A massive drought, the worst since the Dust Bowl years of the thirties, and the hottest July ever recorded with more of the same in August, and the Mississippi River shrinking to the point where soon no one will be able to move freight and the water supply in New Orleans may be threatened, and massive fires everywhere – it’s been one hell of a summer. And there’s this – “Army suicides hit a new single-month record in July, when thirty-eight active-duty and reserve soldiers took their own lives, according to official figures released Thursday.” There were twenty-four suicides in June – do the math. And this was the summer of lone madmen with guns – the mass killings at the movie theater in Aurora and at the Sikh Temple in Michigan, and now a fellow who volunteered at a gay community center walks into the offices of the anti-gay Family Research Council with a backpack full of Chick-fil-A sandwiches and a box of ammunition and says “I don’t like your politics” and shoots a security guard. The Southern Poverty Law Center long ago labeled the Family Research Council a “hate group” and this complicates matters – if they weren’t complicated enough already.
Maybe it’s just the heat. Or maybe these really are the End Times – if you believe in that sort of thing. Maybe the country has just settled into a kind of murderous despair, where everyone broods in the hot darkness, contemplating what they’d really like to do, damn it – the wrong people are getting Medicare and unemployment checks and all the breaks, or the damned Wall Street rich guys have taken over most everything the Christian Right didn’t take over already, leaving us all with no money and no chances and everyone wanting to convince us that sex is evil and maybe women are too and God hates our gay friends. Take your choice. Everyone is seething.
This is a bad time for a presidential election. Hope and Change are long gone. As mentioned in the previous column, the economy has been stuck for years now in not much of anything, with no real recovery but no new sinking, just extended misery, easing far too slowly, in fits and starts. No one is happy about that but Obama argues we should continue the slow and careful climb out of this hole, even if it’s hard with a Republican House that refuses to pass anything but bills renaming post offices – because going back and starting over, trying once again what was tried in the Bush years and didn’t work then, is nuts. Romney was arguing, for a time, that he had been a hyper-successful businessman, who had become one of the richest men in America, so he knew how to fix things, and now he has Paul Ryan by his side, the man who knows everything there is to know about free-market capitalism and is a budget guru who knows just how the government should tax and spend. The argument was Bush wasn’t bold enough – his tax cuts for the wealthy should have been ten times deeper, there were some regulations he never got around to eliminating, and he should not have had the government spend a dime on anything.
That was the argument, for a time, but maybe the heat got to everyone. Now it’s endless wonky arguments about whether to improve Medicare or abandon it and have old people comparison shop for whatever private health insurance is available in the open market, with small government vouchers in hand. Not many follow all the details. Kevin Drum has a good tabled-summary of who is proposing what – far better than Mitt Romney going all Glenn Beck with a whiteboard lecture on the evil of what Obama is doing – furiously drawing arrows this way and that. At least Romney didn’t get into the Marxist iconography of the friezes at Rockefeller Center and their hidden relationship to Italian fascism – Romney just isn’t Glenn Beck. But it was still odd. The controversy over Joe Biden using the word “chains” was just as odd – an argument about nothing much that prompted Romney to say this – “Mr. President, take your campaign of division and anger and hate back to Chicago.”
Maybe it was just the heat – and Chicago is part of America. See Jon Stewart – “As a general rule, I find it helps not to frame a plea for unity by insulting a major city within that nation.” Well, duh!
The Washington Post’s Dan Balz just throws up his hands – President Obama, Mitt Romney Running a Most Poisonous Campaign – an argument that it’s all nonsense. He thinks the problem is the SuperPACs neither campaign can really control. That whole business is nothing but trouble. Romney ran Bain Capital but he’s not responsible for that man’s wife dying of cancer. Obama is certainly not ending all work requirements for welfare and handing thick wads of free money to lazy black folks who are grinning and mocking the rest of us white folks. Balz has example after example. Everyone is seething about something that’s just not so.
What have been left behind are the basics – the argument that Obama said he was going to fix things and he didn’t. His stimulus plan didn’t work – because it couldn’t work. The government was supposed to get out of the way, not do things – that would lead to prosperity. It was the wrong idea. Romney was going to hang that around Obama’s neck. All this talk about some sort of social contract, where we all have each other’s backs, was nonsense – when we compete with each other, even viciously, simply wonderful things happen. That’s what free-market capitalism is all about, and there’s nothing better than free-market capitalism.
It was the same argument from the thirties – between 1933 and 1936 FDR forced the New Deal into place, over the howls and screams of the conservatives of the time. The government hired millions of the unemployed to work on anything even vaguely useful, so they had a few bucks in their pockets, which they spent as they had to, to survive, thus restoring some demand to the economy, which made the economy grow, slowly but surely. It was pretty simple, but there were those who said the whole thing was stupid, and now there are those who say the same thing about Obama’s efforts.
