Rick Holmes: The real deal on Obama’s ‘new deal’

In a week spent celebrating his first term, Barack Obama’s greatest domestic achievement was barely mentioned.

Victims of a kind of Stockholm syndrome, they’ve spent four years absorbing myths generated by their opposition: the myth that Obama made health reform his first priority, that he did nothing to create jobs, that his policies failed, that his campaign was built on gauzy promises that never came to anything.

It fell to Bill Clinton to challenge that narrative. The economic crisis was the first thing Obama did, signing the massive, multi-faceted American Recovery and Reinvestment Act within a month of taking office.

“The Recovery Act saved and created millions of jobs and cut taxes for 95 percent of the American people,” Clinton said. “In the last 29 months the economy has produced about 4.5 million private sector jobs. But last year, the Republicans blocked the president’s jobs plan costing the economy more than a million new jobs.”

That counter-narrative is told with powerful detail in a new book by Michael Grunwald, “The New New Deal.”

Grunwald is a journalist with a contrarian streak. Curious about the fog of cynicism that clung to Obama’s stimulus bill when job numbers failed to meet expectations, he dug into the data and interviewed hundreds of people who were in the room when key decisions were made by participants on all sides. The result is as entertaining a policy wonk drama as you’re likely to find.

Grunwald’s conclusion: The stimulus was a huge success, not only in turning around an economy sliding into depression, but in bringing real change – change you can believe in – to exactly those areas candidate Obama had vowed to tackle.

The big, Keynesian stimulus part of the ARRA – the tax cuts that made up more than a third of the $800 billion total, state aid to prevent budget cuts and layoffs, and direct benefits for the unemployed and their families – helped prevent the economy from slipping into the abyss, as most independent economists attest.

But Grunwald is more excited by the “reinvestment” part of the ARRA, which is where Obama began keeping his promise, delivered in his inaugural address, “not only to create new jobs but to lay a new foundation for growth.”

Promises kept

“We will build the roads and bridges, the electric grids and digital lines that feed our commerce and bind us together,” Obama pledged that January day, and the stimulus jump-started thousands of projects to do just that.

Finding “shovel-ready” projects was harder than anticipated, and the premium was on getting the money flowing quickly through the economy. Much as the political operatives in the White House wanted to build another Grand Coulee Dam, repaving existing roads made more economic sense short-term. But long-term investments in building a smarter, more efficient electric grid, in extending broadband to rural areas, and speeding up the nation’s rail lines put flesh on the bones of Obama’s promises.

“We will restore science to its rightful place and wield technology’s wonders to raise health care’s quality and lower its costs,” Obama promised. ARRA’s huge investment in health information technology gave a boost to the health care industry’s efforts to adopt the productivity and quality improvements IT has brought to so many other fields.

“We will harness the sun and the winds and the soil to fuel our cars and run our factories,” Obama promised, and the stimulus has already had a transformative impact on green energy. Production of renewable energy has doubled. Costs of solar power have plummeted.

Overnight, the ARRA changed the Energy Department, a sleepy corner of the federal bureaucracy mostly involved with monitoring nuclear facilities, in the world’s largest green energy venture capital fund. Secretary Steven Chu, a Nobel-winning physicist from Berkeley, staffed his department with Silicon Valley entrepreneurs. They weren’t there to “pick winners and losers,” Grunwald argues. They picked sectors – wind, solar, biofuels, next-generation batteries – and invested in competing companies within those sectors, letting the market pick the winners.

Much has been made of Solyndra, the solar bet that didn’t pay off. But it was just one of 5,000 green energy grants and loans Chu’s department awarded. The venture capital business is built on the assumption that a few successes will be worth many failures.

The only agency created by the stimulus was ARPA-E, the energy incubator modeled on the Pentagon’s ARPA (Advanced Research Projects Agency), which helped give birth to the Internet and a host of other game-changing technologies. ARPA-E, Chu explains, is swinging for the fences. It may strike out on most of its attempts, but it may hit a homerun that changes everything.

“We will transform our schools and colleges and universities to meet the demands of a new age,” Obama promised in his inaugural address, and ARRA’s Race to the Top delivered on that promise. The competition it established for access to its $5 billion in school aid was itself a big change in the way Washington operates. Instead of spreading the money for maximum political impact, it rewarded states for reforming their own policies.

More than half of the states took the bait, passing laws to increase accountability, remove barriers to charter schools, improve teacher evaluations and turn around failing schools. The winners – Massachusetts was one – got money to do new things, not just prop up education budgets.

In his speech in Charlotte, Gov. Deval Patrick spotlighted Orchard Gardens Elementary School in Roxbury, where a longer school day, new programs, teacher training and administrative reforms have led to a dramatic turnaround in student skills. There is now a waiting list for the school that used to have the worst reputation among Boston’s elementary schools. The stimulus paid for many of those changes, as it has for thousands of schools across the country.

Messages not received

Grunwald’s book is filled with things most people don’t know about the stimulus: that the Romer-Bernstein Report, which predicted unemployment would stay below 8 percent if the stimulus passed, was right about the “delta” between possible scenarios, but blundered by pegging the baseline worst-case unemployment numbers too high; that there were no earmarks in the bill; that the amount of fraud in the program was astoundingly low - .001 percent, according to an independent inspector general’s report; that Joe Biden was masterful and unrelenting in sparking a sluggish federal bureaucracy into action; and that ARRA set a high new standard for transparency in federal spending. At www.recovery.gov, you can easily find the amount, purpose and status of every grant awarded, in every community of every state.

Grunwald explodes the myth that Obama delegated the stimulus to Democrats in Congress. He offers a discouraging account of the Republicans’ strategic decision, as the economy was collapsing, to do nothing to help the new president stop the skid.

As one member of the House Republican leadership, Rep. Tom Cole, told Grunwald, “It was apparent very early that this wasn’t going to be bipartisan. … We wanted the talking point: ‘The only thing bipartisan was the opposition.’”

On policy, Grunwald argues, the “New New Deal” was as ambitious as FDR’s New Deal, and may prove to be more successful. But on politics, it was a tremendous failure. There were terrible mistakes made on messaging by the administration, he says, and the major media repeatedly missed the forest for the trees.

Because the press covers plan crashes, not successful landings, the ARRA’s many “wins” were barely acknowledged, while its few “losses” were widely exaggerated. It was, Grunwald says, an example of journalistic malpractice as bad as the media’s failure to vet the Bush administration’s claims about Iraq’s Weapons of Mass Destruction.

Republicans were only too happy to spread the “failed stimulus” narrative, whatever the facts on the ground. That narrative helped the GOP gain enough seats in Congress in 2010 to stop any attempt to build on ARRA’s success with more stimulus. The American Jobs Act, a $447 billion stimulus program, was filibustered to death by Senate Republicans in 2011, an act of economic sabotage the Democrats barely mentioned in Charlotte.

So we head toward a presidential election with the candidates tied in the polls, the economy the center of the debate, and the incumbent’s biggest economic achievement sidelined. “The New New Deal” is a worthy effort to set the record straight.

Rick Holmes, opinion editor for the MetroWest (Mass.) Daily News, blogs at Holmes & Co. He can be reached at rholmes@wickedlocal.com.