I recently bought two books, both of which I put on my nightstand. One was a small anthology of Beat Poetry the other Grunwald’s 518-page tome about the politics and policy of the Recovery Act… and I finished The New New Deal first. It is well written and genuinely a page-turner.
Here are a few things that stuck out to me from reading Grunwald’s book:
The stimulus was deeply Keynesian…—The basic idea of Keynesian economics is that the government should spend in a counter-cyclical fashion, when the private sector spends the government saves, when the private sector stops spending the government keeps money flowing in the economy by spending. On an extreme end of this, the government could pay people to dig holes and then fill them—because the point of Government stimulus is to get money out there by all means available.
… but infused with Obama’s campaign promises and priorities—Well, the administration figured a good way to get money out into the economy was to spend on things they had promised in the 2008 election campaign, especially, upgrading schools and reforming education, introducing information technology into health care, improving the efficiency of the national rail system and investing in high-speed rail, and encouraging both the efficiency of energy consumption, as well the development of alternative energies. Or to put it more simply, spending money on reforming health, transportation, energy, and education.
Making Sausage isn’t pretty, even in the age of Hope and Change—Obama’s economic advisors had done their homework when they created their stimulus proposal—all their ideas had to be timely, targeted, and temporary. It was a tight plan focused on reviving the economy and transforming it.
Then congress got hold of it.
The two main criticism of the stimulus are 1. It wasn’t big enough (from the left) and 2. It had too much pork in it (from the right). Both of these problems can be traced back to needing a 60th vote in the Senate to override a Republican filibuster—Arlen Specter, the 60th vote, can be blamed for both these perceived problems with the stimulus. On one hand, he required that the stimulus cost no more than 800 billion and on the other hand, he required 10 billion in funding to go toward the National Institute of Health. Some people say he cut the stimulus off 200 billion too small, and a lot of the “pork” cited by Republicans came from the NIH funding—for example research into why men don’t want to wear condoms and cocaine research on monkeys.
Our VP is… unique—Grunwald portrays Vice President Biden as somewhere between a Hipster, Elmo, and a Boxer being interviewed right after a brutal fight. He is full of bravado, wide-eyed hope, and uses literally literally in every sentence.
The Stimulus surprisingly lacked fraud and corruption—Thanks to the unprecedented transparency of the Obama administration, most clearly evident in being able to track every cent spent at http://www.recovery.gov/, the expected fraud that generally accompanies such massive amount of spending didn’t happen. The experts said there would be tens of billions of dollars of fraud—instead a total of 7.2 million was lost to fraud. In addition to transparency, lot of the grants and other types of funding were purposefully competitive (for example “Race to the Top”), which discouraged those who couldn’t compete from trying to get a “hand out.”
But what about Solyndra?—I wondered this myself, after all people compare it to Watergate… well here is the report by Darrell Issa, who once described the Solyndra loan as proof that that Obama was, “one of the most corrupt presidents in modern times.”
“Is there criminal activity? Perhaps not. Is there a political influence and connections? Perhaps not.” But, he concluded the administration “bent the rules for an agenda.”
What exactly did the administration do? The people granting loans pushed the decision date for granting Solyndra’s loans up to coincide with an Obama photo-op at a Solyndra plant. Later they asked Solyndra to hold off on announcing lay offs until after the 2010 election.
They were picking winners and losers because no one else was picking —we hear a lot of criticism of the government being in the loan business, because failures like the Solyndra loan will happen and the government will be out money. The reason the administration was “picking winners and losers”—that is loaning money to risky startup companies, is that no one else would. The credit crunch was real, and there was very little money flowing to new companies because the banks all became risk adverse. So again, Keynesian economics, the government decided to temporarily act as a bank because the banks weren’t acting as banks normally act.
ARPA-E is exciting—I don’t know if I’d heard of the Advanced Research Projects Agency—Energy, the only new federal agency created by the Recovery act, until I read about it in Grunwald’s book. ARPA-E researches and funds out of the box experiments that might change the world—sort of a DARPA for energy science. For example, they gave out a lot of different grants to study using bacteria as a fuel—Electrofuels—which could change the whole energy sector. It’s Obama’s Manhattan Project.
Romney really doesn’t like the Tea Party—On two separate occasions Grunwald quotes Mitt Romney dissing the Tea Party. Romney tells a story of pulling a ferret out of his dishwasher and being bit by the ungrateful ferret. Romney believes the Tea Party is the ferret and moderates like Mitt are saving them from being boiled and battered in a dishwasher.
The Stimulus Worked—According to Grunwald’s research the Stimulus stopped a Great Depression. It kept 1.2 million Americans from being homeless, kept another 7 million from slipping below the poverty line, created 2.5 million jobs, increased the GDP from 2.1% to 3.8%, and without it unemployment would be at 12% right now instead of 8.1% (meaning instead of 12.5 million unemployed people in the US there would be 18.5 million).
The Stimulus is even being felt right here in South Plainfield, where, according to Recovery.gov, 5 jobs were created by the stimulus in the last 3 months.