The stage was set early. See the cover of Time Magazine from November 24, 2008 – Obama as FDR with the wire-rimmed glasses and the jaunty cigarette holder and everything. Note the headline – The New New Deal. That’s what this election was supposed to be about. FDR couldn’t be stopped, but maybe Obama could be. Obama’s stimulus package was an epic failure after all.
Time Magazine editor Michael Grunwald now disagrees:
No. U.S. President Barack Obama’s $787 billion stimulus bill was certainly a political failure. Obama signed it during his first month in office, cutting taxes for more than 95 percent of American workers, while pouring cash into health care, education, energy, infrastructure, and aid to victims of the Great Recession. It was textbook Keynesian economics, using public dollars to revive private demand, but within a year, the percentage of those who thought it had created jobs was lower than the percentage of Americans who believe Elvis is alive. Republicans mocked it as “Porkulus,” a bloated encapsulation of everything wrong with the Obama regime, and it helped launch their Tea Party-fueled political revival. The media breathlessly chronicled its silly expenditures, like costumes for water-safety mascots; silly-sounding legitimate expenditures, like a brain-chemistry study of cocaine-addicted monkeys; and fictitious expenditures, like levitating trains to Disneyland. Democrats got so weary of the nonstop ridicule that they stopped using the word “stimulus.”
It was only a political failure. It wasn’t “a big-government boondoggle that blew up the national debt without putting Americans back to work, a profligate exercise in tax-and-spend liberalism, crony capitalism, and airy-fairy green utopianism.” That’s what the Republicans say, but it’s just not true:
Obama doesn’t use the s-word today, but he does argue that the bill, formally the American Recovery and Reinvestment Act, saved the country from a second Great Depression, ending an economic nightmare in the short term (the Recovery part) while laying the groundwork for a more competitive and sustainable economy in the long term (the Reinvestment part). Meanwhile, disgruntled liberals complain that the stimulus was far too small, because Obama was far too timid, and that jobless Americans are still paying the price for the president’s spinelessness.
But facts are facts:
For starters, there is voluminous evidence that the stimulus did provide real stimulus, helping to stop a terrifying free-fall, avert a second Depression, and end a brutal recession. America’s top economic forecasters – Macroeconomic Advisers, Moody’s Economy.com, IHS Global Insight, JPMorgan Chase, Goldman Sachs, and the Congressional Budget Office – agree that it increased GDP at least 2 percentage points, the difference between contraction and growth, and saved or created about 2.5 million jobs. The concept of “saved or created” has inspired a lot of sarcasm – Obama joked after his 2009 Thanksgiving pardon that he had just saved or created four turkeys - but it simply means 2.5 million more people would have been jobless without the Recovery Act. The unemployment rate might still be in the double digits.
Of course, as Obama’s critics on the left and right correctly point out, the 8 percent U.S. jobless rate is still terribly high. And there’s no way to run a double-blind study of an alternative U.S. economy without the stimulus, so there’s no smoking gun to prove the stimulus launched a recovery. But the ballistics certainly match. The economy shrank at a Depression-level rate in the fourth quarter of 2008, and job losses peaked in January 2009. After the stimulus bill passed in February, however, output had its second-biggest quarterly improvement in 25 years, and employment had its biggest quarterly improvement in 30 years. The recession officially ended that June. A Washington Post review of Recovery Act studies found six that showed a positive economic effect versus one useful study (by prominent Republican economist John B. Taylor) that concluded the stimulus failed – and critics noted that Taylor’s data just as easily support the conclusion that the stimulus was too small.
This can be maddening:
Keynesian stimulus has since become a political football, but before Obama took office, just about everyone agreed that when the economy slumps, government can boost growth and create jobs by injecting money into the economy, whether by taxing less or spending more. In early 2008, every Republican and Democratic presidential candidate proposed a stimulus plan – in fact, Romney’s was the largest. And Republicans still use Keynesian pump-priming arguments to push tax cuts, military spending, and other stimulus they happen to support. Of course, the most powerful argument for aggressive stimulus has been the experience of European countries like Britain and Spain that have turned back toward austerity and stumbled back into recession.
Republicans have ripped the Recovery Act’s food stamps, unemployment benefits, and other aid to the less fortunate for fostering a culture of dependency, but with a few exceptions (more generous tuition grants for low-income students and tax credits for low-income workers), the handouts were temporary. And there’s no doubt that they made an extraordinarily painful time less painful, lifting at least 7 million Americans above the poverty line while making 32 million poor Americans less poor. As a result, the poverty rate increased only slightly during the worst downturn since the 1930s. Homelessness actually declined slightly, largely because an innovative Recovery Act experiment in “homelessness prevention” helped house 1.2 million Americans in crisis. If half of them had ended up on the streets instead, the country’s homeless population would have doubled.
