“Truly Transformative”: Why The Stimulus Made America Better Off Four Years Later
President Barack Obama signed the American Recovery and Reinvestment Act on February 17, 2009, with the hopes of jump-starting a depressed U.S. economy and initiating his agenda for healthcare, energy, and education. Larger in constant dollars than President Franklin Delano Roosevelt’s New Deal, Obama’s stimulus is one of the most misunderstood pieces of legislation in U.S. history, says Time journalist Michael Grunwald. The author of The New New Deal: The Hidden Story of Change in the Obama Era recently spoke to U.S. News about why Republicans were so successful in their campaign against the bill, and why Americans don’t understand how truly transformative it was. Excerpts:
Why did Obama pursue the Recovery Act?
The economy had fallen off a cliff, and in the past, this idea that when the private sector shuts down, the public sector needs to step up was totally uncontroversial. Bush had passed a stimulus bill with overwhelming bipartisan support when the economy started to go soft in 2008. All the Republican and Democratic presidential candidates had their own stimulus plans in 2008. Mitt Romney’s was actually the largest. And House Republicans, including Paul Ryan, voted in 2009 for a $715 billion alternative to the stimulus that was quite similar to President Obama’s $787 billion stimulus. It was never really clear how the Republican plan could be good public policy and how Obama’s pretty similar policy was radical socialism.
While the Recovery Act was partly about recovery, it was also really the purest distillation of what Obama meant when he talked about change we can believe in, in terms of transforming energy, starting to reduce healthcare costs, reforming education with things like Race to the Top, and then the largest infrastructure investments, the largest middle-class tax cuts since Reagan, the largest research investments ever. That’s the new New Deal.
Why does the stimulus have such a bad rap?
First, you have to say that the Republicans did a brilliant job of completely distorting the substance of the bill. They turned this into an $800 billion boondoggle that was full of levitating trains to Disneyland and mob museums and snow-making machines in Duluth and all kinds of nonsense that wasn’t actually in the bill. They’ve been very disciplined and unified in portraying this as just a big mess. This thing was just hard to sell at a time when the financial earthquake had hit but the economic tsunami hadn’t reached the shore. It wasn’t like when FDR took office after three years of depression, so everybody knew it was Hoover’s depression. But Obama took office during a freefall, and January 2009 was the worst month for job losses. And then he passed the stimulus, and then the next quarter was the biggest jobs improvement in 30 years, but it improved from absolutely hideous to just bad, and it’s hard to sell a jobs bill when the job situation is bad.
What was the value of programs that weren’t necessarily shovel-ready?
After a financial meltdown, the recoveries are always going to be long and slow. That’s one reason the money was spread out over several years. Right up front they wrote big checks to states to help governors balance their budgets without doing mass layoffs of public employees and mass cutbacks of Medicaid spending on the poor. Tax cuts went out quickly to get money into people’s pockets. So all that stuff was obviously shovel-ready; you just shovel the money out the door. Then you had some stuff that really wasn’t supposed to be all that shovel-ready at all, like building the world’s largest wind farm or bringing our pen-and-paper healthcare system into the digital age, or building high-speed rail lines. It was always understood that those were going to take longer. The idea was that even if it wasn’t shovel-ready, it was shovel-worthy.
How are Republicans using the stimulus against President Obama?
Republicans had always supported stimulus up until January 20, 2009, and most of what’s in the stimulus were things that had always enjoyed plenty of bipartisan support. Highway spending and unemployment benefits and middle-class tax cuts and even clean energy, but of course Republicans had decided before that that they were in absolute lock-step opposition. They couldn’t have clean bipartisan support. They had to portray him as a radical partisan.
Why should Mitt Romney read this book?
What Republicans can learn from this is that a lot of the things they’ve been trashing as big government nonsense have actually had an effect.
Are Americans better off than they were four years ago?
I think the answer is yes. What people forget is just how catastrophic our situation was four years ago. Gaining 150,000 jobs isn’t that great, but it’s way better than losing 800,000. And that’s always going to be the difficulty for Obama: selling the notion that things could have been worse, and that things were worse.
By: Teresa Welsh, U. S. News and World Report, September 7, 2012
“Politics Over People”: Romney Endorses Mass Public-Sector Layoffs
Mitt Romney chatted with Bloomberg Businessweek Editor Josh Tyrangiel for a good-but-brief interview, which was published today, and which turned out to be quite informative (thanks to Tricia McKinney for the heads-up).
Tyrangiel asked, for example, about the famous Bain Capital photo featuring Romney and his colleagues posing with cash, and what Romney thinks of the image now. “Oh, that was a moment of humor as we had just done what we thought was impossible,” he said.
