The New New Deal

by Grunwald, Michael

  Solyndra never made it to 2012. After a private financing deal collapsed in August, the company had to beg the Energy Department for another lifeline. At the White House, energy adviser Heather Zichal again pithily summarized the situation: “*#~@ show.” This time, the administration refused to throw good money after bad. Solyndra declared bankruptcy and laid off its nearly 1,200 employees. The FBI raided the firm, and Harrison and other executives took the Fifth at congressional hearings. The *#~@ show was just starting.

  Republicans hyped Solyndra into a classic Washington scandal, with a “gate” suffix, drip-drip-drip document leaks, and endless, breathless who-knew-what-when media speculation. Michelle Bachmann said it “makes Watergate look like child’s play.” The Republican National Committee declared it proof of the “Corruption at the Heart of the Obama Economic Strategy.” Anti-Obama groups bankrolled millions of dollars’ worth of crony capitalism ads. One deceptively edited spot featured Obama saying he didn’t regret his kind words for Solyndra: “No, I don’t … overall, it’s doing well.”413 The unedited quote was: “No, I don’t. If you look at the overall portfolio of loan guarantees that have been provided, overall, it’s doing well.” The same Republicans who had bashed Obama for spending too slowly began bashing him for rushing money out the door on sweetheart deals.

  Most of the Solyndra inquisitors in the House had pushed clean-energy loans for their own constituents before discovering their inner Torquemadas. Energy and Commerce chairman Fred Upton—a longtime moderate who considered voting for the stimulus in 2009, but had to pledge allegiance to the Tea Party to secure his chairmanship in 2011—had supported a loan for a Michigan solar company that later failed. House Government Oversight chairman Darrell Issa—who called Obama “one of the most corrupt presidents in modern times”—had written Chu on behalf of an electric vehicle start-up. But once the witch hunt began, the past didn’t matter, and neither did the facts.

  So far, after holding a dozen hearings, subpoenaing hundreds of thousands of pages of documents, and threatening numerous White House officials with contempt, Republicans have drawn a blank. Their efforts to prove that the administration was reckless or corrupt have done nothing of the sort. They have exposed plenty of internal debate, but no evidence of anyone doing anything wrong. “Is there criminal activity? Perhaps not,” Issa admitted after a year of relentless investigations.414 “Is there a political influence and connections? Perhaps not.” Still, Issa insisted the administration “bent the rules for an agenda,” the agenda being energy that doesn’t endanger our security or the planet. Is it possible that a government official urged Solyndra to delay a layoff announcement for a week until after the midterm? Perhaps. That’s not quite Watergate.

  It’s no fun to watch a half-billion-dollar loan go bad, but loans go bad all the time, because businesses fail all the time, especially in cutting-edge industries. Republicans suggested the Recovery Act’s loans ought to be safer than the private sector’s, but in fact they were supposed to be riskier, carrying clean-energy technologies across the Valleys of Death that scared off private lenders. Congress had set aside $2.5 billion for busted loans, and an independent review of the administration’s portfolio (led by the former finance chairman of John McCain’s presidential campaign) found no danger of exceeding those losses.415 Most of the loans went to lower-risk generation projects with contracts in place to sell clean electricity, and a Bloomberg Government analysis found the program has more than enough reserves to absorb the failure of every one of its higher-risk manufacturing projects.

  Solyndra and its ingenious technology attracted some of the smartest money on the planet, but its business plan didn’t account for solar prices plunging 60 percent in three years. It just couldn’t compete on costs, especially after the Chinese government poured $30 billion into solar manufacturers in 2010. Solyndra did make strategic mistakes, and burned through cash as if it was a billion-dollar company before it ever turned a profit—although, in fairness, it was a billion-dollar company. But nothing about one solar firm flying too close to the sun justified the Republican obituaries for the solar industry.