Yes, it seems lame to argue that without the stimulus the terrible economy would have been much worse. It just happened to be true, as if that matters now.
Nevertheless, Michael Grunwald had written a new book about this – The New New Deal: The Hidden Story of Change in the Obama Era – and he’s serious. He argues that stimulus has transformed the nation in ways no one likes to talk about. And Slate’s David Plotz interviews Grunwald about what this is all about.
The interview is quite detailed, but a few things stand out:
The stimulus isn’t the New Deal. But they were both massive exercises in government activism in response to epic economic collapses. And they were both about change. The stimulus was the purest distillation of what Obama meant by “Change we can believe in.” And it’s the essence of Obama-ism – not only the policies, which came straight from his campaign agenda, but his approach to getting them into law, which was more pragmatic and political and messy than his hopey-changey rhetoric had led people to believe. So there was plenty of New, and plenty of Deal.
The Obama team thought a lot about the New Deal while they were putting the stimulus together, but times have changed since the New Deal. The Hoover Dam put 5,000 Americans to work with shovels. A comparable project today would only require a few hundred workers with heavy equipment. Christy Romer, the Depression scholar who led Obama’s Council of Economic Advisers, kept reminding colleagues that the Roosevelt administration hired 4 million Americans in the winter of 1934. At one point she started calling Cabinet departments to see how many employees they could hire with unlimited funds: They’d say oh, a lot, maybe 20,000! So the stimulus didn’t create giant new alphabet agencies like the WPA or CCC. It only created one new agency, a tiny incubator for cutting-edge energy research called ARPA-E.
People forget that the CCC herded unemployed urban youths into militarized rural work camps – often known as “concentration camps,” before that phrase became uncool – for less than a dollar a day. That kind of thing wouldn’t fly today. The New Deal basically created Big Government, but it’s still here. There was no need to re-create Big Government, and no political desire to expand Big Government.
This had to be different:
So the stimulus didn’t establish new entitlements like Social Security or deposit insurance, or new federal responsibilities like securities regulation or labor relations, or new workfare programs for the creative class like the Federal Art Project, Federal Music Project, or Federal Writers Project. The New Deal was a barrage of contradictory initiatives enacted and adjusted over several years. The stimulus was one piece of legislation cobbled together and squeezed through Congress during Obama’s first month in office. The New Deal was a journey, an era, an aura. The Recovery Act was just a bill on Capitol Hill.
But it was a really big bill, 50 percent bigger than the entire New Deal in constant dollars. It included some New Deal-ish programs, like a $7 billion initiative to bring broadband to underserved areas, a modern version of FDR’s rural electrification. It included another $7 billion in incentives for states to modernize and expand the New Deal-era unemployment insurance system, which was created for a workforce of male breadwinners. Its aid to victims of the Great Recession lifted at least 7 million people out of poverty and made 32 million poor people less poor. It built power lines and sewage plants and fire stations, just like the New Deal. It refurbished a lot of New Deal parks and train stations and libraries. And Republicans have trashed the stimulus as a radical exercise in socialism, just as some Republicans – but not all Republicans – trashed the New Deal.
The most significant difference is that the New Deal was wildly popular, while the stimulus has been a political bust. There are many reasons for this, but the most important is that FDR launched the New Deal after the U.S. had suffered through more than two years of depression under Hoover, while Obama launched the stimulus when the economy was nowhere near rock bottom. Everyone knew about the financial earthquake, but the economic tsunami hadn’t yet hit the shore.
The timing was wrong and, most importantly, nothing was flashy:
Most of the money in the stimulus went to unsexy stuff designed to prevent a depression and ease the pain of the recession: aid to help states avoid drastic cuts in public services and public employees; unemployment benefits, food stamps, and other assistance for victims of the downturn; and tax cuts for 95 percent of American workers. And the money that did flow into public works went more toward fixing stuff that needed fixing – aging pipes, dilapidated train stations, my beloved Everglades – than building new stuff. In its first year, the stimulus financed 22,000 miles of road improvements, and only 230 miles of new roads. There were good reasons for that. Repairs tend to be more shovel-ready than new projects, so they pump money into the economy faster. They also pass the do-no-harm test. (New sprawl roads make all kind of problems worse.) And they are fiscally responsible. Repairing roads reduces maintenance backlogs and future deficits; building roads add to maintenance backlogs and future deficits.
In short, the stimulus did good things no one noticed, and there were headwinds:
I don’t think my book portrays the Republicans as “vicious,” but I do show – thanks to a lot of in-depth interviews with GOP sources—how they plotted to obstruct Obama before he even took office. I show how the stimulus was chock full of stuff they claimed to support until Jan. 20, 2009—not just things like health IT and the smart grid and energy efficiency and scientific research, but the very idea of Keynesian stimulus….
