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The New New Deal: The Hidden Story of Change in the Obama Era - Michael Grunwald I’m pretty tired of this depression we’ve been having. Unemployment that hit 12% in 2009 and kept rising, states from ocean to ocean laying off tens, hundreds of thousands of public employees each. No more auto industry, and vast swaths of the Midwest losing jobs and industrial capacity faster than Mitt Romney changes policy positions. And things have not been looking up either. The federal government is investing nothing in alternate energy R&D, leaving such things to private enterprise, and doing nothing to change the pencil-and-paper recordkeeping that characterizes our national medical system. In fact, the federal government invested nothing in the future or the present, and left to the states the cost of repairing increasingly decrepit roads and bridges. Reduced demand in America for imported products has had a harsh impact overseas as well, depressing foreign economies. And with governments in powerful nations like Germany demanding austerity as a response to diminished national revenues, the international downturn picked up speed and we are now heading towards a global economic conflagration.

What? You don’t remember?

I know, I know. Times are tough. And they have been tough for a while, but envisioning what the world might have looked like in the absence of the American Recovery and Reinvestment Act should give one pause. We are not talking Recession, major or minor. We are talking capital-D Depression, which is exactly where the US economy was headed in the final quarter of 2008. And whether it is great or mediocre, enduring another one of those SOBs is not something any sane person wants to do.

So what does one do? If, as most economists contend, the problem in the late Bush economy, the result of the housing bubble and certain Wall Street criminality, was one of lax demand, and if the private economy was in no position or mood to ramp up demand, then the only player capable of doing so was the federal government. Both Democratic and Republican administrations, true Keynesians, have a history of providing the demand that the market has not always generated on its own. Been there, done that. It works. That’s why they keep doing it. This time the problem was bigger. It was with the intention of preventing a second Great Depression that the Obama Administration proposed the American Recovery and Reinvestment Act, or ARRA, an acronym only a pirate could love. But there was more than simple economic stimulus involved. The administration wanted to change some long term trends, in health care, energy and education, as well.

Amazingly, within a month of taking office, the Obama Administration managed to get through Congress the largest stimulus bill in the nation’s history. It’s nice to have a large enough majority in the Senate that only a few of the opposition need be persuaded in order to make a bill a law. National media, more than happy to carry water for the party of “Just Say No,” took great delight in trying to dig up dirt on what became an $800 billion program. And when that did not satisfy, as there was rather little dirt to be dug, they made things up. A consensus was forming in the DC bubble, as soon as the program came into being, that it was a complete boondoggle.

In 2010, a reporter for Time magazine, Michael Grunwald, was in Florida working on a book:
I was only vaguely aware of the Beltway consensus that President Obama’s stimulus was an $800 billion joke. But because I write a lot about the environment, I was very aware that the stimulus included about $90 billion for clean energy, which was astonishing, because the feds were only spending a few billion dollars a year before. The stimulus was pouring unprecedented funding into wind, solar, and other renewables; energy efficiency in every form; advanced biofuels; electric vehicles; a smarter grid; cleaner coal; and factories to make all that green stuff in the U.S. It was clearly a huge deal. And it got me curious about what else was in the stimulus.
So what was different about this one? A few things.

For one, vast sums were directed toward ravaged state governments to keep them from laying off hundreds of thousands of state employees. You know the sort, public leaches like teachers, cops, firefighters, sanitation workers, and many thousands more.

Hundreds of billions were allocated to tax cuts. And the money was not sent out in a lump sum, as had been done in the past. The reason is that when folks get such a windfall, they tend to save all or some of it. Of course it is politically advantageous to send out the money in a lump sum, with the president’s face on it, but while that may boost the standing of the president, it is not the most effective way to get that money into the economy. The intention with the ARRA was to get money flowing through the economy ASAP and the best way to do that was to put it in people’s pockets right away. Thus the reduction was largely in the form of cutting payroll taxes. It may not be all that obvious to most folks, but there was an extra $10 or $20 dollars following you home every week. And that money was spent, as anticipated, accomplishing the aim of the program.

