The New New Deal

Interviews with a point.
Aug. 14 2012 4:30 AM

The New New Deal

President Obama’s stimulus has been an astonishing, and unrecognized, success, argues Michael Grunwald.

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Why was the GOP’s message of opposition so much more effective than the administration’s message of spending? Was Obama’s failure fundamentally a communications failure, as Ed Rendell told you?

I don’t claim to be an expert in political strategy and messaging. I tried to tell the story and let readers decide for themselves where the politics went wrong. But I’ll make a few observations. First, the Obama team’s Recovery Act message was highly nuanced. It was short-term jobs along with long-term investments. It was tax cuts along with spending. It was the biggest domestic spending bill in history, but it was also just a first step toward normalcy. The economy needed fiscal stimulus in the short term but fiscal responsibility in the long term.

The Republican message was much simpler: No.

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Republicans were also maniacally disciplined about repeating that message. During the stimulus debate, Democrats used most of their airtime quibbling with Obama’s specifics, which helped confirm the GOP message that the stimulus was a porky big-government mess. And once it passed, Obama and the Democrats moved on to other business, like health care, financial reform, and so on. The Republicans never moved on. Their message—big spending, big government, big mess—never changed.

There’s a lot of reporting about messaging in this book. It was a topic of hot debate inside the White House, on the Hill, and everywhere else. But I will say that I think people tend to overstate its importance. I’m not sure what kind of message would have worked when unemployment was hovering around double digits. I tell a story about how Obama set up White House interviews with all the major anchors to sell the stimulus—a chance to tell his story to the American people through Katie Couric and Anderson Cooper!—but all the questions were about Tom Daschle withdrawing his Cabinet nomination that morning because of unpaid taxes. I suppose you could make the case that was a turning point, but I really don’t think so. And I’m skeptical of Rendell’s idea that the Democratic Party’s Great Communicator suddenly became a lousy communicator once he took office. I think Obama and his team made more than their share of communications mistakes—I especially think he should have focused his message more on long-term transformation than short-term economic revival, and some of his aides agree with me—but I don’t see how better communications would have changed the story of 2010.

 When will Americans be able to look out and recognize measurable, wonderful gains from the stimulus?

Well, we’re already able. For example, 95 percent of us received Making Work Pay tax cuts of up to $800 a year for a family. But they were dribbled out through reduced withholding, because behavioral economics suggests that we’re less likely to spend money when it arrives in a big chunk, so fewer than 10 percent of us noticed them. The backstory of that decision will make Obama supporters cringe.

Similarly, anyone who received expanded unemployment benefits or food stamps or Cobra subsidies or Pell Grants in 2009 or 2010 benefited from the stimulus. The stimulus saved more than 300,000 education jobs, and preserved over $100 billion worth of health services for the poor. We’re already using more clean energy and less energy overall because of the stimulus; the electric vehicle industry is here because of the stimulus; the domestically manufactured content of U.S. wind turbines has increased from 20 percent to 60 percent because of the stimulus. There are over 100,000 stimulus projects that have upgraded our parks, subways, hospitals, food pantries, and so forth. On our last vacation my family visited Ketchikan, Alaska, where the stimulus upgraded the nature center. It was a very nice nature center.

Also: The stimulus helped prevent a depression, and as Romer says in the book, depressions really, really suck. They create horrible human suffering, and horrible deficits, too. The economy is quite lousy, but it really could’ve been a lot lousier.

The stimulus will produce more good stuff in the future. By 2015, almost all of us will have an electronic medical record because of the stimulus. The stimulus is also pouring $1 billion into desperately needed “comparative effectiveness research” that will help doctors and patients learn what kind of treatments actually work. There’s billions more for data-driven education reforms—Investments in Innovation and School Improvement Grants as well as Race to the Top—that will seek to scale up promising approaches in public schools. And the most exciting changes will transform the way we generate and consume energy. For example, a company called Envia Systems that got a grant from ARPA-E—a modern version of the Manhattan Project—has already developed the world’s most powerful lithium-ion battery, which could slice $5,000 off the price of the next Chevy Volt.

Will Americans associate any of this change with the 2009 stimulus? I doubt it. Maybe they will if my book becomes a runaway best-seller.

Would President Romney roll back these programs or A) is it too late and the money is spent? or B) would he actually support them as president because they are fundamentally valuable programs?

During the 2010 campaign, Republicans vowed to cancel all unspent stimulus funds if they took back Congress. They took back the House, but they didn’t take back one dime of stimulus money. Romney also says he’ll cancel unspent stimulus funds, but there aren’t many left to cancel—at this point, mostly health IT, high-speed rail, and some clean-energy dollars—and I’d bet they’ll all eventually get spent.

That said, Romney and the Republicans can make sure that much of the stimulus legacy ends with the stimulus. Romney wants to shut down the tax credit for wind power, which could virtually shut down the industry. High-speed rail could die on the vine. Romney has said nice things about ARPA-E—even though it “picks winners and losers”—and as governor he supported health IT and other stimulus-friendly policies, so maybe he’d keep them as president. I wouldn’t bet on that, though.

There’s a reason most of Romney’s ads feature the stimulus (a caricature of the stimulus, but still). He’s running against the idea that government can produce positive change, and the stimulus was the ultimate test of that idea. Maybe he’ll change his mind if he wins—he’s obviously changed his mind before—but presidents tend to try to keep their campaign promises. Obama certainly did.