  On the contrary, the collapsing prices that doomed Solyndra reflected an industry on a roll, building the scale it needed to cut costs. The *#~@ show was a sideshow. Solar is now cheaper than new nuclear, and in sunny states with incentives for renewables, it’s becoming competitive with fossil fuels for long-term contracts, even though natural gas prices have plunged. U.S. solar installations increased from just 290 megawatts in 2008 to 1,855 megawatts in 2011, and an astonishing 7,000 megawatts worth of new projects were proposed in the two months before Solyndra went belly up. That’s the equivalent of seven nuclear reactors, seven more than the United States has built in the last three decades. And that doesn’t even include residential solar, which is also booming. The ruckus over Solyndra helped scuttle a loan guarantee for Solar Strong, a $1 billion effort to install solar panels on 160,000 rooftops’ worth of military housing across thirty-three states. But the project is still going forward with financing from Bank of America, and could singlehandedly double America’s residential solar generation.

  “The common mind-set doesn’t understand what’s happening,” says Lyndon Rive of SolarCity, which will install the panels for Solar Strong, and is now preparing for an IPO. “Yeah, a big solar manufacturer went out of business. It went out of business because of the success of the solar industry! We’re hiring like crazy.”

  Innovation doesn’t move in a straight line.416 Disruptive technologies can putter around the margins of the economy for years, failing to disrupt much of anything. But if they get better or cheaper, at some point they can suddenly take off, challenging the status quo. And as they scale up, they get even cheaper. That’s what’s happening as solar power travels down the cost curve. It’s also starting to happen for energy-saving LED lighting, which could replace traditional incandescent bulbs and even advanced compact fluorescents within a decade. LED prices have dropped by half since 2009, upending the outdoor lighting market, and they’re still dropping, threatening to invade the indoor market next. While Congress has squabbled over Obama’s supposed ban on incandescents—actually just a requirement for more efficient bulbs, originally promoted by Upton before his rush to the right—the march of innovation could render the entire debate irrelevant.417

  The Recovery Act’s state and local energy grants have financed nearly 400,000 LED streetlights and traffic signals, helping to scale up the technology. LEDs are now 2 percent of the overall lighting market, but Rogers says that could grow to 80 percent by 2020, which could lower U.S. electricity demand by the equivalent of over thirty power plants.

  “LEDs are approaching the tipping point where everything changes,” he says.

  The Recovery Act has also helped cut the cost of electric vehicle batteries in half. It will need to be halved again before plug-ins can be truly competitive with gasoline, but that could happen in the next five years, thanks to innovators like Envia and the stimulus-funded battery factories. Sales of the Volt and the Leaf have been a bit disappointing, and America might not meet Obama’s goal of one million electric vehicles on the road by 2015. But there will be far more than there would have been without Obama or the stimulus.

  Obama probably won’t be able to keep some of his aggressive green promises; for example, the economics of clean coal remain bleak without a price on carbon. But he has made a huge down payment on a greener economy. Just a decade after Clinton proposed a five-year, $6.3 billion clean-energy initiative that was considered hopelessly unrealistic, Obama pushed $90 billion into the sector with one signature, leveraging over $100 billion in additional private capital. Gingrich has mocked Obama for promoting algae instead of oil, and Republicans have blistered the Navy for buying a batch of renewable biofuel from Solazyme at four times the usual price. But as Solazyme scales up, its costs will come down. Before the Recovery Act rescued the advanced biofuels industry and dragged it out of the lab, no one would ha
ve imagined that U.S. destroyers and jets would be running on U.S. algae in 2011. That’s what change looks like.

  Of course, down payments disappear if they’re not followed up with regular payments. The Energy Department followed up the Recovery Act’s solar investments with SunShot, an initiative to make solar energy cost-competitive without subsidies by 2020, incubating more innovative firms and launching a nationwide effort to reduce “soft costs” like permitting. Obama also followed up the Recovery Act’s efficiency push with Better Buildings, an effort to reduce energy consumption 20 percent by 2020. The federal government will do $2 billion worth of retrofits through contracts financed by electricity savings, so they won’t cost taxpayers a dime; private companies have also committed $2 billion to retrofit 1.6 billion square feet of commercial and industrial space.

