72 “Poorly designed fiscal stimulus”: Larry Summers, “Why America Must Have a Fiscal Stimulus,” Financial Times, January 6, 2008.
73 A new Brookings analysis … : Douglas W. Elmendorf and Jason Furman, “If, When, How: A Primer on Fiscal Stimulus,” Brookings Institution, January 10, 2008, http://www.brookings.edu/papers/2008/0110_fiscal_stimulus_elmendorf_furman.aspx; Mark M. Zandi, “Assessing the Macro Economic Impact of Fiscal Stimulus 2008,” Moody’s Economy.com, January 2008, http://www.economy.com/mark-zandi/documents/Stimulus-Impact-2008.pdf; “Options for Responding to Short-Term Economic Weakness,” Congressional Budget Office, January 2008, http://www.cbo.gov/ftpdocs/89xx/doc8916/01-15-Econ_Stimulus.pdf.
74 their plan included state aid and unemployment benefits: “Barack Obama’s Plan to Stimulate the Economy,” Obama campaign fact sheet, http://obama.3cdn.net/8335008b3be0e6391e_foi8mve29.pdf.
75 “I know that Mr. Obama’s supporters hate to hear this”: Paul Krugman, “Responding to Recession,” New York Times, January 14, 2008.
76 Obama won easily with an A-minus: Ruth Marcus, “Whose Stimulus Makes the Grade?,” Washington Post, January 23, 2008.
77 Boehner was a conservative K Street Republican: Michael Grunwald and Jay Newton-Small, “Mr. Speaker,” Time, November 5, 2010, http://www.time.com/time/magazine/article/0,9171,2029476,00.html.
78 The rest of 2008: I consulted several books about the financial crisis. David Wessel’s In Fed We Trust: Ben Bernanke’s War on the Great Panic (New York: Crown, 2009) is an excellent account of the Federal Reserve’s role. Andrew Ross Sorkin’s Too Big to Fail (New York: Viking, 2009) is a gripping yarn from the Wall Street perspective. Henry Paulson Jr.’s On the Brink: Inside the Race to Stop the Collapse of the Global Financial System (New York: Business Plus, 2010) tells the treasury secretary’s story. And Carmen M. Reinhart and Kenneth S. Rogoff basically foretold the last few years in This Time Is Different: Eight Centuries of Financial Folly (Princeton: Princeton University Press, 2009).
79 the first in a series of unprecedented interventions: Michael Grunwald, “Ben Bernanke: Person of the Year,” Time, December 16, 2009, www.time.com/time/specials/packages/article/0,28804,1946375_1947251_1947520,00.html.
80 By the time Obama clinched: I relied on three fun books about the 2008 campaign in addition to my own reporting: Obama campaign manager David Plouffe’s The Audacity to Win (New York: Viking, 2009), John Heilemann and Mark Halperin’s Game Change (New York: Harper, 2010), and Richard Wolffe’s Renegade (New York: Random House, 2009).
81 “Nancy, we’re racing to prevent a collapse”: Paulson, On the Brink, p. 255.
4. “We Were Staring into the Abyss.”
82 his run-in with a bald, strapping, tax-averse plumber: Obama-Wurzelbacher exchange, October 12, 2008, http://www.youtube.com/watch?v=BRPbCSSXyp0&feature=related.
83 he unveiled his “Rescue Plan for the Middle Class”: Obama campaign speech, Toledo, Ohio, October 13, 2008, http://www.presidency.ucsb.edu/ws/index.php?pid=84562.
84 Reporters described it as a $60 billion proposal: Jackie Calmes, “From 2 Rivals, 2 Prescriptions,” New York Times, October 14, 2008; Don Gonyea, “Obama Proposes $60 Billion in Tax Breaks,” NPR Morning Edition, October 14, 2008.
85 “stimulus proposals are proliferating like Halloween pumpkins”: Lori Montgomery and Dan Eggen, “Spending Surge Pushing Deficit Toward $1 Trillion,” Washington Post, October 18, 2008.