How many people did the federal government hire? Practically none. No CCC here. But the stimulus prevented a bad situation from becoming catastrophic. Yes, 9% unemployment sucks, now down to about 8%, but in the absence of the stimulus it would have been much worse. And that leads us to another reason why this stimulus was perceived so differently from, say, the New Deal.

Back in the 1930s the economy had gone nicely to hell during the Republican Hoover administration, whose plan for getting the nation out of a depression was to tell people to suck it up. A few years of this particular form of heartlessness and folks were ready for action, any action. Thus when FDR began stirring up the alphabet pot, the American people were highly receptive. In late 2008, the economy had gone completely off the rails. How’s that tax-cuttin’ and de-regulation stuff workin’ out for ya? But the economy had not yet reached its potential bottom by the time the new administration took office. So there was not yet public knowledge of just how bad things were and thus no large natural constituency for a huge stimulus. BTW, the largest stimulus proposed during the 2008 campaign was by one Willard Mitt Romney, who seems to have had his Road to Damascus moment since then and now finds the light of stimulus spending too blinding for his liking.

Because economic report numbers lag behind the reality, the new administration did not have all the data they needed when they took office to make a fully informed judgment of just how bad things were. Their analysts were under the impression that economic growth (an oxymoron here) was at negative four percent. As in the economy was not only not growing it was shrinking. Pretty bad, huh? Except that that was not even half right. It turned out that the economy was shrinking at a rate of almost nine percent in the final quarter of 2008. That is Depression territory.

It is pretty significant, if you are trying to sell a program, that you have your baseline correct, to know how quickly your ship is sinking. If, say, you figure your program will boost the economy by four percent a year, so that it is no longer sinking, and it does just that, well, you have succeeded rather nicely. But it you propose a program that will improve the national economy by four percent and it is in fact plunging at a rate of nine percent, even if you meet your expectations, the economy will still be seen to be going glug, glug, glug, and your program, even if it is completely successful, will be seen as being all wet. Oh and toss in the fact that the opposition party, in order to keep the administration from appearing to have any success, did all they could to scuttle attempts to keep the economy afloat. They must have learned this from ghetto kids back in the days of the crack epidemic, who would set fires and then throw rocks at the firefighters who arrived to put the blazes out.

The Administration allowed out an economic report using the negative 4 % number and thus promised to keep unemployment under 8%, but with the real problem being much larger, 8% was no longer a realistic target. That did not stop the reality-free Obama opponents from repeating the 8% number daily, even though they knew better.

The final piece here is, I think, the most interesting. And that is the Reinvestment “R.” Grunwald focuses considerable attention on the green technology mega-boost supported by the Recovery Act. The act included $90 billion for sundry green energy initiatives, from funding insulation programs for homes, to esoteric research in algae-based biofuels, to investing in battery research, which has helped cut the cost of electric vehicle batteries in half, to replacing over 400,000 streetlamps with energy-sipping LEDs. The Quarterly-P&L-focus of American corporations has resulted in the USA falling further and further behind other nations, which have been investing in a green future. China, for example, recently announced a plan to invest over $300 billion over five years. Germany and Spain are world leaders in developing and manufacturing solar technology. For the USA to remain viable we need to make major strides in this area. In the absence of the Recovery Act, we would be sinking into the darkness of increasing dependence on foreign suppliers. Improving our energy standing in the world is, ultimately, a matter of national security. While it is an amazing thing that the ARRA helped prevent a depression in 21st century America, what the lasting legacy of the act is likely to be is the new industries that it created, in green power generation, electrofuels, batteries, and other advanced green tech that will generate hundreds of thousands of domestic jobs and significantly reduce our dependence on foreign resources. In addition, this public support for the nascent industry has attracted hundred of billions in private investment. One of the few new entities created by the Recovery Act was the ARPA-E section of the Department of Energy. You may recall that ARPA was the government entity that came up with the idea of the internet, among other things. ARPA-E is a version designed to find and promote advances in energy science and technology. Extremely cool stuff.

American medical record-keeping is a joke. The world has been moving ahead with digitizing medical records, while the USA is still in the paper and pencil era. Considerable Recovery Act money was put into moving 21st century record-keeping technology into the medical world.