  Meanwhile, ARPA-E is exploring the next green revolutions. For example, after inventing the concept of electrofuels that don’t rely on photosynthesis, the agency has launched a new program to improve photosynthesis, by manipulating crops like sugarcane and sorghum to grow fuel. Not cellulosic material that can be converted into fuel, but actual fuel that can be dropped into a tank. PETRO (Plants Engineered to Replace Oil, a rare acronym that works) aims to eliminate the inefficiencies of converting carbohydrates into hydrocarbons by growing the hydrocarbons directly; one national lab’s project is modifying tobacco plants, America’s original cash crop, to produce gasoline or diesel that would leak out when you squeeze the leaves. It sounds crazy, but soybeans can produce about 50 gallons of biofuel per acre, while petroleum crops could conceivably produce 5,000.

  “All this stuff sounds crazy, until it changes the world,” Majumdar says.

  Solyndra was just a bump on the road to a clean-energy future, and we’re further down the road than people realize. But Republicans are pushing to close the road. They’ve blocked Obama’s “Cash for Caulkers” proposal to expand energy efficiency tax credits, as well as extensions of the Recovery Act’s renewable energy tax credits, while defending tax breaks for oil giants that vacuumed up $140 billion in profits in 2011. They no longer support formerly bipartisan initiatives like the smart grid, wind power, or electric vehicles now that they’re identified with Obama’s green agenda.

  So the 2012 election will be a fork in that road to clean energy.

  Change Is Here

  Change isn’t always obvious.

  The Making Work Pay tax cuts affected almost all of us, but few of us noticed the extra $8 slipped into our weekly paychecks. The Recovery Act funded the world’s largest dam removal project on the Elwha River, but how many of us pay attention to salmon runs in the Olympic peninsula? The stimulus has upgraded 236 miles of flood control levees, 350 military bases, 850 wastewater systems, and over 400,000 public housing apartments, but you probably haven’t noticed unless they were in your area. My last book was about the Florida Everglades, and I still haven’t checked out $100 million worth of stimulus-funded projects to help restore the River of Grass. And so far, it’s hard to tell whether nationwide gains in high-speed Internet access have anything to do with the Recovery Act’s $7.2 billion worth of broadband grants to underserved communities.

  But the stimulus-funded revolution in health IT is hard to miss. We all go to the doctor, and soon just about all our doctors will use electronic health records. The statistics are already striking. In 2008, just 17 percent of physicians and 12 percent of hospitals used digital records; it’s now 34 percent of physicians and 40 percent of hospitals, and the Recovery Act’s $27 billion in health IT money just started going out the door last year. In 2008, only one in twenty doctors dispensed prescriptions electronically; now nearly half of them e-prescribe. The era of illegible scribbles and telephone tag causing deadly overdoses is coming to an end, as is the era of misplaced results and inaccessible files causing redundant tests. And according to the Bureau of Labor Statistics, health IT is becoming America’s fastest-growing occupation. Health and Human Services Secretary Kathleen Sebelius says more than fifty thousand jobs have been created in the health IT industry since the stimulus passed.

  Electronic medicine will do more than replace your doctor’s clipboard with an iPad, help you make appointments online, and eliminate all that time you waste filling out forms in waiting rooms. It’s also the foundation for health reform, what Sebelius calls “the single biggest component in improving quality and lowering costs.” As Zeke Emanuel points out, health IT firms that used to spend their time devising new ways to bill insurers and Medicare are now developing new ways to improve care and coordination, bringing hundreds of new products to market, attracting a wave of new venture capital.418 They will help doctors monitor the blood sugar levels of diabetic patients remotely, share MRI results with specialists on the other side of the country instantly, and change medical care in countless ways no one has thought of yet. Like the smart grid, health IT is a software play: Its killer apps are still waiting to be invented.

