Michael Grunwald is a national correspondent for Time Magazine and author of "The New New Deal: The Hidden Story of Change in the Obama Era," a reported history of the stimulus. We spoke last week. A lightly edited transcript of our conversation follows.
Ezra Klein: Let’s begin with the obvious question. Did the stimulus work?
Michael Grunwald: Everything people think they know about the stimulus is wrong. It was called the American Recovery and Reinvestment Act and it did produce a short-term recovery. We dropped 8.9 percent of GDP in Q4 2008. We lost 800,000 jobs in January 2009. We passed the stimulus. And then the next quarter we saw the biggest jobs improvement in 30 years.
The long-term reinvestment part is working. It spent $90 billion for clean energy when we were spending just a few billion a year. It's doubled renewable energy. It's started an electric battery industry from scratch. It jump-started the smart grid. It's bringing our pen-and-paper medical system into the digital age. It's got Race to the Top which is the biggest education program in decades. It's got the biggest middle-class tax cuts since the Reagan era. It prevented seven million people from falling behind the poverty line.
EK: That gets to one of the central political problems the stimulus had, I think. It was called the Recovery and Reinvestment Act. The Reinvestment side was composed of long-term investments to jump-start tomorrow’s economy. But since it’s thought of entirely as a stimulus bill, those investments, which in another context would be huge accomplishments, are seen as a distraction from the central work of the law.
MG: Politically, one of the difficulties was the two-part messaging. You're doing short-term recovery and transforming the economy in the long term. You're doing tax cuts and spending. You're doing stimulus now, and you'll pivot to fiscal responsibility. You're doing shovel ready and also looking for shovel worthy.
But after the financial crisis, everyone knew it wasn't going to turn around quickly. That changes the rules on timely, targeted and temporary. You're not worried about overheating the economy if it didn't spend out in six months. So what they did was [give] aid to states to prevent layoffs, which went out right away. Food stamps to get money into people's pockets. And then other stuff, the infrastructure, the clean energy, the health IT -- that was understood to take longer. But even there, take wind energy, which obviously it takes awhile to get a wind farm going. By the end of 2008, that industry was dead in the water. The day after the stimulus passed, one of the major wind companies, which was pulling out of America entirely, turned around and announced a $6 billion investment in the United States.
Health IT is another example I love. That's one of the few where even they would admit there was no pretense of stimulus. The money didn't go out the door till 2011. But right now, according to the Bureau of Labor Statistics, health IT is America's fastest growing industry.
EK: One complaint you hear about the stimulus is that it’s not led to Hoover Dam like accomplishments. People look around and say, fine, if you spent all this money on infrastructure, where’s the infrastructure? But so many of the investments were, for lack of a better term, in digital infrastructure. You can’t see the smart grid or digitized medical records or wind power in the way you can see a mural.
MG: It's often invisible. Even the stuff where you actually build big things -- the world's largest wind farm, a half dozen of the world's largest solar farms -- you'll still use your X-Box the same way. The energy is just coming from somewhere different. The New Deal had the world's largest dam. The stimulus had one of the world's largest dam removal projects. People won't point to that a thousand years from now.
EK: One problem for the Obama administration, in my view, is that the stimulus included five or six or arguably even 10 or 12 bills that, if passed on their own, would be major achievements that the administration would be bragging about today. A standalone, $29 billion bill to digitize the country’s medical records is a big deal. A $90 billion investment in jump-starting renewables is a big deal. But because it’s all grouped under “stimulus,” Republicans see those projects as distractions, and most liberals are more focused on the idea that it was too small. So there’s really been no political home for the law.
MG: Most of those 30 bills would have been stuff like health IT and extending unemployment benefits and accountability-based, data-driven education reform and building highways -- those are things that had been bipartisan until January 2009. So was the idea of stimulus. Until January 2009, every Republican and Democratic presidential candidate had a stimulus, and Mitt Romney's was the biggest. House Republicans had an infrastructure stimulus similar to Obama's, and Paul Ryan voted for it. But Republicans made this decision that their path back to power was to oppose everything. There's a fantasy that Obama should have passed, say, a short-term stimulus bill and a long-term stimulus bill. But he probably couldn't have gotten that.
One thing the Clinton guys recognized during the transition was that if Obama was going to pass his agenda, he needed to do it now. The halo of post-partisanship and unity wasn't going to last long, If they were serious about clean energy, that was the time to do it.
EK: That gets to a conservative critique of the stimulus that I think is right: The Obama administration and the Democrats in Congress really did use the stimulus to invest in absolutely every program and priority that they could think of. In that way, part of it was a kind of Democratic wish list bill that came in under the guise and urgency of responding to the economic crisis.
GW: I think it was the purest distillation of what Obama meant by change we can believe in. If we're going to spend $800 billion, let's spend it on the things we promised we'd spent it on. Now, his agenda didn't always line up with the liberal agenda, with education reform being the best example. But this was the Rahm line about never letting a crisis go to waste.