The editor also tried to ask the tax-return issue in a new way: “If you’re an investor and you’re looking at a company, and that company says that its great strength is wise management and fiscal know-how, wouldn’t you want to see the previous, say, five years’ worth of its financials?” Romney dismissed the comparison, saying, “I’m not a business.”
I was also delighted to see Tyrangiel ask how Romney intends to balance the budget without raising taxes, without cutting defense, and without touching Social Security. Romney responded by talking about eliminating “Obamacare,” which, of course, would make the deficit worse, not better.
But what I found most interesting was an exchange that probably won’t get as much attention. Tyrangiel asked a fantastic question about the economy: “One thing that distinguishes this recovery is that public sector jobs, government jobs, have already fallen by 650,000. Given the conservative goal of shrinking government, is this a positive development or a negative one?” Romney didn’t give a straight answer, but his take was nevertheless illustrative of a larger point.
“Well, clearly you don’t like to hear [about] anyone losing a job. At the same time, government is the least productive — the federal government is the least productive of our economic sectors. The most productive is the private sector. The next most productive is the not-for-profit sector, then comes state and local governments, and finally the federal government. And so moving responsibilities from the federal government to the states or to the private sector will increase productivity. And higher productivity means higher wages for the American worker. All right?
“America is the highest productivity nation of major nations in the world, and that results in our having, for instance, an average compensation about 30 percent higher than the average compensation in Europe. A government that becomes more productive, that does more with less, is good for the earnings of the American worker, and ultimately it will mean that our taxes don’t have to go up, that small businesses will find it easier to start and grow, and we will be able to add more private sector jobs.”
It’s far from clear that Romney’s correct about the federal government being the “least productive of our economic sectors,” but for the sake of conversation, let’s say that’s true. Let’s just assume that those rascally federal bureaucracies are just too darned “unproductive.”
This is still a deeply misguided policy position.
Remember, the question from Tyrangiel has to do with the economic recovery: is it good or bad that America has been trying to dig itself out of a brutally-deep economic hole while simultaneously laying off 650,000 public-sector workers — on purpose.
Romney’s response is about a long-term vision — a more efficient and productive federal sector will eventually be good for the private sector. That may or may not be true, but the Republican is badly missing the point: how can the economy get better in a hurry if we’re deliberately putting 650,000 out of work? The answer is, we can’t, but apparently Romney doesn’t much care.
For that matter, Romney may struggle with the details of basic economics, but it’s disconcerting that he doesn’t realize who these people are. “The federal government is the least productive of our economic sectors”? What does that have to do with school teachers, police officers, and firefighters who’ve been laid off in droves in communities nowhere near the Beltway?
By: Steve Benen, The Maddow Blog, August 9, 2012
“Debt, Depression, DeMarco”: How Economic Policy Has Been Crippled By Unyielding, Irresponsible Republican Opposition
There has been plenty to criticize about President Obama’s handling of the economy. Yet the overriding story of the past few years is not Mr. Obama’s mistakes but the scorched-earth opposition of Republicans, who have done everything they can to get in his way — and who now, having blocked the president’s policies, hope to win the White House by claiming that his policies have failed.
And this week’s shocking refusal to implement debt relief by the acting director of the Federal Housing Finance Agency — a Bush-era holdover the president hasn’t been able to replace — illustrates perfectly what’s going on.
Some background: many economists believe that the overhang of excess household debt, a legacy of the bubble years, is the biggest factor holding back economic recovery. Loosely speaking, excess debt has created a situation in which everyone is trying to spend less than their income. Since this is collectively impossible — my spending is your income, and your spending is my income — the result is a persistently depressed economy.
How should policy respond? One answer is government spending to support the economy while the private sector repairs its balance sheets; now is not the time for austerity, and cuts in government purchases have been a major economic drag. Another answer is aggressive monetary policy, which is why the Federal Reserve’s refusal to act in the face of high unemployment and below-target inflation is a scandal.
But fiscal and monetary policy could, and should, be coupled with debt relief. Reducing the burden on Americans in financial trouble would mean more jobs and improved opportunities for everyone.
Unfortunately, the administration’s initial debt relief efforts were ineffectual: Officials imposed so many restrictions to avoid giving relief to “undeserving” debtors that the program went nowhere. More recently, however, the administration has gotten a lot more serious about the issue.
And the obvious place to provide debt relief is on mortgages owned by Fannie Mae and Freddie Mac, the government-sponsored lenders that were effectively nationalized in the waning days of the George W. Bush administration.
The idea of using Fannie and Freddie has bipartisan support. Indeed, Columbia’s Glenn Hubbard, a top Romney adviser, has called on Fannie and Freddie to let homeowners with little or no equity refinance their mortgages, which could sharply cut their interest payments and provide a major boost to the economy. The Obama administration supports this idea and has also proposed a special program of relief for deeply troubled borrowers.