  The computerization of medicine will also promote evidence-based care, by helping researchers collect data and helping providers use the results. The insurer WellPoint has announced plans to use Watson, the IBM computer best known as a Jeopardy! champion, to comb through data to suggest treatment options to doctors. And the Recovery Act’s investments in comparative effectiveness are already producing news doctors and patients can use. One stimulus-funded study found that a $50-per-dose drug is just as effective as a $2,000-per-dose drug in treating macular degeneration. Another suggested bypass surgery might be more effective than stents at treating heart blockages.

  Some doctors who consider medicine more art than science have bristled at the idea of computers suggesting evidence-based protocols. And during the Obamacare debate, well-funded critics denounced comparative effectiveness as vicious rationing; the drumbeat got so loud that Rahm argued for abandoning the White House’s efforts to expand and institutionalize the research, prompting a predictably indecorous response from his brother Zeke. In the final compromise, Congress refused to allow the new board overseeing comparative effectiveness to consider costs. Still, the trend is toward more data in more accessible forms, which should make the system more logical over time.

  “We’re not naive. We know some of these studies may lead to challenging policy decisions,” says immunologist Richard Hodes, cochair of NIH’s comparative effectiveness council. “But our feeling is: First, let’s get the facts.”

  Even before Obamacare, the Recovery Act started pushing the medical system in the directions Obama wanted it to go. States had been limiting access to Medicaid; the stimulus expanded access. It also expanded preventive care, built or upgraded more than one thousand community health clinics, and started addressing the shortage of primary care doctors and nurses. And it’s the reason our health care system no longer manages patient data with the same technologies Hippocrates used. It’s unlikely that all Americans will have an electronic record by 2014, Obama’s goal, but the vast majority should.

  Before the stimulus, 91 percent of Tennessee’s students were reported to be proficient in math. In 2011, thanks to the state’s Race to the Top grant, that figure was down to 34 percent. And the minority achievement gap had doubled. Yet Secretary Duncan was delighted.

  That’s because the statistical nosedive was purely the result of much stricter standards—and as they say in recovery, the first step is admitting you’ve got a problem.

  “They stopped dumbing down their standards and lying to their kids,” Duncan told me. “Now they know the truth, which is a very liberating and motivating thing.”

  Some of the Recovery Act’s impact on schools is obvious. Its fiscal relief saved at least 350,000 education jobs. It extended Pell Grants so that three million more low-income students could attend college, and more than doubled overall tuition aid. But it’s too early to know how the long-range school reforms slipped into the stimulus will change education. So far, the winning Race to the Top states have been setting up new training and evaluat
ion programs for teachers and principals, while starting to implement the new Common Core standards for kids. Other than a few hiccups—labor disputes in New York, foot-dragging in Hawaii—things seem to be going as planned. The Race will drive new approaches to teaching and testing, and Duncan says some of the failing schools that received turnaround grants have already reported improved test scores, attendance records, and other signs of improvement. But the evidence is not yet clear.

  What’s clear is that the Race and the Recovery Act’s other reforms, backed by less than 0.5 percent of annual U.S. education spending, will have an outsized impact on the future of schools. Their emphasis on competition is eroding the entitlement mentality in education funding, forcing applicants to demonstrate merit instead of lining up for automatic handouts. Reform is also expanding the federal role in local schools, imposing Obama’s technocratic vision through the strings attached to the cash.

  But while most of the early attacks on the Race came from progressives, Washington Republicans are now attacking it as a federal assault on local prerogatives. It is, after all, an Obama initiative. So its fate might depend on 2012 as well.

  Vice President Biden was having a bit of fun at my expense, thanking me for my journalistic work as a Recovery Act cheerleader. “As you might guess, I’ve read all your articles, because you’re the only guy that wrote anything remotely positive,” he needled me. I’m generally more Debbie Downer than Little Mary Sunshine, and I told Biden this was unusual for me. He grinned. “I took ’em to bed, slept on ’em …”