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The New New Deal by Michael Grunwald

Although I know that economists generally consider the stimulus to have been a success, and that it’s considered one of the most transparent government programs ever, I’ve never been particularly familiar with the details outside of the HITECH Act. As such, I was looking forward to getting started on this book.

Reading the introduction made me excited about seeing what will be accomplished from the reinvestment part of the Act. It’s the first time I heard about the ARPA-E agency, Obama’s mini-Manhatten Project, designed to invest in high-risk, high-reward energy research. And while the size of the Act – half what economists said at the time was required, with much of it devoted to tax cuts – was a disappointment, the sheer reach is mind-boggling: investments in transportation infrastructure, investments in research, investments in healthcare, investments in energy. Reading this chapter left me wanting more, wanting to know the details behind each of these ambitious programs.

Chapter one takes a step back and looks at what Obama wanted to accomplish with the bill, what his priorities were and the values that the stimulus represented. Then in chapter two, we get what the author calls the four pillars of the stimulus. Energy: how can we reduce our energy use and our carbon footprint without reducing our standard of living? Health care: how can we prevent the explosion in health costs that were on track to take up a full third of the economy by 2040, and improve the quality of care? Education: could we reach the goals that No Child Left Behind set out, but dismally failed to reach? Finally, the economy: after a decade in which 2/3 of all income gains went to the top 1%, with an economy that was sinking – nobody knew yet how quickly – into recession, how could we make things better for the middle class? Each of these areas was a ticking bomb, with the potential to leave the United States far behind in the global economy. The stimulus would address all of them.

(Follow me over the orange squiggle...)

Chapters three and four cover the collapsing economy, and Obama’s transition team’s struggle to keep up with it as they planned out the stimulus, along with other efforts to ensure that Obama was ready to hit the ground running after winning the election. In the second section, we then move into the “how” of the stimulus: how much money was needed, how should it be distributed, and how do we pass the bill? The amount of trouble the economy was known to be in (and thus the amount of stimulus needed) kept increasing; while the original intent had been to immediately push tens of billions of dollars into the economy (Rahm wanted Obama to sign a bill his first day in office), it was rapidly becoming clear that a massive effort over several years would be required. The team was walking a tightrope: they needed a stimulus that was sufficiently large and effective that it would keep the economy from free-falling into a depression, yet small and bipartisan enough that it could actually make it through Congress. In September, the Senate failed to pass a $56 billion stimulus; by the time Obama was formally elected, his economists were throwing around numbers like 1.2 trillion and 1.6 trillion. In December, the president-elect decided to aim for something in the 800s – just big enough to divert disaster, but not causing Congress to choke on a trillion dollar bill. The assumption, however, was that after they proposed a stimulus (they agreed on a number between $675 billion and $775 billion), democrats would add more spending and republicans would add more tax cuts, pushing the final number closer to what the economists said they needed. Congress, however, had its own ideas…

At the time, the Senate had 99 members; Al Franken had been elected senator, but republicans kept the election tied up in court until long after the stimulus was passed. Breaking a filibuster still required 60 votes, meaning it couldn’t be done without republican help. Additionally, since no republican wanted to be the vote to pass the bill, in practice it actually required 61 out of the 99 senators to pass. Most members of the republican caucus were not going to vote for the stimulus regardless of what was in it; the official policy of the republican leadership was to have every single republican in Congress vote against the bill (something they managed in the House). Although Reid allowed unlimited amendments (and every member of the Senate requested something for inclusion), only a few republicans ever considered actually supporting the bill, and it eventually passed with only three (Susan Collins, Olympia Snowe, and Arlen Spector). Each of them, as well as blue dog democrats who wavered on supporting the bill, had enormous negotiating power. Snowe, for example, insisted that the stimulus include the $70 billion AMT fix to make Chuck Grassley happy (even though it had no stimulative effect, since nobody expected the AMT tax hike to go into effect anyway, and Grassley still wouldn’t vote for the bill), while Spector demanded that the bill contain $10 billion for NIH and also cost less than $800 billion altogether. House democrats, having passed their version of the bill, became increasingly frustrated at seeing it weakened in order to appease a few stubborn senators, but were held together by Nancy Pelosi. In the end, the revised bill passed (with Teddy Kennedy too sick to make the final vote, Sherrod Brown had to fly back to Washington immediately after his mother’s funeral to break the filibuster) and the president signed it at the Denver Museum of Science. Money began flowing shortly afterwards, and the economy (which contracted at a rate of 8.9% in the fourth quarter of 2008) began to recover. But the fight was just beginning.

