It was kind of funny because it was kind of true. At times, I did feel like I was writing about an alternative universe stimulus. But the facts were the facts. The Recovery Act was on schedule, and was so far under budget that the administration had financed an extra three thousand construction projects with the savings. As Biden liked to say, fraud was the dog that hadn’t barked. Experts had predicted tens of billions of dollars in losses, but there had only been 298 convictions, for scams totaling just $7.2 million; the Recovery Act’s unprecedented transparency and scrutiny made it an uninviting target for crooks. And its oversubscribed competitive grant programs—for everything from brownfields redevelopment to emissions-reducing transit projects—really did seem to promote a culture of responsibility, forcing bureaucrats to use judgment instead of just checking boxes. Even when their judgments were wrong, as with Solyndra or the busted battery manufacturer Ener1, there was no indication of corruption or cronyism.
Good government is hard to quantify. It’s mostly a counterfactual achievement, measured by the lack of scandals and other flubs. But I’ve heard countless stories about public servants like Claire Broido Johnson whipping the weatherization turkey farm into shape, Seth Harris lying awake worrying about that 13(c) provision, ARPA-E’s Eric Toone inventing electrofuels, and OMB’s Danny Werfel wishing he could bottle the Recovery Act for the rest of the government. After Obama and Biden made it clear the stimulus was a top priority, the federal bureaucracy mobilized. It was still the federal bureaucracy, with all the paperwork and legalisms that implies, but the Recovery Act inspired a much more collaborative, results-oriented, businesslike approach. I wish I had a dollar for every time I heard about “returns on investment” or “value propositions,” or for that matter “silos” or “stovepipes.”
“This is the first time we really did go in and absolutely knocked down these goddamned stovepipes,” Biden says. “We took sledgehammers like, Bah-Wham!”
The president has already signed an executive order creating a government-wide version of the Recovery Accountability and Transparency Board, to extend its oversight to all federal spending. Obama has also proposed a bunch of new races to the top, from a Race to Green competition to encourage local building codes to a Workforce Innovation Fund for job-training programs to a $5 billion competition to help schools attract and reward excellent teachers. “The Recovery Act is going to create a new template for making government function,” Biden says. “Literally! Literally!”
These were worthy reforms, but after the soaring poetry of the Obama campaign, after all those lofty promises of unity and prosperity and an ennobling new politics, his supporters expected more inspirational change. They expected more Bah-Wham! When he had pledged to create a new Washington, and portrayed Hillary Clinton as old Washington, he hadn’t suggested that she was insufficiently focused on data collection or overly wedded to formula programs. He had suggested that she was too enmeshed in the city’s tawdry culture of partisan bickering and backroom horse-trading to change it. And by the time Obama signed the stimulus, it was clear he was unable or unwilling to change it as well.
But the question isn’t whether Obama has lived up to the hype. Nothing in life except parenthood lives up to the hype. The question is whether he has produced change. Change doesn’t mean perfect. Change means better. It’s a direction, not a destination. And the Recovery Act was exactly the policy direction he had promised, even if it wasn’t delivered through the uplifting process he had promised. He had said that America’s intractable policy messes would never be fixed until Washington’s intractable political messes were fixed, but he quickly proved himself wrong.
Before Obama had completed his first month in office, the stimulus started building all four pillars of his New Foundation. It took a giant leap toward cleaner energy, including a smarter grid, greener buildings, and low-carbon fuel and electricity. It dragged health care into the digital era, toward a less expensive and more rational system. It laid the groundwork for data-driven education reforms that Democrats had always resisted. And it began to advance his long-term vision for the economy, with a more progressive tax code, a more expansive safety net, and more aggressive investments in research and infrastructure. Meanwhile, the Recovery Act was saving the economy from sinking into a depression. It didn’t produce robust growth, but it made a nightmarish situation better. And better is better than worse.