People really hadn't paid that much attention to Obama's policy agenda. They were interested in his race and Jeremiah Wright and his fight with Hillary, and to some degree, the agenda wasn't that interesting -- it wasn't all that different from Hillary's agenda. But it was this coherent agenda. Health care was too expensive, schools suck, we shouldn't be boiling the planet, the tax code is screwing the middle class, our infrastructure is falling apart -- Obama had made an economic case for all that. Health-care costs were destroying the economy, there were opportunities for millions of new jobs in green energy, unless we had an educated workforce we couldn't compete in the 21st century economy, unless the middle class had money the economy wouldn't work -- and then, in the stimulus, he went ahead and did it. So I think it's fair to complain he used the stimulus to keep all his campaign promises. But it's a little unfair to be surprised about it.
EK: You have this great scene in the book where Rep. Pete Sessions, head of the House Republicans campaign committee, is giving a presentation, and he says that the purpose of the majority is to govern and the purpose of the minority is to get back into power. In a sense, that seems like the last three years in a nutshell. Sessions is, i think, right. But when you think about that in terms of the American political system, with its staggered elections and divided governments and the filibuster, you understand exactly why the political system is working so poorly.
MG: I should say, I wasn't the first to report that. The New York Times had that first. But it also goes to the idea that Obama campaigned as this change-the-system outsider and governed as this work-the-system insider. It's ugly. It leads to catfish subsidies in the stimulus. And it creates the kind of sense of deflation, where the tyranny of 60 votes in the Senate drives so much of the actual mechanics of politics in Washington, but he made a decision, which was that bills that don't get 60 votes don't get change. And Republicans made a smart decision, which was that rather than making bipartisan legislation more to their liking, they'd just make it as difficult and ugly as possible for Obama to get his legislation. There's a moment when a senior Senate Republican tells me everything is going swimmingly for the Republicans. This is after the 2010 elections. And I say, well, but Obama got the stimulus and this clean energy revolution and health-care reform and all this other stuff, and he kind of pauses and says, "yeah, we regret that."
EK: What’s your view on the argument that the White House should have passed on doing health care and simply gone for more stimulus? I’ve always thought, looking at the calendar, that it’s hard to see what difference that would have made -- health care passed in early 2010, and the stimulus was just beginning to spend out then. It’s hard for me to imagine Congress doing much more stimulus before the first stimulus had really started. But do you think they could have gotten more stimulus in that time period?
MG: There are some in the White House who think they could have gotten a little more stimulus than they actually did. I'm not convinced of that. The main hold-up was the Republicans in the Senate and, by that point, quite a few Democrats in the Senate who thought enough was enough. And it's worth saying Obama did get another $700 billion in stimulus over the next few years in under-the-radar ways.
But just saying stimulus, stimulus, stimulus was not, given the politics of the time, likely to create a groundswell. There's really no evidence that the bully pulpit could have done that. I have this scene where Joe Biden is yelling at Steny Hoyer, saying, stop saying the stimulus isn't working, we need more! Start saying it is working, and we need more! The feeling was you could talk about jobs all day but people would still be unhappy with the jobs situation, or you could pass a health-reform bill and cover 30 million people, and while people would still be unhappy with the jobs situation, 30 million people would have health care.
EK: One point people in the administration have emphasized to me is that, at a certain point, it just became too hard to spend the money in worthwhile ways. You can give huge tax cuts, but there’s only so much infrastructure we have the capacity to do at one time. Is that just rationalization? Or do you think that even if the politics had been there for more stimulus, there was a severe limit on what could be usefully done?
MG: There's only so much pig you can get through that federal python. You'd have to do a lot more through direct transfers and tax cuts. That has its advantages and disadvantages. There might have been some way of doing a big housing stimulus to help deal with some of that overhang as well -- but I'm really not an expert on it. But it's really difficult to spend a lot of money in a big hurry, particularly if you care, as they really did, about not hiring people to dig holes and fill them in and not having a lot of it stolen by bad guys.
That's one reason to the extent that people say they scattered money around to all these programs, if you'd just decided to fix every bridge in the country, the 2,000th bridge will not be as shovel-ready or shovel-worthy. But if you put some money into bridges and some into bus stations and some into veterans cemeteries, the third veterans cemetery on the list probably needed more help than the 2,000th bridge. The downside is that it makes it look like a scattershot thing where you're trying to solve every problem at once.
EK: And there’s that famous Obama statement that shovel-ready wasn’t as shovel-ready as he’d thought.
MG: I think it's kind of a bizarre thing that Obama said. if you look at the numbers, shovel-ready was pretty much exactly as shovel-ready as they expected. Infrastructure was never scheduled to go out immediately. The first year they resurfaced or improved 22,000 miles of roads and started building about 200 miles of new roads. So that was pretty shovel-ready. And they hit every spending deadline. So at some some level it was about as shovel-ready as expected. Which is not to say that infrastructure shouldn't be easier to build, and I do write about some of the ridiculous bureaucratic constraints, particularly on the green energy initiatives. The Davis-Bacon prevailing wage laws were also a pain. But they know high-speed rail wouldn't be ready right away.