But Edward DeMarco, the acting director of the agency that oversees Fannie and Freddie, refuses to move on refinancing. And, this week, he rejected the administration’s relief plan.
Who is Ed DeMarco? He’s a civil servant who became acting director of the housing finance agency after the Bush-appointed director resigned in 2009. He is still there, in the fourth year of the Obama administration, because Senate Republicans have blocked attempts to install a permanent director. And he evidently just hates the idea of providing debt relief.
Mr. DeMarco’s letter rejecting the relief plan made remarkably weak arguments. He claimed that the plan, while improving his agency’s financial position thanks to subsidies from the Treasury Department, would be a net loss to taxpayers — a conclusion not supported by his own staff’s analysis, which showed a net gain. And it’s worth pointing out that many private lenders have offered the very kinds of principal reductions Mr. DeMarco rejects — even though these lenders, unlike the government, have no incentive to take into account the way debt relief would strengthen the economy.
The main point, however, is that Mr. DeMarco seems to misunderstand his job. He’s supposed to run his agency and secure its finances — not make national economic policy. If the Treasury secretary, acting for the president, seeks to subsidize debt relief in a way that actually strengthens the finance agency, the agency’s chief has no business blocking that policy. Doing so should be a firing offense.
Can Mr. DeMarco be fired right away? I’ve been seeing conflicting analyses on that point, although one thing is clear: President Obama, if re-elected, can, and should, replace him through a recess appointment. In fact, he should have done that years ago. As I said, Mr. Obama has made plenty of mistakes.
But the DeMarco affair nonetheless demonstrates, once again, the extent to which U.S. economic policy has been crippled by unyielding, irresponsible political opposition. If our economy is still deeply depressed, much — and I would say most — of the blame rests not with Mr. Obama but with the very people seeking to use that depressed economy for political advantage.
By: Paul Krugman, Op-Ed Columnist, The New York Times, August 2, 2012
“Polarized, Inefficient and Unproductive”: Congressional Brinkmanship Threatens Economic Recovery
Congress’s job approval rating has slowly ticked up over the past six months—reaching a whopping 16 percent in the first half of July, with 78 percent disapproving. However, even these dismal numbers may be giving Congress too much credit, especially if legislators don’t act soon to avoid the looming fiscal cliff.
The scenario is eerily reminiscent of last spring, when political deadlock over the federal budget threatened a government shutdown before an 11th-hour deal was struck. Such political wrangling risked the loss of 800,000 jobs and the curtailment of crucial public services such as mortgage, passport, and loan processing—not to mention a massive disruption of a fragile economic recovery.
And another similar scenario just a few months later was the battle over the federal debt ceiling, gambling the possibility of another government shutdown. The haphazard deal reached during that policy fight, which failed to produce long-term practical solutions, laid the groundwork for what the country faces today.
The risks of the impending fiscal cliff are similar, if not graver. If current fiscal policy is allowed to take effect, the United States economy will simultaneously experience across-the-board income tax hikes and deep, automatic spending cuts of billions of dollars at the end of this year. According to the nonpartisan Congressional Budget Office, these policies combined will contribute to lower incomes and higher unemployment numbers, slowing economic growth in 2013 to a mere 0.5 percent—and sending America into a double-dip recession.
The general assumption is that lawmakers will not let it get to that point; spending measures will be passed and tax cuts will be extended—though how much and for whom remains undecided. We all need to be asking when this is going to happen.
The 112th Congress has been called the most polarized, inefficient, and unproductive Congress in the 236-year history of the United States; and if they’re trying to fight that image, it sure is hard to tell. Legislators have shown little political will to act before the November presidential elections, dangerously close to the December 31 deadline when the first of a series of tax cuts will expire.
Such political brinkmanship is detrimental to the business environment and to a weak economic recovery. Small businesses are particularly hard hit by the uncertain climate created by Washington, and the threat of substantial tax increases has done nothing to ease fears. According to a Chamber of Commerce poll in July, over half of small business owners cite economic uncertainty as their top concern. Only 20 percent of those surveyed expected to hire in 2013.
This is bad news—with real implications for American prosperity. Small businesses are the key to economic recovery, spurring the majority of job creation. But to hire, business owners need the assurance of a stable investment environment in which they can secure returns. Regardless of whether America falls off the fiscal cliff, Congress’s behavior is already having detrimental effects on business and employment expectations. Amid discouraging jobs and industry reports, this political game is not something we can afford.
Lawmakers must realize that their gridlocked partisanship is hurting a nation already struggling. The 112th Congress has five months left in its term. Is it too naïve to hope things might change?
By: Steve Zelnak, U. S. News and World Report, August 3, 2012
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