The New New Deal (24 page)

The drama was in the substance, the promise of change. Behind all those dry spreadsheets lurked a new approach to powering and fueling America.

“For eight years, unless you mined coal or drilled oil, you couldn’t get the time of day,” says Chris Miller, Harry Reid’s energy staffer. “And suddenly there we were, planning a low-carbon future.”

Obama set the agenda, but Congress added several of its own twists. For instance, Majority Leader Reid, who envisioned Nevada as the Saudi Arabia of geothermal power, secured $400 million for advanced geothermal technologies, twenty times the program’s 2008 budget. Hill Democrats not only adopted Obama’s ambitious energy efficiency proposals for retrofitting government buildings, schools, and homes, they added programs to retrofit factories and hospitals. Overall, the Recovery Act would include over $25 billion for efficiency, far more than the most optimistic advocates had requested.

“We’re used to asking for pennies,” says Kateri Callahan, head of the Alliance to Save Energy. “And then: Whoa! The numbers kept going up and up and up.”

Even the congressional fine print could be transformative. For example, Reid stuck $80 million into the Recovery Act for regional transmission planning, an unprecedented effort to address some of the siting problems that Carol Browner had explained to Obama in Chicago. House Energy chairman Henry Waxman of California also attached some eyes-glaze-over policy strings to the state energy grants that could significantly reduce U.S. electricity use. Before governors could get their money, they would have to sign a pledge to enact strict green building codes, and to pursue regulations giving utilities incentives to help customers save energy—that holy grail of efficiency that Obama discussed during the campaign. House energy staffer John Jimison hashed out the arcane provision at a late night negotiating session, then read it aloud to colleagues. Total silence. “Sheer poetry,” he joked.

The Hill was also responsible for the most controversial program in the stimulus, although it wasn’t controversial at the time. Reid and Senate Energy chairman Jeff Bingaman of New Mexico pushed to extend the Energy Department’s loan guarantee program to a broader swath of clean-tech projects, even though the Bush administration had failed to back a single loan in four years.
¹⁷⁴
The program had bipartisan support; in fact, Bush’s political appointees scrambled to try to complete their first loan before leaving office, until the department’s career staff concluded in early January that the application—for a California solar
start-up called Solyndra—wasn’t quite ready. “The apparent haste in recommending the project meant that certain credit procedures were not adhered to,” the staff wrote.
¹⁷⁵
Some market economists—including one Lawrence H. Summers—thought governments were lousy lenders, but banks had fled the clean energy space, and the beauty of loans was that a few billion dollars in federal exposure could leverage tens of billions of dollars in eco-friendly private sector activity. “That was the best bang for the buck you could get,” Bingaman says. Everyone understood that some loans would go bust, but economists Aldy and Jeff Liebman figured they’d be happy even if half the loans failed, if the other half helped change the energy game.

That was the whole point of investing in efficiency and renewables instead of hiring workers to dig holes and fill them in: The fossil fuel game was unsustainable. The stimulus was stuffed with potential game-changers—ARPA-E’s research, the first commercial refineries for post-corn biofuels, fast charging stations for electric vehicles, clean-tech manufacturing, green job training, and more. The goal was to help clean-energy businesses reach critical mass, so they could cut their costs enough to compete with dirty energy. “You always say you just need a push,” Browner kept telling them. “This is your push.”

The Recovery Act was not just the biggest clean-energy bill ever. It was the biggest energy bill ever.

“By leaps and bounds,” Browner says.

O
bama’s advisers still resist the notion that the stimulus was a Trojan horse for the president’s agenda. After all, the bulk of the bill was basic stimulus. The transition team cast a wide net for ideas that could satisfy the three-T test and create jobs quickly, vetting thousands of line items that had little to do with his larger vision. The Census Bureau needed to hire extra door knockers? “Hire” was a good word, and there was little danger they would stay beyond the 2010 decennial.
¹⁷⁶
The Commerce Department
was running out of coupons to help Americans convert their analog televisions to digital? Extra coupons might sound like a goofy use of stimulus dollars, but they would stimulate purchases of converter boxes by families who would otherwise lose their signals. Banks had stopped lending to small businesses? Waiving Small Business Administration fees and increasing the federal guarantee for new loans could thaw a frozen credit market. The Labor Department could ramp up a summer jobs program for young people? “Jobs” was a great word.