Transportation was another area addressed, with money being allocated more to improving existing infrastructure than in building new roads and bridges. Although not all the work promoted sexy tech like high speed rail, a lot of it is promoting higher-speed transportation, in particular removing impediments to the movement of rail freight. Not sexy, but ultimately very, very smart and effective. Grunwald tells some tales about the hope of the administration to develop a high-speed system somewhere in the country. Maybe in Florida, maybe in the Chicago to St Louis route, maybe LA to San Francisco. That effort makes for fascinating and illuminating reading.

There is more in the book, particularly on the education pillar of the Act, but I will leave that for you to find for yourself.

Grunwald has offered a fairly detailed look at how the Recovery Act was put together, how it was passed (sausage was made), how the right did everything in their power to scuttle it, and how it has been treated by the media. (scorned by the DC echo chamber). Most importantly, he looked at the facts on the ground, at what the Act accomplished (stopped a Depression, among other things) and how it promises to change our future. (creation of new green technology industries, improved energy efficiency, reduction in reliance on foreign oil). Was the Recovery Act imperfect? Sure. Should it have been larger? Yep. Was it politically possible for it to have been larger? Probably not.

I have some issues with Grunwald. There is a seam in the Democratic Party, probably a product of the Clintonian third way clique, of which Obama is a member in good standing, that unions are fair game. Take the charter school movement, please. Somehow it has evolved into a privatization model, in which most, if not all teachers, who work for such entities are no longer allowed to be union members. Instead of working out deals with unions to form partnerships with movements to try new educational models, teachers unions have been perceived as dead-enders, resisting progressive change at every turn, implicitly comparing them to white southerners resisting integration. Grunwald seems to be a subscriber to that notion. His index, for example, skips straight from “American Economic Recovery Plan” to American Jobs Act,” somehow skipping “The American Federation of Teachers”; he skips from “Tea Party” to “Technological,” without an intervening “teacher.” It also skips from “National Economic Council” to “National Endowment for the Arts” with nary an NEA (National Educational Alliance) in sight. You can find a reference under unions, teachers, but with so many other players being named and incorporated it seems more than an oversight that organizations representing teachers are so poorly noted.

He also takes issue with those in the progressive wing of the Democratic Party who expressed disappointment that Obama seemed to be a lousy negotiator because he appeared to always be starting not from a position of demanding pie-in-the-sky, but from a position of having moved to the center before even sitting down with the other side. Really? Grunwald sees no merit to that view? It seems to me and plenty of other progressives that in at least some instances, it would have served the nation well if our national leader had demanded the moon before settling for what he eventually got, which was pretty good, but in no way lunar. You don’t start negotiating in the middle. You wind up there. Starting in the middle only guarantees that the final outcome will wind up being to the right of center. Even if that is not the position a leader wants to take in closed-door sessions with legislators, it most certainly is one he should be taking with the American people. Bloody hell, man, use that bully pulpit, embarsass some of those bastards. Sometimes the American people listen. Sometimes they pressure their representatives. It seems that this approach was never considered, to the detriment of us all. Grunwald castigating even the notion of such an approach, echoing administration folks like Rahm Emmanuel, does a disservice to those of us who hoped for more. If the president only feels the wind from one direction it is pretty clear which way he will tack.

Spleen has been properly vented.

So, bottom line, if you like basing your views on major public policies on facts instead of talking head bloviation and innuendo, this is a book for you. Grunwald is an excellent writer, so do not shy away, fearing that you will be overwhelmed by charts and graphs, or by very dry discourse. This is an exciting read, informative and insightful. Although Joe Biden may have been referring to the Affordable Health Care Act when he uttered the words, he could have justifiably said them about the American Recovery and Reinvestment Act, “This is a big fucking deal.” Yes it was, and still is. A big piece of the hope and change we voted for. You would do well to invest some time in reading Grunwald’s book. The understanding you gain will pay dividends for a long time.


LINKS
This is a must read item – A Slate interview with Grunwald - a nifty summary, in effect, of the book

The website for the act itself

A piece by Jeff Weintraub looking at right wing complaints that the Recovery Act was unsuccessful