The new New Deal has not left an indelible mark on the national psyche the way the New Deal did. It didn’t have a Hoover Dam, or a CCC, or a visible public works campaign. Its iconic solar arrays and wind farms are in remote areas; its bullet trains are still question marks; its smarter grid and refundable tax cuts have mostly gone unnoticed. Its innovations like electronic medical records and homelessness prevention aren’t associated with the stimulus in the public mind. Most governors wouldn’t even put Recovery Act signs alongside Recovery Act construction projects. And the relentless Republican campaign to brand the stimulus as a big-government failure has been an overwhelming success.
The Recovery Act has already launched America on an inexorable course toward digital medicine and a digital grid, and helping to rescue the country from a second depression will always be part of its legacy as well. But much of its legacy is still up for grabs. Obama wants renewable energy, electric vehicles, and energy efficiency retrofits to reach critical mass; Republicans want to end their subsidies and scuttle his green agenda. Obama wants to make “refundable” credits for the working poor a permanent feature of a progressive tax code; Republicans talk about “broadening the base” to stop coddling Americans who don’t pay income taxes. At this point, just about everything in the Obama stimulus is toxic to the GOP, by virtue of being in the Obama stimulus; the president has joked that he ought to say he’s adamantly opposed to investments in education and infrastructure, just so Republicans will support them.
Politically, the most obvious legacy of the stimulus is that politicians want nothing to do with “stimulus.” It’s become a four-letter word, shorthand for reckless spending and wasteful pork and political shenanigans. That doesn’t describe the Recovery Act at all, but Obama still won’t say the S-word, and the bipartisan consensus for fiscal expansion during recessions has completely unraveled.
“This is going to be the last stimulus we see for a long time,” says former Democratic senator Evan Bayh. “That can be the last sentence of your book.”
Well, not quite. The ultimate legacy of the stimulus will be decided in 2012.
— EPILOGUE —
The Choice
Back in January 2008, as the economy softened, Mitt Romney was all about stimulus. When his Republican rival John McCain said spending cuts were the path to prosperity, Romney scoffed: “That’s not stimulative.” When deficit hawks said his $250 billion plan for permanent high-end tax cuts would create too much red ink, he argued that a recession would create even more. When the Washington Post’s Ruth Marcus wrote her column grading stimulus proposals—the report card that gave Barack Obama an A-minus for focusing on timely, targeted, and temporary—she gave Romney a D, not only because his plan flunked the three-T test, but because it was “too big.”
A year later, as the economy cratered, Romney still sounded like a Keynesian. “A stimulus plan is needed without further delay,” he wrote.419 Consumers and businesses were reeling, so “what’s left is the government sector,” he told a panel of House Republicans.420 He was still pushing permanent tax relief for the rich—eliminating taxes on dividends and capital gains, slashing corporate rates, making the Bush tax cuts permanent—but he also called for some spending. Infrastructure projects were slow, but “should be part of the picture.” Romney had mixed feelings about state aid, but said he “won’t prescribe zero help for the states.” He also said the package should include “spending for energy research and energy infrastructure”—and no earmarks.
The Recovery Act followed those suggestions—except for the budget-busting permanent tax cuts—a
nd in his 2010 book No Apologies, Romney acknowledged that it would “accelerate the timing of the start of the recovery.” But for the paperback edition in 2011, Romney airbrushed out those tempered words, and any suggestion that he might have favored stimulus in the past. “The Obama stimulus, funded with a mountain of debt, was a bust,” he wrote. The politics of stimulus had shifted, and so had Mitt Romney.
Romney will probably be Obama’s opponent in the fall, and consistency is not his particular hobgoblin. As the governor of Massachusetts, he not only enacted the health reforms that inspired Obamacare—which he now vows to repeal—he supported many of the transformative policies in the Obama stimulus, including electronic health records, tax credits for energy efficiency, and investments in renewables. One of the firms backed by his green-energy government venture fund developed those BigBelly solar trash compactors that the stimulus financed in Philadelphia. But as a presidential candidate, Romney was determined to avoid the fate of Arlen Specter, Charlie Crist, and other moderates scozzafavaed by Tea Party conservatives in Republican primaries.
