Posts Tagged ‘Michael Grunwald’

Obama’s stimulus: a new New Deal?

September 24, 2012

While I’m critical of President Obama’s overall record, and do not intend to vote for him, I do think he deserves credit for the economic stimulus program he pushed through Congress in the early days of his administration.

While the economic recovery is strong in the stock market and weak in the jobs market, the United States averted the complete economic collapse which seemed to be imminent in early 2009.  I think the Obama stimulus program helped stop the downward spiral, and also put in place some things that will be important for the economic future.

I don’t think a President Hillary Clinton would have done better, and I think a President George W. Bush, John McCain or Mitt Romney would have done a whole lot worse.

I just got finished reading The New New Deal: The Hidden History of Change in the Obama Era. by Time reporter Michael Grunwald.  He told me things about Barack Obama’s stimulus program that I hadn’t known and that hadn’t fully registered.  He left me with a better opinion of the President and the stimulus program than I’d had.

Grunwald argued that the stimulus prevented the Great Recession from becoming much worse that it was, and that it put in place efforts, especially the DARPA-E program for green energy, that are important to the long-term economic growth of the United States.  He also argued that, given the political realities, what President Obama did was probably as much as could reasonably be expected.

He said the the Obama stimulus program in itself pumped more money into the U.S. economy, in inflation-adjusted dollars, than President Franklin Roosevelt’s entire New Deal.  It is true that the United States is a much richer country, in inflation-adjusted dollars, than in the 1930s, but Grunwald also said that Obama’s stimulus program absorbed a greater fraction of the U.S. gross domestic product than the New Deal in any one year.  This is astonishing.  I hadn’t known this.

Given that fact, I agree that it is not reasonable to complain that the stimulus was not even bigger than it was.  My criticisms of President Obama’s economic policies are on other grounds—his administration’s failure to address the causes of the financial crash, his shielding of Wall Street speculators from prosecution for financial fraud, his willingness to use Social Security and Medicare as bargaining chips.

Obama has in some ways a tougher challenge than FDR.  The New Deal of the 1930s was intended to restart a stalled economy.  With the hollowing out of U.S. manufacturing during the past few decades, it is necessary not only to restart but to repair.

The American renewable energy industry was on the verge of collapse when Obama took office, Grunwald wrote.  The Obama administration has revived it by investing in innovative companies, by creating a market for renewable energy by starting to convert the government to green energy and by grants for energy research through the new Advanced Research Projects Agency for energy.

Not all the investments turned out well.  The Solyndra solar panel company is an example of a failed investment (not of corruption), but other initiatives are turning out well, according to Grunwald.  The use of renewable energy in government buildings and vehicles creates a market for green energy, in which the same way that military purchases of semiconductors or granting of air mail contracts in past eras helped the U.S. develop a semiconductor and aviation industry.

ARPA-E is modeled on the successful Defense Advanced Research Projects Agency which promoted innovation with military applications.  It actually was formed during the George W. Bush administration, but greatly expanded after Obama took office.   Gov. Mitt Romney supports ARPA-E, so this is one innovation not likely to be rescinded.

Grunwald wrote a good bit about the struggle to create high-speed passenger trains in the United States.  As a matter of national pride, this would be nice to have, but as a matter of economic benefit, I think we should recognize that, in the United States, the rail system is mainly for moving freight and people travel mainly by highway and by air.  As part of the stimulus program, the Obama administration started a program for replacing track, straightening out curves and eliminating bottlenecks on the rail system.  I think that was the right priority.  For highway transportation, the administration gave priority to maintenance and repair over new construction, and I think that was the right priority, too.

Grunwald pointed out other nuggets in the program—use of information technology for medical records, for example, and extension of broad-band Internet to under-served rural areas, in the spirit of the New Deal’s rural electrification program.

I don’t agree with the Obama administration’s Race to the Top education program, which was part of the stimulus bill.  Grunwald thinks Race to the Top is a program to encourage educational innovation.  Until somebody can show me an example of successful innovation that has come out of the program, I will continue to think that it is a plan to scapegoat school teachers and impose on them a dysfunctional corporate management philosophy.

While I largely agree with Grunwald’s favorable view of the stimulus program, I don’t think the Obama administration overall record reflects the spirit of the New Deal.  President Obama, like President Franklin Roosevelt, is an inspirational leader who can touch the idealism of the American people.  But his record does not match FDR’s.

A real new New Deal would (1) defend Social Security and Medicare instead of making them bargaining chips in a tax deal, (2) break up the too-big-to-fail banks and restore the Glass-Steagal act, (3) prosecute financial fraud and (4) enact the Employee Free Choice Act (aka “card check”) to protect the right of workers to join unions.

Grunwald wrote that Obama achieved as much as can be expected, given the requirement of 60 votes to get a bill through the Senate.  Someone like me who wants more is a “whiner.”  But the 60-vote requirement is simply a procedural rule which can be changed.

The important difference between Obama’s situation and FDR’s is that there is no aroused public opinion forcing the President to do more, as there was in the 1930s.  Until that changes, President Obama’s policies will be the limits of the possible.

Click on The New New Deal for an interview with Grunwald about his book by David Plotz of Slate.

Click on “Everything People Think They Know About the Stimulus Is Wrong” for an interview of Grunwald by Ezra Klein of the Washington Post.

Click on The ‘Silent Green Revolution’ Underway at the Department of Energy for an interview of Grunwald by Ross Anderson of The Atlantic.

Click on Don’t Tell Anyone, But the Stimulus worked for a New York Times report.

Click on Obama’s Green Revolution for an article by Grunwald on President Obama’s energy program.

Click on Michael Grunwald | TIME.com for an archive of his recent articles.

Hat tip to Bill Elwell for suggesting Grunwald’s book.