The transition team also rejected dozens of ideas that would have promoted the Obama agenda, usually because of skepticism of their timeliness or suspicion about their budgetary tails. Browner’s green team wanted to convert the Postal Service fleet to electric vehicles, but concluded it wouldn’t create jobs quickly enough. Operating subsidies for local transit agencies could have helped avert damaging fare increases, but Obama’s aides had a feeling the subsidies would never disappear. One transition official compared the anti-tail ethic to a sign he saw at the Grand Canyon, warning tourists not to feed the squirrels. “It said: You won’t be here in the winter, but the squirrels will, and they’re still going to expect to get fed,” the official recalls. Obama did not want the Recovery Act to create entitled squirrels.

But yes, Obama’s team was looking for line items that could help transform the country. Most of them flew under the radar.

For example, the U.S. unemployment insurance system was an antiquated vestige of the New Deal, designed for a workforce of male breadwinners. It served only about a third of jobless workers, and they had to wait three months to qualify for benefits, a legacy of the pre-computer age when labor data was much tougher to track. So Furman and Bernstein worked with House Democrats like New York’s Charlie Rangel and Jim McDermott of Washington to modernize and expand the system, providing $7 billion in incentives for states to eliminate the time lags and loosen their eligibility rules. Governors would be rewarded for extending benefits to part-time workers, as well as workers who quit jobs to care for a family member, follow a spouse who had to relocate, or escape domestic violence. These reforms wouldn’t attract
much attention, but they would extend the New Deal safety net to new cohorts of deserving workers while providing an automatic Keynesian stabilizer in times of high unemployment.

“My view of legislation is, you should always have ideas ready,” says McDermott, who first proposed the reforms in 2002. “Like George Washington Plunkitt said: I seen my opportunities and I took ’em.”

That would be a good slogan for the whole Recovery Act—not in Plunkitt’s original Tammany Hall graft sense, but in the Rahm’s Rule sense of taking advantage of the Democratic moment. A few more examples of the seeds it planted for change:

Build America Bonds.
The municipal bond market was another casualty of the financial crisis. Muni bonds were fueled by tax exemptions, and investors had just as little appetite for exemptions as they had for clean-energy tax credits. So Rangel’s staff devised new bonds that replaced the exemption with a direct subsidy, hoping to lower rates enough to attract investors and jump-start public works. These Build America Bonds would be exponentially more popular than anyone expected, financing thousands of local infrastructure projects that put Americans to work in all fifty states.

Homelessness Prevention.
The longer homeless people remain on the streets, the harder it is for them to repair their lives, and the more they end up costing society. In 2008, a pilot program had shown that modest interventions to help Americans on the brink of homelessness—helping out with utility bills, security deposits, moving expenses, or rent—could help keep a roof over their heads while slashing shelter costs, prison costs, and medical costs for taxpayers. The Recovery Act approved a sixty-fold funding increase to take the program national.

“For $1.5 billion, you get a systemic reform that changes the way we deal with the problem,” says Shaun Donovan, Obama’s HUD secretary.

Green Infrastructure.
America’s long-neglected waterworks were typical of the hidden infrastructure crisis that Obama had vowed to tackle, wasting billions of gallons of clean water and releasing billions of gallons of raw sewage every year. The Recovery Act provided over
$6 billion in new investments, a significant though not transformative effort to upgrade leaky pipes and inadequate treatment plants.