But the top priority for Washington Republicans was denying Obama bipartisan victories, so that they could come back from political oblivion. There’s a lot of fun fly-on-the-wall stuff in the book about meetings where Eric Cantor, Mitch McConnell, and other GOP leaders made this case – and on-the-record quotes from former GOP congressmen like Mike Castle, George Voinovich, and Specter complaining about it. McConnell often reminded his caucus about the 1984 election. Everyone remembers it as the 49-state Reagan landslide, Morning in America; people forget that only one Republican challenger ousted a Democratic incumbent that year. (It was McConnell, so he remembers.) His point was that there was nothing to be gained by going along with Obama. If the recovery plan worked and the economy boomed, Republicans would get re-elected even if they had voted against Obama. But if the economy was still struggling in 2010, Republicans could make a comeback if they stuck together.
And the rest is history, and the battle that still continues. Joe Biden’s careless syntax is beside the point.
There may be an even broader issue here too – the social contract itself – and an anonymous commenter at The Dish speaks to that:
In broad strokes, the issue is that Americans want more government than they are willing to pay for, but they have been shielded from this truth over the years for the sake of political expediency – a well-maintained playing field with equitable rules that offers the promise of success for those who can achieve it and the reassurance that those that stumble won’t be left to die in the street – our basic, tacit, social contract. Even at our current heights of anti-government furor, calls to cut these government functions – which account for the overwhelming majority of the federal budget – are deeply unpopular.
The only thing as unpopular as reducing those benefits is paying taxes to fund them. So over the past several decades the Republicans have skillfully played this dynamic to their favor with a simple formula: Advocate tax cuts at all times, make noise about wasteful spending and cut small items with limited appeal (or appeal only to the un-powerful), and never touch (and in fact add to) spending on popular big-ticket items like defense and entitlements. Oh and, of course, obscure all this with constant, distracting, engagement in the culture wars. The fruits of this strategy, unsurprisingly, are record low taxes, increasing spending, and exploding debt.
We all know how this goes:
The GOP establishment is, for the most part, still trying to play from its standard playbook which is to sell tax cuts, keep talk of spending cuts vague, and count on voters to assume none of the cuts would really affect them, just the “undeserving.” Even when confronted with specific GOP policy proposals many voters simply dismiss out of hand that a politician would actually do any of that.
That’s the formula Romney has used to this point and compared to the specific, painful, realities of a Simpson-Bowles style plan it would win hands-down. You rail on taxes and regulations and demagogue the benefit cuts in your opponent’s plan. Then you keep the tax cuts, soft pedal the spending reductions, throw the difference on the deficit, and start picking drapes for the Lincoln bedroom. In fact, the only way you win running on increasing taxes and reforming entitlements is to run it head to head as a choice between your plan and a much more noxious option.
And now we have Paul Ryan:
I don’t think Chicago ever thought they would be so lucky as to run against the man himself, but they’ve been trying to hang his toxic budget around the GOP nominee’s neck all cycle. That’s because Ryan and his acolytes are true believers of a radical small government philosophy. While the GOP establishment knows that tax cuts and deficit spending are what win elections, Ryan thinks he can sell people on huge reductions in services in exchange for tax cuts that mostly benefit the wealthy. The polling suggests he is very wrong.
The Obama campaign’s principle strategy to this point has been to prevent a referendum election on the state of the economy and turn it into a choice between a balanced, conservative, approach that maintains the basic structure of federal spending and a more radical GOP plan to restructure our social contract to accommodate their tax preferences.
Rather than try to avoid or obfuscate this choice, Romney chose to turn into the fire. It is a gutsy call that deserves respect in the nanosecond before he categorically denies neither he nor Paul meant or even said any of the things they have ever said.
Obama wins this one:
He has avoided the referendum election, he has made it a choice election, and it’s a debate over starkly different policies that polling suggests he could win handily. If he is the President so many of us believe we elected, now is the time he proves it by laying out a competing vision – dare I dream of short-term stimulus, rehiring state workers, and recovery followed by long-term deficit reduction in the mold of Simpson-Bowles? He then heads into his second term with a clear electoral mandate to break our current stalemate and cement his first term achievements before they are smothered in the crib.
That’s how FDR kept getting reelected. All this talk about some sort of social contract, where we all have each other’s backs, is not nonsense, while the idea that when we compete with each other, even viciously, simply wonderful things happen, is nonsense. Few if any want the cuts and deregulation being proposed, and even if they want more government than they are willing to pay for, they want government to do things, for them. What is the other side running on, elect us and we promise we’ll do nothing for you, or for anyone? No wonder this brutal summer is so full of maddening diversions. Sure, the heat makes people crazy. But summer ends, eventually. And then the core argument here will become obvious.