The New New Deal (34 page)

“Look, more stimulus would’ve been better,” says Jared Bernstein, the most liberal economist in the White House. “But Paul Krugman in his wildest dreams couldn’t have offset an $8 trillion loss in housing wealth, and trillions more in output. No conceivable stimulus could have offset the Great Recession.”

Anyway, the White House didn’t have the votes for more stimulus, not one more dollar. Krugman didn’t have to get his column passed by a supermajority.

“Give me a break,” Biden says. “I’ve been doing this my whole career. I’m going to say something outrageous: I don’t know anybody who counts votes better than me in the Senate. And you tell me you could’ve gotten better, you could’ve gotten $900 billion or $1 trillion? I mean, come on. I love the left saying, well, we could’ve gotten more. Okay, you go get it. You tell me how to get the sixty votes.”

Some liberal activists say Obama could have gotten a better deal if he had campaigned for it, harnessing the grassroots energy that had gotten him elected instead of playing inside baseball. Adam Green, who founded the Progressive Change Campaign Committee that January, thought he should have barnstormed across Maine and Pennsylvania to pressure Collins, Snowe, and Specter to back off, rather than settling for a smaller stimulus that would give stimulus a bad name. “That was a defining moment,” Green says. “It sent the message right from the start that he could be rolled.”

Obama has scoffed at this “notion that somehow I could have gone and made the case around the country for a far bigger stimulus,” as if suddenly the automatons of the Senate would have done his bidding. He was the president, not the king. And he didn’t just need the votes of Collins, Snowe, and Specter to pass the stimulus; he also needed Ben Nelson and the other centrist red-state Democrats who weren’t willing to spend a penny more than $800 billion. Should he have flown to Alaska to put pressure on Senator Begich, too? Time was a bit of an issue, with the country plunging into a depression.

“If folks think we could have gotten Ben Nelson, Arlen Specter, and Susan Collins to vote for additional stimulus, I would just suggest you weren’t in the meetings,” Obama later said. “We didn’t have the luxury to say to the Senate, our way or the highway.”

With so much attention focused on Obama’s concessions, it was just as easy to forget how much of what he wanted he was getting. Rahm estimated that the figure was 90 percent, well over Schiliro’s original 80–20 threshold. For example, the Recovery Act included about $300 billion worth of tax cuts—the number Obama initially proposed—almost entirely for the middle class and the working poor. It also authorized $140 billion in new safety net spending, the largest one-time expansion ever. And even after the haircut from the moderates, the stimulus still provided an unprecedented $165 billion in fiscal aid to help states avoid layoffs and cuts—about half of it through Medicaid, most of the rest through education funding. That wasn’t enough to fill all the state budget gaps that Bob Greenstein’s think tank had identified, but it was over 80 percent of what Obama requested, and way more than most progressives expected.

“I couldn’t believe how much they got compared to what I thought was possible,” Greenstein says.

It is an article of faith in Washington that the Recovery Act was light on infrastructure, but it was the most ambitious new commitment to public works since Dwight Eisenhower’s administration. It poured nearly $50 billion into transportation; according to Congressman Mica’s formula, that alone would “create or sustain” about 1.5 million jobs.
And while progressives complained that over half of that funding would go to highways—“Stimulus for Planes, Trains, but Mostly Automobiles,” blared a Center for Public Integrity headline—the percentage for mass transit was over twice as high as it had been in the last transportation bill.
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The stimulus launched a slew of other infrastructure investments as well, including $13 billion for water and sewer projects, $11 billion for grid upgrades, and $7 billion for new broadband. According to Senator Gregg’s definition, the $40 billion allotted to research and health IT should count as infrastructure, too. There was another $20 billion or so in the stimulus for energy efficiency retrofits and other construction projects at military bases, border stations, public housing, and other government buildings. And that was on top of the Recovery Act’s unprecedented investments in geothermal technologies, advanced biorefineries, electric vehicles, green-collar job training, and the rest of the clean-energy food chain.