Part 3 of the book covers the aftermath of the recovery act: how it worked, and how the American public responded. A huge amount of money was going out the door; the administration needed to ensure that it was going where it was supposed to be, as quickly as possible. Shortly after the stimulus passed, Biden wrote a memo outlining the need for someone to oversee the stimulus, someone who could avoid waste, watch out for missed deadlines, and bring anything Obama needed to see to the president’s attention. Obama gave him the job, and Spiden spent much of the next two years ensuring that stimulus dollars did what they were supposed to do. Although I follow politics fairly closely, I hadn’t fully appreciated how involved Biden was in making sure that everything went smoothly, and how important it was to have someone with his background in the administration. When inefficiencies popped up, Biden was on top of them – a senator who complained about a road that was due to be resurfaced with stimulus funds right before heavy trucks went over them carrying materials for another stimulus program admitted the next day that the schedule had been fixed to avoid the problem. The White House considered transparency and accountability to be key elements of the stimulus; one of the first things they did was set up, which was run by an independent third party (Earl Devaney, the former inspector general who broke the Abramoff lobbying scandal). The expectation from outside experts was that 5% of stimulus funds could be stolen; instead, fraud was practical nonexistent – about 0.001 percent. Current plans, in fact, are to apply the transparency efforts from the stimulus to the rest of the federal government. That was particularly impressive considering the speed at which things were moving; with plenty of pressure from Biden, the administration met every funding deadline in the stimulus.

Getting the economy kick-started immediately wasn’t the only reason that money needed to go out right away. Congressional republicans had made it clear that if they took control of Congress in the 2010 midterms, any money that hadn’t been spent yet wouldn’t be. The stimulus was working – independent estimates showed it creating or saving millions of jobs. The American solar power industry, which was dying when Obama took office, was now booming; in fact, Solyndra, the highest profile failure from the loan guarantee program (which was, it should be noted, specifically designed to fund higher-risk projects with the expectation that some would fail) went out of business largely because the stimulus helped drive down the price of silicon, to the point where Solyndra’s revolutionary technology was no longer cost-effective. The green energy sector as a whole had doubled in size, and the United States was actually becoming a net exporter of green technology.

But while the stimulus itself was working, Obama was losing the messaging war. The republican party was successfully driving the narrative, and they cast the stimulus as a big-government boondoggle. While it had no earmarks, the US public believed it was full of pork. While it was responsibile for millions of jobs (and most economists credited it for lowering the unemployment rate by several percentage points), hardly anyone believed that it had created any jobs. While it was the most transparent and accountable government program in history, it was sold as an example of the corruption and fraud surrounding the Obama administration. By the time the 2010 election rolled around, every republican running for Congress was running against the stimulus, and almost no democrats were publically in favor of it. If not for tea party challenges to more moderate Senate republicans, the democratic party would most likely have lost control of the Senate as well as the House, and the long-term projects of the stimulus – changes to health care IT, high speed rail, and other projects that would dramatically improve the productivity and quality of life of Americans – would have been defunded before they could finish.

While the entire book is about politics, the last section is the most political. The author is obviously enthusiastic about the possibilities of the programs funded by the stimulus, and is not impressed by the republican politicians who now oppose ideas they’ve long supported, solely because Obama also supports them. Indeed, the last few chapters are largely an argument that the 2012 election will determine the future of the country: either the democrats win and reforms that was already positioning America to be a world leader in the 21st century – alternative fuels, health IT (the area I work in, as it happens), mass transportation – continue to advance, or the republican party wins, overturns everything the stimulus put into place, and returns us to the policies of the Bush years. I didn’t feel that the third section of the book was as strong as the first two, and republican readers who hated the stimulus will likely hate this part of the book as well, but it does make the case that the 2012 election will decide the future of the country.

Overall, I found the book to be quite readable; the writing flows easily, there’s a disctinct lack of typos, and every so often the author throws in a funny zinger. Those who follow politics will be familiar with most of the events of the book – I found myself getting annoyed again as he recounted the republican obstructionism – but it’s an interesting read. Grinwald interviewed a number of people, including the leadership in both parties (with the notable exception of the president himself) and also lists 449 references at the end of the book. While the book definitely isn’t perfect – I felt that the author spent too much of the third section giving his own opinion rather than sticking with the facts – I recommend it for anyone who has an opinion on the stimulus or intends to vote this November.


On Tuesday, Michael Grunwald released his book about the American Recovery and Reinvestment Act; it's been mentioned on Daily Kos a few times (in fact, this is where I heard about it), but I haven't seen a review yet so I thought I'd copy over mine (which I just published this morning on my book review site). The book is available for $18.48 at Amazon.

7:23 PM PT: Update: as of Sunday night, the Amazon price has now dropped to $16.80 hardcover, $14.99 Kindle.

Originally posted to wmspringer on Sun Aug 19, 2012 at 10:03 AM PDT.

Also republished by Community Spotlight.

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