A new book says Obama’s stimulus was much bigger and more effective than most Americans think, not only keeping the U.S. from falling into a deep depression, but also laying the foundation for the economy of the 21st century.
By Francesca Rheannon
It’s hard to claim a negative, the political experts say. The Obama stimulus is the most salient current example. When the Obama camp says that the economy would have been worse if they hadn’t done the stimulus, their opponents counter with the (rhetorical) question: “Are you better off now than you were before Obama came to office?”
Time Magazine reporter Michael Grunwald would answer this question for Americans with a resounding “yes!” He spent two years researching the Obama Administration’s economic stimulus programs; his book, The New New Deal, lays out in massive detail the story of how the stimulus unfolded and what it accomplished.
Grunwald claims that Obama’s stimulus not only kept the U.S. from falling into a deep depression, it also lays the foundation for the economy of the 21st century.
According to him, it was the “biggest and most transformative education reform bill,” the “biggest and most transformative energy bill,” “America's biggest foray into industrial policy since FDR,” “the biggest expansion of antipoverty initiatives since Lyndon Johnson,” the “biggest middle class tax cut since Ronald Reagan,” and the “biggest infusion of research money ever.”
Much of the information in the book came as a complete surprise to me. Perhaps because the stimulus was pitifully underreported by the media, misrepresented by political opponents -- and also poorly messaged by the Obama Administration itself.
I spoke with Grunwald to bring more of the story The New New Deal tells to CSRwire Talkback readers.
How Obama’s Stimulus Got A Bad Rap
The stimulus was widely criticized from both left and right. What were the arguments from both sides?
Michael Grunwald: It got a really bad rap. A year after the stimulus passed, the percentage of Americans who believed it had created jobs was lower than the percentage who believed that Elvis was alive.
One of the stories I tell is how the Republicans decided in secret meetings that “No” was their path back to power and they were going to fight [the stimulus] no matter what was in it. And so, even though Mitt Romney had the largest stimulus plan of any of the 2008 presidential candidates and House Republicans voted for a stimulus that was very similar to Obama’s, from the beginning they agreed their message was going to be, “This is big government, big spending, and a big mess.”
And they have been remarkably disciplined and effective in sticking to that message and making it sound like it's $800 billion worth of condoms and sod on the mall and snow making machines in Duluth and all sorts of nonsense that isn't in the actual stimulus.
Meanwhile, on the left you've had Democrats who have mostly complained it was too small -- although I show in my book there wasn't any way Obama could have gotten one penny more -- or they’ve complained that it has too many tax cuts, or it wasn't shovel ready enough or they didn't like particular provisions of the stimulus. And all of that added up to a drumbeat of “it's a mess.”
Unprecedented Investments in Energy
Clean energy is one of the key areas you discuss in your book. What are some of the signature accomplishments of the stimulus in energy?
Energy is how I stumbled into this story. I knew, because I write about energy, that we had been spending a few billion dollars a year on clean energy -- and the stimulus was pouring in $90 billion, which was itself leveraging another $100 billion.
You had unprecedented investments in wind, solar, geothermal and other renewables and in energy efficiency in every imaginable form -- in the smart grid, cleaner coal, advanced biofuels, electric vehicles and the factories to make all this green stuff in the U.S. The stimulus created a new agency called ARPA-E, which is the kind of place where Q from the James Bond movies would want to work--they're doing this blue sky, out-of-the-box energy research to invent the technologies of ten years from now.
It was just a complete game-changer and it's had real results.
It's the sole reason that we've doubled renewable energy since Obama took office. It's the reason we've really jumpstarted a smart grid. We've created a battery industry in the United States for electric vehicles almost entirely from thin air. In 30 years when people look back at the stimulus, they're going to remember it as the moment we began our transition to a low-carbon economy.
One of the areas the stimulus invested in is "clean coal" -- something the environmental community calls a mirage. What is the balance in the stimulus between proven technologies like wind, solar and geothermal versus something like clean coal, where it may be extraordinarily expensive to develop, taking dollars away that could go instead to proven technologies?
Part of the idea was that they were going to do the entire food chain. Clean coal is something that hasn't worked very well, but the idea is that there are a lot of coal plants and a lot of coal in India and China. If somebody can figure out a way to store the carbon effectively, it could change the history of the world.
But the bulk of the investments were in wind, solar and particularly in energy efficiency -- areas where we know how to do it. These aren't whiz-bang technologies, but they just never had the financial muscle behind them before. In fact after the 2008 financial collapse, renewable energy was dead in the water.
Reviving The Moribund Wind Energy Sector With A Changed Tax Credit
Take the wind industry, which depends on tax credits. After the financial cataclysm, there was no appetite for tax credits because no businesses had profits. The Obama Administration found a way to monetize those credits so you could give money to entrepreneurs and replace those tax credits they weren't using. Wind turbines had been rusting in the field before the stimulus.
One Spanish company, which had shut down all its wind projects in the U.S., announced the day after the stimulus passed that it was investing $6 billion in U.S. wind farms. When Obama took office, the official forecast was that by 2030 we would increase our wind energy from 25 gigawatts to 40 gigawatts. It's 2012 and we're already up to 50 gigawatts. We've increased solar energy more than 600 percent. These really are game-changing investments.
Obama Will Likely Push for More Stimulus, Republicans for Austerity
If Obama wins, what will he want to accomplish in his second term, with respect to fiscal stimulus?
I think it's important to remember the trajectory of the first term. There was a massive stimulus of $800 billion that passed at the beginning that now many people on the left say was not big enough. Three hundred and eighty seven liberal economists had written Obama a letter saying, “we desperately need a $300-400 billion stimulus,” and he did twice that.
And then you hear that he didn't follow up with a second stimulus. But in fact, although he didn't run around the country saying that we need more stimulus -- and I quote him telling his economic advisors, “I get the Keynesian thing, but it's not where the public is” -- he did in fact get more than $700 billion in additional stimulus in 2009 and 2010 against really hardcore Republican opposition to such things as extending unemployment benefits and saving teachers jobs and even small business tax cuts. So we did get an awful lot of stimulus in 2009 and 2010.
And then in 2011, Obama proposed the American Jobs Bill, which was essentially another stimulus bill, and that was blocked by Republicans. At the same time, Republicans were pushing for the kind of austerity program that you had in Spain and Great Britain that has plunged those countries back into double dip recessions and Obama blocked that. So we've had the status quo.
I think it's fair to assume that as long as the economy is weak, Obama is going to push for more fiscal impact and Republicans are going to push for less. And the balance of power in 2013 will depend which way we go.
You do hear that Obama is interested in some sort of grand bargain [on deficit reduction] and I think that's true. I know a lot of people on the left are worried whether he would budge on Social Security and Medicare. In the long term those are certainly things that ought to be debated. But there's never been any suggestion that Obama is interested in short term cutting while there's still slack in the economy. I expect that to continue.