86 “open its wallet, not tighten its belt”: David R. Sands, “Economists Prescribe Deeper Deficit,” Washington Times, October 17, 2008.
87 a fifty-six-chapter blueprint: Mark Green and Michele Jolin, eds., Change for America: A Progressive Blueprint for the 44th President (New York: Basic Books, 2009).
88 His own book: John Podesta, The Power of Progress: How America’s Progressives Can (Once Again) Save Our Economy, Our Climate, and Our Country (New York: Crown, 2008).
89 a Goldman Sachs report: Jan Hatzius et al., “US Economics Analyst,” Goldman Sachs, October 24, 2008.
90 conservative Harvard economist Martin Feldstein: Martin Feldstein, “The Stimulus Plan We Need Now,” Washington Post, October 30, 2008.
91 Lew’s final stimulus presentation: “Economic Team: Fiscal Stimulus,” November 2, 2008, discussion document provided to the author.
92 Soon the president-elect came on the screen: Obama victory speech, November 4, 2008, http://www.presidency.ucsb.edu/ws/index.php?pid=84750.
5. Ready Before Day One
93 Obama’s first post-election move: Several authors have written with insight about the Obama transition and White House. The best account of his first year is Jonathan Alter’s The Promise: President Obama, Year One (New York: Simon & Schuster, 2010). Other books covering this period include Ron Suskind’s Confidence Men (New York: Harper, 2011), Noam Scheiber’s Escape Artists: How Obama’s Team Fumbled the Recovery (New York: Simon & Schuster, 2011), and Richard Wolffe’s Revival: The Struggle for Survival Inside the Obama White House (New York: Crown, 2010).
94 The New York Times noted with dry understatement: Peter Baker and Jeff Zeleny, “For Obama, No Day to Bask as He Starts to Build a Team,” New York Times, November 6, 2008.
95 “These reports don’t get much worse than a loss of 240,000 jobs in a single month”: “Waiting for Obama,” Wall Street Journal, editorial, November 8, 2008.
96 Obama held his first news conference as president-elect: Obama transition press conference, Chicago, Illinois, November 7, 2008, http://www.presidency.ucsb.edu/ws/index.php?pid=84773.
97 As Jonathan Alter chronicled in The Defining Moment: Jonathan Alter, The Defining Moment (New York: Simon & Schuster, 2006). Rahm Emanuel was reading The Defining Moment during the transition, too, and Rob Nabors was listening to it on his iPod.
98 Nobel laureate Joseph Stiglitz: Joseph Stiglitz, “A $1 Trillion Answer,” New York Times, November 29, 2008.
99 “You really, really don’t want to lowball this”: Paul Krugman, “Stimulus Math (Wonkish),” The Conscience of a Liberal blog, New York Times, November 10, 2008, http://krugman.blogs.nytimes.com/2008/11/10/stimulus-math-wonkish/.
100 Furman’s eleven-page Confidential Discussion Draft: “Economic Team: Fiscal Stimulus,” November 12, 2008; document provided to the author.
101 At the time, 387 predominantly liberal economists: Economists’ letter to Harry Reid, Mitch McConnell, Nancy Pelosi, and John Boehner, November 19, 2008, http://www.cepr.net/documents/publications/Economists_letter_2008_11_19.pdf.
102 a “Green Stimulus” memo: “Memorandum for the Economic Team,” November 11, 2008; memo provided to the author. The proposals included $11 billion to install smart meters in 110 million U.S. homes, $4 billion for solar roofs on federal buildings, $20 billion for renewable energy tax credits, $30 billion for mass transit, and $7.25 billion for green schools. The transit estimates, cribbed from Transportation 4 America, turned out to be way more than agencies could spend, so the team reduced them.