The new Romney has mocked the Chevy Volt, tweaked Obama’s “unhealthy obsession with green jobs,” and seized on Solyndra as a symbol of the Obama economy. And he has based his candidacy around the Tea Party creed that the U.S. government is an enemy of liberty, redistributing your money to someone less deserving, hindering the job creators who make the economy go. He is framing the 2012 election as a choice between Big Government and Free Enterprise, between a failed president who thinks the economy needs the government to provide stimulus and a successful businessman who knows the economy needs the government to get out of its way.
Meanwhile, Obama is framing 2012 as a choice between We’re In This Together and You’re On Your Own, between bottom-up growth and trickle-down growth, between the president who got the economy out of the ditch and the party that drove it into the ditch—the party whose standard-bearer wants to go back to driving the same way.
In 2008, Obama was like a blank slate onto which voters could project their Yes We Can fantasies of change. Now the slate is no longer blank, and voters won’t have to imagine what kind of president Obama would be or what he meant by change. Starting with the Recovery Act, he’s been pretty much the president he said he’d be, even if the immediate results haven’t been what he hoped they’d be.
Ideologically, he’s been a consistent left-of-center Democrat. He’s pursued big reforms rather than school uniforms, and he’s kept pushing for investments in clean energy, medical research, better schools, better infrastructure, and the rest of his New Foundation. But he’s been willing to take the ham sandwich when he couldn’t get the whole hog, and he’s been less liberal than advertised. He chose aides from the corporate-friendly Rubin wing of his party, abandoned “card check” for unions when the business lobby objected, grudgingly extended the Bush tax cuts for the rich, and cut taxes for everyone else. Race to the Top was a real departure from Democratic education traditions, and even when he was adding $800 billion to the national debt through the stimulus, he was always trying to minimize the fiscal fallout. The Recovery Act did end up with a few “tails”—like increases in Pell Grants for low-income students and a more generous Earned Income Tax Credit for low-income workers—but otherwise it has virtually no impact on current deficits. And it did not grow government; public-sector employment has steadily declined.
The rap on Obama in 2008 was that he was a words guy, not a deeds guy, a great communicator but an unaccomplished legislator. It turned out that he was more of a deeds guy. The professor-in-chief has utterly failed to educate Americans about Keynesian stimulus or global warming. He’s also succeeded in injecting record amounts of stimulus and making unprecedented inroads against global warming. Even his partisan critics now admit, to their regret, that he’s gotten a lot done. They portray his stimulus, auto bailout, health reforms, financial reforms, and other achievements as a giant leap toward the Europeanization of America. And even his allies complain that he’s failed to communicate what he’s done, that he’s let Republicans define him, that his immersion in legislative sausage-making has undermined his narrative of change.
Obama did have two obvious failures that have muddled his message and cast a shadow over his presidency. He failed to change the tone of Washington politics, which remains as rancid as ever. It wasn’t his fault that Republicans settled on a strategy of Horse Feathers obstructionism before he even took office, and gleefully compared their stand against the stimulus to Patton’s stand against the Nazis. But Obama was the one who made post-partisan promises he couldn’t keep. Obama also failed to produce a strong enough recovery to return unemployment to normal levels, which meant that everything else he’s done has been couched in caveats. Again, it wasn’t his fault that he inherited an obliterated economy, or that recoveries are always slow after financial cataclysms, or that Republicans blocked more aggressive responses to create jobs. But Obama was the one who promised a stronger middle class and a return to prosperity.
For a long time, Obama’s political advisers didn’t even want him bragging about the accomplishment side of his ledger, fearing that self-congratulation at a time of brutal unemployment would evoke Bush’s premature “Mission Accomplished” banner. But in 2012, Obama has started talking about change again, including the change produced by the Recovery Act. His campaign film, “The Road We’ve Traveled,” included shout-outs to its middle-class tax cuts, infrastructure projects, Race to the Top, and state aid to “keep teachers in the classroom, cops on the street, and first responders ready,” as well as its impact on the free-falling economy that greeted Obama at the start of 2009. The White House has started talking a lot about promises kept, and the stimulus kept a lot of promises—about energy efficiency, renewable electricity, middle-class tax cuts, electronic medicine, early childhood education, scientific research, and more. Some of those investments will start producing more visible change over the next four years, and Obama would like to be celebrating them in the White House.
