking advantage of the Democratic moment. A few more examples of the seeds it planted for change:
Build America Bonds. The municipal bond market was another casualty of the financial crisis. Muni bonds were fueled by t
ax exemptions, and investors had just as little appetite for exemptions as they had for clean-energy tax credits. So Rangel’s staff devised new bonds that replaced the exemption with a direct subsidy, hoping to lower rates enough to attract investors and jump-start public works. These Build America Bonds would be exponentially more popular than anyone expected, financing thousands of local infrastructure projects that put Americans to work in all fifty states.
Homelessness Prevention. The longer homeless people remain on the streets, the harder it is for them to repair their lives, and the more they end up costing society. In 2008, a pilot program had shown that modest interventions to help Americans on the brink of homelessness—helping out with utility bills, security deposits, moving expenses, or rent—could help keep a roof over their heads while slashing shelter costs, prison costs, and medical costs for taxpayers. The Recovery Act approved a sixty-fold funding increase to take the program national.
“For $1.5 billion, you get a systemic reform that changes the way we deal with the problem,” says Shaun Donovan, Obama’s HUD secretary.
Green Infrastructure. America’s long-neglected waterworks were typical of the hidden infrastructure crisis that Obama had vowed to tackle, wasting billions of gallons of clean water and releasing billions of gallons of raw sewage every year. The Recovery Act provided over $6 billion in new investments, a significant though not transformative effort to upgrade leaky pipes and inadequate treatment plants.
What was potentially transformative was a new rule reserving 20 percent of the cash for “green infrastructure” like permeable pavement, green roofs, rain barrels, and wetland restoration projects, an unprecedented investment in eco-friendlier water management. The idea was to keep stormwater out of overwhelmed sewers instead of building new capacity, to reduce demand for treatment instead of increasing supply, to make urban jungles function more like natural forests.177
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