103 Bob Greenstein came bearing especially bad news: Greenstein’s eighteen-page presentation was provided to the author: “Economic Team: Federal Budget Baseline and Selected Policy Issues,” November 11, 2008. Greenstein’s think tank, the Center for Budget and Policy Priorities, produced a number of reports about state fiscal gaps.
104 The council’s number-one priority: David Wessel, “Shaping the New Agenda (A Special Report)—Finance and the U.S. Economy,” Wall Street Journal, November 24, 2008; Jon Hilsenrath, “CEOs Say Stimulus Top Priority,” Wall Street Journal, November 19, 2008; Jon Hilsenrath, “Obama Aides Say Economy Needs Big Lift,” Wall Street Journal, November 18, 2008.
105 GOP leaders and conservative pundits were laying down markers: For example, Senate Republican whip Jon Kyl of Arizona warned: “If they go after things like card check and the Fairness Doctrine, or some big tax increase or get-out-of-Iraq-immediately, that is likely to unify Republicans.” Obama didn’t go after any of those things, but Republicans managed to remai
n unified anyway. Kirk Victor, “Q&A: Kyl Talks About Playing Defense,” National Journal, November 17, 2008, http://lostintransition.nationaljournal.com/2008/11/kyl-talks-about-playing-defense.php. Also: Amy Schatz, “Fairness Doctrine Stirs Angst Among the Right,” Wall Street Journal, November 3, 2008; “Do Gun Owners Fear an Obama Presidency?,” America’s Election HQ, Fox News, October 31, 2008, http://www.foxnews.com/story/0,2933,445627,00.html; David Ignatius, “Mr. Cool’s Centrist Gamble,” Washington Post, January 9, 2009; Karl Rove, “Thanksgiving Cheer from Obama,” Wall Street Journal, November 28, 2008.
106 “a virtual Rubin constellation”: Jackie Calmes, “Rubin Protégés Change Their Tune as They Join Obama’s Team,” New York Times, November 24, 2008.
107 “I don’t know what the exact number is”: Austan Goolsbee on Face the Nation, CBS, November 23, 2008.
108 “before exchanging hellos or even shaking hands”: Suskind, Confidence Men, p. 150. To his credit, Suskind says he plans to correct this scene in his paperback edition.
109 Obama pitched his new New Deal: Obama press conference, November 24, 2011, http://blogs.suntimes.com/sweet/2008/11/presidentelect_obama_second_pr.html.
110 “It’s as if the news is full of floods”: Peggy Noonan, “Turbulence Ahead,” Wall Street Journal, November 28, 2008.
111 “The economy is unraveling so fast”: Neil Irwin and Steven Mufson, “Economic Indicators Continue Nose Dive; Half-Million Jobs Cut: Worst Month Since 1974,” Washington Post, December 6, 2008.
112 As Romer later pointed out: Christina Romer, “So Is It Working? An Assessment of the American Recovery and Reinvestment Act at the Five-Month Mark,” Speech at the Economic Club of Washington, D.C., August 6, 2009, http://elsa.berkeley.edu/~cromer/DCEconClub.pdf.
113 about as much as the United States spent on Medicare and Medicaid: In 2008, net mandatory Medicare spending was $386 billion, while federal spending on Medicaid was $201 billion. “The Long-Term Outlook for Medicare, Medicaid, and Total Health Care Spending,” Congressional Budget Office, June 2009, http://www.cbo.gov/ftpdocs/102xx/doc10297/chapter2.5.1.shtml.
114 In a four-page summary distributed in early December: “The American Economic Recovery Plan,” undated discussion draft provided to the author. It proposed $70 billion for building a clean energy economy, $80 billion for strengthening American infrastructure, $125 billion for health IT and state Medicaid relief, $25 billion for education, and $280 billion for tax cuts and protecting the vulnerable.
115 Geithner had told Obama that no matter what happened: Scheiber, Escape Artists, pp. 15–16.
116 In his radio address: Obama radio address, December 6, 2009, http://www.presidency.ucsb.edu/ws/index.php?pid=84776#axzz1mIf49S9E.