Obama still avoids the word “stimulus,” but the Recovery Act is at the heart of his case for reelection. It’s central to his explanation of why Americans actually are better off than they were four years ago, even if they don’t feel so great. It started his New Foundation, and it’s the template for the follow-up investments he hopes to make if he’s reelected. It’s also a handy way to illustrate his differences with Republicans, who marched in lockstep against his recovery plan, and have proposed to tear down his New Foundation in favor of the policies that preceded his arrival in the White House.
Obama hopes to use a second term to consolidate and expand his new New Deal, continuing support for clean energy, implementing electronic health records and Race to the Top, making high-speed rail a reality, shifting the tax code in more progressive directions. Republicans have taken the other side of all those issues, and they are sure to resurrect their failed-stimulus attacks during the campaign, especially if Solyndra returns to the news, or a stimulus-funded company like A123 flounders in the fall. To Obama, the new New Deal is about “winning the future,” rising to our new Sputnik moment, “out-building, out-educating, and out-competing” our economic rivals. To Romney, it’s about “industrial policy,” “crony capitalism,” and government picking winners and losers.
It’s a philosophical and factual debate worth having. But 2012 won’t just be about litigating the new New Deal. It will also be about relitigating the old New Deal.
Romney’s history of flip-floppery has spurred a lot of speculation about the “real Romney.” Is he a true conservative who was just pandering to liberal Massachusetts when he passed universal health care with an individual mandate? Is he a true moderate who was just pandering to Tea Party primary voters when he raised doubts about climate science? Is he somewhere in between? They’re fun questions, but the answers probably don’t matter much. What matters are the policies that Romney has vowed to pursue on the campaign trail, because presidents usuall
y try to keep their promises. The single best predictor of President Obama’s policies has been his 2008 campaign agenda.
Romney basically wants to undo everything Obama has done—from health reform to Wall Street reform to clean-energy subsidies—and return to a pre-Change America. He’s been a bit vague about his other plans, but his general policies are mostly indistinguishable from Bush’s, except that he wants even deeper high-end tax cuts, and says he wants deep but unspecified cuts in government spending. He’s embraced House budget chairman Paul Ryan’s plan to squeeze Medicare and roll back non-military spending, a Tea Party blueprint that would leave virtually no room in the federal budget for anything but Social Security, health care, and defense within a few decades.
Romney doesn’t have the personality of an angry ideologue, and it’s possible that he does see the Tea Party as a ferret biting the hand that wants to save it from the dishwasher. But a President Romney would still preside over a party fueled by the resentments of its uncompromising Tea Party base. The New Deal notion that the government can help solve national problems or improve people’s lives is anathema to modern Republican dogma. As Obama discovered on his first presidential visit to Congress, Washington Republicans don’t think the New Deal worked. There were hints during the Supreme Court arguments on Obamacare that some conservative justices don’t even think the New Deal was constitutional. U.S. politics has always featured a healthy skepticism of the federal leviathan, but the GOP has defined government spending (except military spending) as an assault on freedom, essentially state-sanctioned theft.
The rising fury about government is curiously disconnected from the facts. Our federal tax burden is the lowest it’s been in decades; Obama made it even lower. The federal deficit is high, but it hasn’t increased under Obama, and it’s got almost nothing to do with the Recovery Act or the bank bailouts that came before it. The Republican rap on the Recovery Act—$1 trillion worth of wasteful earmarks, rampant fraud, political shenanigans, and wackadoodle liberalism—flies in the face of the evidence. But the fury is real. As Rick Santelli wrote after his rant, it’s driven by the suspicion that government is giving your hard-earned money to freeloaders, that Obama’s bureaucrats are picking winners who aren’t you, that Washington is out of control.
The New New Deal Page 49