I'll be in Tampa for the GOP convention, so I'll write about the Republicans tomorrow. Today I'll give a taste of what I discovered about the stimulus, because almost everything most Americans think they know about it is wrong. The bottom line is that the American Recovery and Reinvestment Act is, as Vice President Biden would say, a BFD, both the short-term Recovery and the long-term Reinvestment. Even though Washington thinks it's a joke. Even though the country agrees.
In 2010, a poll found that the percentage of Americans who believed the stimulus created jobs was lower than the percentage who believed Elvis was alive. I'm sure many TPM readers are in the minority who understand that the stimulus helped prevent a full-blown depression, that the economy was bleeding an unthinkable 800,000 jobs a month before the stimulus helped cauterize the wound. But it's hard to remember just how horrible things were when Obama took office, and just how quickly the stimulus started to turn things around.
In the fourth quarter of 2008, the U.S. economy shrunk at an 8.9% annualized rate. That's depression territory. At that rate we would have lost an entire Canadian economy worth of output in 2009. Job losses peaked in January, and Obama signed the stimulus in February. There's been a lot of talk about shovel-ready projects that weren't shovel-ready, but the Recovery Act quickly poured hundreds of billions of dollars worth of textbook Keynesian stimulus into the economy to boost demand: massive aid to state governments to prevent Medicaid cuts, teacher layoffs, and other public-sector anti-stimulus; unemployment benefits, food stamps, and other assistance for victims of the recession; $250 checks to seniors and the disabled; and tax cuts for 95% of American workers that less than 10% of them actually noticed. Liberals often complain that the stimulus wasn't big enough--and they're right, although my reporting demonstrates that there was no way Obama could have squeezed another dime out of Congress--but it was pretty damn big, more than 50% larger than the entire multi-year New Deal in constant dollars.
As a result, the jobs numbers in the second quarter of 2009 reflected the biggest improvement in three decades. Of course, the numbers were still grim, and the unemployment rate was still rising, so it didn't feel much like a recovery. But by June, the worst recession since the Great Depression was officially over. The leading economic forecasters all believe that at its peak the stimulus added about 2-4% to GDP, the difference between contraction and growth, and saved or created about 2.5 million jobs. ("Saved or created" has become a punchline--Obama joked after his annual Thanksgiving pardon that he had just saved or created four turkeys--but it simply means the economy would've had 2.5 million less jobs without the stimulus.) Early empirical studies have overwhelmingly confirmed the Recovery Act's positive effects. And the anti-stimulus approach is flailing in Europe, where austerity in tough times has led to double-dip recessions in Great Britain and Spain.
But the Recovery Act did not just blast money into the economy willy-nilly. It also financed enormous investments in Obama's agenda, a major down payment on the campaign promises that the media ignored while obsessing about his race and his pastor and the ads comparing him to Paris Hilton.
For starters, the stimulus was by far the largest energy bill in history, pouring a mind-boggling $90 billion into clean energy when we had been spending just a few billion dollars a year. It included unprecedented investments in wind, solar, and other renewables; energy efficiency in every form; a smarter grid; electric vehicles; advanced biofuels; and the factories to build all that green stuff in the U.S. The clean energy industry was on the brink of death after the financial collapse of 2008, but thanks to the stimulus, U.S. generation of renewable power has doubled under Obama. The stimulus is building the world's largest wind farm, a half dozen of the world's largest solar farms, and the nation's first refineries for cellulosic biofuels. It created an advanced battery industry for electric vehicles almost entirely from scratch, financing 30 new factories. And it launched a research agency called ARPA-E, modeled on the Pentagon's DARPA unit that pioneered the Internet and GPS technology, that's already creating the clean-energy breakthroughs of tomorrow.
As they say in the infomercials, that's not all. The stimulus also poured $27 billion-with-a-b into health information technology that will drag our antiquated pen-and-paper medical system into the digital age, so just about every American will have an electronic medical record by 2015, and doctors will no longer kill their patients with chicken-scratch handwriting. The Recovery Act included the most dramatic federal education reforms in decades, including the Race to the Top competition that has transformed the national debate over public schools. It launched the most extensive infrastructure investments since Eisenhower, including a high-speed rail initiative that could transform America's pathetic inter-city passenger trains. It modernized the New Deal-era unemployment insurance system, and extended broadband to underserved areas in ways reminiscent of the New Deal's rural electrification. It included a new homelessness prevention program that kept 1.2 million Americans off the streets, so the homeless population declined despite the weak economy, and a new municipal bond program that financed $180 billion worth of public works, a stimulus hidden inside the stimulus. And so on.
The Recovery Act also poured all that cash into the economic jetstream with unprecedented transparency, a big reason it was on time, under budget, and virtually fraud-free. Experts predicted that 5%-7% of its spending would be lost to fraud, but so far the confirmed losses have been about 0.01%. Stimulus watchdog Earl Devaney--the hard-nosed investigator who helped break open the Jack Abramoff scandal--has been stunned by how clean it's been. "We don't get involved in politics, but whether you're a Democrat, Republican, communist, whatever, you've got to appreciate that the serious fraud just hasn't happened," he told me.
Let's just say that Americans don't seem to have gotten the memo. Republicans have destroyed the reputation of the stimulus through a relentless campaign of distortion, dismissing it as $800 billion worth of mob museums, levitating trains to Disneyland, honeybee insurance and other fictional nonsense, while hyping the Solyndra non-scandal into a second Watergate. Democrats have been far more likely to quibble about the Recovery Act's size or contents than to defend it, reinforcing the GOP message that it's a big-government mess. The White House has made its own political miscalculations and messaging mistakes. And the media has blown the story as badly as it blew the run-up to the war in Iraq.
I spent nine years at The Washington Post, but I now live in the public policy paradise of South Beach, and I don't think I could have written this book if I still lived inside the Beltway. The groupthink is just too strong. It's incredibly uncool to talk about the stimulus in DC without rolling your eyes; it's like admitting you're not in on the joke. When I started telling my editors the stimulus was an amazing story hidden in plain sight, they looked at me like that blogger kid in Newsroom pitching the story that Bigfoot is real. I told them I felt like a reporter in 1938, trying to convince his bosses to do a story about this thing called the New Deal.
The stimulus was not the New Deal. It didn't create new alphabet agencies with vast armies of federal workers. It didn't create new federal entitlements like Social Security or deposit insurance. It didn't create big government, because FDR already did that. The New Deal was a journey, an era, an aura; the stimulus was just a single bill on Capitol Hill, albeit the largest domestic spending bill ever.
But the legacy of the stimulus, like the legacy of the New Deal, will be change. This Bigfoot is real.