117 Obama chose his cabinet faster: White House Transition Project, http://uncnews.unc.edu/content/view/1971/70/.
118 even two centrist Democrats had voted no: Democratic senators Evan Bayh (Indiana) and Claire McCaskill (Missouri) joined forty Republicans in voting against the $56 billion stimulus. The vote was 52–42 in favor, but the bill died because sixty was needed to overcome a Republican filibuster.
119 That was even bigger than TARP: The cost of Afghanistan and Iraq through 2008 was $795 billion. Amy Belasco, “The Cost of Iraq, Afghanistan, and Other Global War on Terror Operations Since 9/11,” Congressional Research Service, March 29, 2011.
120 a fifty-seven page “Executive Summary of Economic Policy Work”: The New Yorker’s excellent Ryan Lizza was the first reporter to report on this memo, in “Inside the Crisis,” October 12, 2009, and then to obtain the memo, in “The Obama Memos,” January 30, 2012. He posted it at http://www.newyorker.com/online/blogs/newsdesk/2012/01/the-summers-memo.html.
6. The Moment
121 The stories Obamaworld tells about itself: The best narrative journalism about the Obama administration and the stimulus always seems to home in on December 16. For example: Scott Wilson, “Bruised by Stimulus Battle, Obama Changed His Approach to Washington,” Washington Post, April 29, 2009; Ryan Lizza, “Inside the Crisis,” The New Yorker, October 12, 2009; Peter Baker, “Education of a President,” New York Times, October 12, 2010; Ezra Klein, “Financial Crisis and Stimulus: Could This Time Be Different?,” Washington Post, October 8, 2011. The “holy-shit moment” also appears in several books about the administration.
122 Romer had searing memories: Christina D. Romer, “Not My Father’s Recession: The Extraordinary Challenges and Policy Responses of the First Twenty Months of the Obama Administration,” Speech at the National Press Club, September 1, 2010, http://www.whitehouse.gov/sites/default/files/microsites/100901-National-Press-Club.pdf.
123 In FDR’s most aggressive year: Romer, citing Bureau of Economic Analysis and Census data, said the largest fiscal impact took place in 1936. Romer, “Back from the Brink,” Speech to the Federal Reserve Bank of Chicago, September 24, 2009, http://www.whitehouse.gov/assets/documents/Back_from_the_Brink2.pdf.
124 the biggest deficit in history: The Congressional Budget Office projected the 2009 deficit to hit $1.2 trillion. The actual deficit that year was $1.4 trillion. The previous largest deficit was $459 billion in 2008. “The Budget and Economic Outlook: 2009 to 2019,” Congressional Budget Office, January 2009, http://www.cbo.gov/ftpdocs/99xx/doc9957/01-07-Outlook.pdf.
125 Summers hadn’t mentioned Romer’s $1.2 trillion figure: Lizza, “Inside the Crisis,” The New Yorker. I don’t entirely agree with Lizza’s take on this memo, but he was the first reporter to write about it and then the first reporter to publish it. Felix Salmon’s criticism was typical. “How Larry Summers Hobbled Obama’s Economic Policy,” Reuters, January 19, 2011, http://blogs.reuters.com/felix-salmon/2011/01/19/how-larry-summers-hobbled-obamas-economic-policy/.
126 Romer had suggested in one draft: Scheiber, The Escape Artists, p. 27. I think Scheiber makes way too much out of this tidbit, but he deserves credit for breaking the news and publishing the draft on his website (www.noamscheiber.com). Incidentally, by December 16, the situation had deteriorated to the point where Romer believed that even $1.8 billion would have been insufficient to fill the hole in demand.