What was potentially transformative was a new rule reserving 20 percent of the cash for “green infrastructure” like permeable pavement, green roofs, rain barrels, and wetland restoration projects, an unprecedented investment in eco-friendlier water management. The idea was to keep stormwater out of overwhelmed sewers instead of building new capacity, to reduce demand for treatment instead of increasing supply, to make urban jungles function more like natural forests.
¹⁷⁷

In Philadelphia, for example, an aging stormwater system was dumping raw sewage into local waterways after heavy rains, and engineers had proposed a $9 billion outflow tunnel underneath the Delaware River to stop the overflows. Instead, Mayor Michael Nutter launched a stimulus-funded campaign to capture runoff from one-third of his city’s impervious surfaces. He’s not a tie-dyed tree hugger—although he does enjoy converting parking lots into parks—but he didn’t feel like burying $9 billion 150 feet underground. Greening his infrastructure instead could save $7 billion.

“It’s revolutionary, but it’s really a no-brainer,” he says. “We help the environment, and we don’t have to waste all that money tearing up the city.”

Electronic Medicine.
Obama saw computerization as a crucial foundation for health care reform, a way to cut extraneous costs, reduce fatal errors, and start collecting the data needed to rationalize a chaotic system. But after announcing he wanted the Recovery Act to spend $20 billion to get every American an electronic medical record within five years, he left most of the details to Congress.
¹⁷⁸
And while there was strong support for health IT on the Hill, a slew of competing bills had stalled over disagreements over how to protect patient privacy, how to get doctors and hospitals to go digital, and how to get computer systems to talk to each other.

The Recovery Act forced the major players into a deal. For example, Congressman Pete Stark of California had to drop his idea of mandating
adoption of the Veterans Administration’s computer system, which would have squelched innovation and forced early adopters to “rip and replace” competing systems.
¹⁷⁹
But Stark successfully argued that to qualify for financial incentives, physicians should have to prove they’re “meaningful users” of digital systems, not just purchasers, to make sure they’re e-prescribing, getting lab reports online, and reaping the benefits of the new technology. The negotiators eventually agreed on carrots and sticks that provide up to $48,400 for doctors and $11 million for hospitals that put electronic medicine into action, while slowly reducing Medicare payments for those that don’t. Patients will have to give consent before their data can be transferred electronically, but won’t have to reiterate their consent before every transfer.

As short-term stimulus, health IT didn’t pass the laugh test. Most of the money wouldn’t begin to go out the door until 2011. But even Summers thought it was exactly the kind of investment that government should make, helping to overcome private disincentives to build a network that would have huge public benefits once it reached critical mass.
¹⁸⁰
Summers had spent one of the most traumatic hours of his life waiting helplessly in a hospital after a lab technician misread a handwritten record—it said “Simmons,” not “Summers”—and thought his blood counts were crashing.
¹⁸¹
So he understood in his gut how crazy it was that the average 7-Eleven used more information technology than the average doctor’s office.

Anyway, Obama figured he was entitled to a few exceptions to the three-T rules. Health IT was a bipartisan cause, and a campaign promise, too.

Comparative Effectiveness.
Bush’s prescription drug bill had included a token effort to expand comparative effectiveness research, but only authorized $15 million a year, when a single study comparing the performance of antipsychotic drugs had cost $67 million. During the campaign, Obama promised to finance a real effort to figure out which medical treatments work best in which situations. The Recovery Act would pour in $1.1 billion, by far the most aggressive effort ever to transform a system driven by habit and assumption into a system driven by data and evidence.

Rahm’s brother Zeke Emanuel, a noted oncologist and bioethicist who would become Orszag’s health adviser, happened to be one of America’s leading advocates of comparative research. He still remembers his first visit to a cancer ward as a medical student, when the white coats ordered a transfusion for a teenager with Hodgkin’s disease because her platelets were below 20,000. Zeke asked: Why 20,000? Because that’s what we do here, one doc replied. “It drives me fucking nuts—the ignorance is overwhelming,” says Zeke, who shares Rahm’s linguistic proclivities. (So does their brother Ari, a Hollywood super-agent who was the model for the potty-mouthed Ari Gold on HBO’s
Entourage
.) A billion dollars was 0.05 percent of our annual health care expenditures, but it could go a long way toward shifting that’s-what-we-do-here to that’s-what-works.