127 Pelosi didn’t even want to go past $600 billion: Her staff told the Obama transition team, “The Speaker at this stage is at $600 billion and is extremely nervous about going above that.” She was also pushing to reduce the size of the package by using it to repeal the Bush tax cuts for the wealthy. “Issues in Congressional Discussions on Economic Recovery,” December 20, 2008, four-page transition memo provided to the author.
128 “It is easier to add down the road”: “Executive Summary of Economic Policy Work,” p. 57, http://s3.documentcloud.org/documents/285065/summers-12-15-08-memo.pdf.
129 Paul Krugman also predicted: “Behind the Curve,” New York Times, March 9, 2009.
130 I made the same assumption: Michael Grunwald, “How to Spend a Trillion Dollars,” Time, January 15, 2009, http://www.time.com/time/magazine/article/0,9171,1871915,00.html. Otherwise, the article holds up pretty well. I didn’t grasp the macroeconomic importance of bailing out even irresponsible states, but I still think my idea of attaching more strings to state aid made sense. The stimulus did attach more strings than I realized, although most of them were “maintenance of effort” requirements to make sure governors didn’t just use the money as an excuse to make even deeper cuts to Medicaid and education.
131 he called it “unforgettable”: Obama speech at Brookings Institution, December 8, 2009, http://www.presidency.ucsb.edu/ws/index.php?pid=86975.
132 Advocates had identified $10 billion in shovel-ready water and sewer projects: Letter to Democratic senators, American Water Works Association, January 26, 2009, http://www.awwa.org/files/GovtPublicAffairs/PDF/SenateStimulus.pdf.easier
133 the National Park Service had less than $1 billion in ready-to-go projects: The “Green Stimulus” memo said the NPS had identified $440 million worth of projects that could be contracted out in less than six months. “By focusing on NPS infr
astructure investment, this effort could generate jobs and follow in spirit with the WPA and CCC,” the memo said. The National Parks Conservation Association later said there were $2.5 billion in ready-to-go projects.
134 History has bathed the CCC in a romantic glow: I consulted several books on the original New Deal including Alter’s The Defining Moment, Alan Brinkley’s The End of Reform: New Deal Liberalism in Recession and War (New York: Random House, 1996), Anthony J. Badger’s The New Deal: The Depression Years, 1933–1940 (New York: Hill & Wang, 1989), and William E. Leuchtenburg’s Franklin D. Roosevelt and the New Deal (New York: Harper Perennial, 2009; first published, 1963).
135 He didn’t have another cake: Jonathan Alter first wrote about the smart grid discussion in “The PDQ Presidency,” Newsweek, October 23, 2009, and The Promise. I also wrote about it in “How the Stimulus Is Changing America,” Time, September 6, 2010. Suskind and others who wrote about Obama’s obsession with the grid tend to portray it as a sign of his misplaced priorities. Even Alter portrays the episode as a failure, but the Recovery Act would end up jump-starting the smart grid.
136 Bob Greenstein would soon ratchet up: “State Budget Troubles Worsen,” the Center on Budget and Policy Priorities, December 23, 2008.
137 polls would find that fewer than 10 percent of them were aware: For example, Michael Cooper, “From Obama, the Tax Cut Nobody Heard Of,” New York Times, October 18, 2010.
138 Behavioral economics had become trendy: Steven D. Levitt and Stephen J. Dubner, Freakonomics: A Rogue Economist Explores the Hidden Side of Everything (New York: William Morrow, 2005); George A. Akerlof and Robert J. Shiller, Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism (Princeton: Princeton University Press, 2009); Richard H. Thaler and Cass R. Sunstein, Nudge (New Haven: Yale University Press, 2008). I wrote the first journalistic piece about the influence of behavioral economics in Obamaworld: Michael Grunwald, “How Obama Is Using the Science of Change,” Time, April 2, 2009, www.time.com/time/magazine/article/0,9171,1889153,00.html. My former colleague Justin Fox has written a smart book about the follies of neoclassical thinking, The Myth of the Rational Market (New York: HarperBusiness, 2009).
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