That didn’t leave much room for cats and dogs. Yes, the money for artists and catfish farmers survived in the final package, along with the census and digital TV coupons. Senator Inouye also jammed in the payments to Filipino veterans. But most of the Recovery Act’s extras were relatively uncontroversial. There were about $4 billion in grants to law enforcement agencies, with specific carve-outs for fighting violence against women, Internet crimes against children, drugs in rural towns, and guns along the Mexican border. There was $16 billion for expanding Pell tuition grants, $6 billion for nuclear waste cleanups, $1 billion for preventive medicine. Then there was education reform—$4.35 billion for Race to the Top, plus $650 million for Investing in Innovation, another groundbreaking grant competition designed to scale up reform models with proven records of success, and $3.5 billion for School Improvement Grants, which would finance radical transformations of America’s worst performing schools. Those programs were controversial, but with liberals and unions, not with Obama’s usual critics.

Obama and his centrist economists also blocked several populist add-ons. For example, Obama’s friend Dick Durbin wanted to include a popular “cramdown” proposal to let bankruptcy judges modify underwater
mortgages, which would give at-risk homeowners much more leverage in their dealings with banks. The Obama team kept it out of the bill. The Recovery Act did deliver one slap at Wall Street, restricting salaries and bonuses for firms receiving TARP funds. But Geithner persuaded Senate Banking chairman Christopher Dodd to add language clarifying that bonuses approved before the stimulus could not be rescinded. Ultimately, the limits would go virtually unnoticed, while the exception to the limits would create a firestorm.

Basically, though, the stimulus was what Obama said it would be. It didn’t launch a nationwide school construction binge, and it had less money for education reform than he had hoped. It had the AMT patch instead of a hiring tax credit, and it didn’t have an infrastructure bank. Otherwise, it almost precisely followed the framework Obama gave Congress during his transition, providing the down payment on his long-term agenda that he promised during his inaugural address. In Peoria, he predicted it would unleash “a new wave of innovation and construction all across America.”

“We’ll put people to work building wind turbines and solar panels and fuel-efficient cars,” Obama said.
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“We’ll computerize our health care system to save billions of dollars and countless lives; lay down broadband lines to connect rural schools and businesses so they can compete with their counterparts anywhere in the world; rebuild crumbling roads and bridges; repair dangerous dams and levees so we don’t face another Katrina. Think about all the work out there to be done!”

T
he only remaining suspense was whether House Republicans would remain united. Anh Cao told reporters he was leaning toward supporting the stimulus, and Emanuel and LaHood were pitching rail-friendly moderates like John Mica, Fred Upton, and Mike Castle on the wonders of fast trains. They still thought a dozen Republicans might vote yes. “I didn’t think the die was cast,” LaHood says. He wasn’t hearing many substantive complaints about the stimulus; his old colleagues mostly seemed annoyed with Pelosi’s influence over the process.

Cantor and his whip team worked the vote hard. He spent most of his time on the floor lobbying Upton, at one point leading him through
that eighteen-page polling presentation. His deputy, Kevin McCarthy, hovered near Cao. The White House also helped Cantor out with a head-scratching political blunder, compiling a list of the Recovery Act’s predicted job creation numbers for all 435 congressional districts—with Cao’s dead last.
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He says that list persuaded him to vote no, and the rest of his Republican colleagues joined him. At one point, Boehner theatrically dropped the 1,073-page bill on the House floor, where it landed with a symbolic thud. This time, the Republicans were joined in opposition by only six Blue Dog Democrats, plus one liberal, Peter DeFazio of Oregon, who switched to no because he thought the final deal had too many tax cuts and not enough infrastructure.
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“You think about the New Deal: It built things,” DeFazio says. “For us, it’s going to be: What did you do in the war, Grandpa? Oh, I got a few tax cuts.”

The Senate vote, while less suspenseful, was one of the longest congressional votes in history. Since Kennedy was too ill to attend, Reid had to hold the roll call open for five hours so that Ohio Democrat Sherrod Brown could fly back from his mother’s funeral on a government plane to record the sixtieth vote. He then immediately flew back to Ohio for the memorial service Saturday morning. This time, Reid didn’t even bother to ask Republicans if they would pair Brown’s vote to spare him from crisscrossing the country during his time of grief. They clearly didn’t intend to do Democrats any favors.

“A lot of Republicans thought the stimulus was necessary,” Specter says. “They just wanted it to pass without their fingerprints. It was all so partisan. You had the sentiment: ‘We’re going to break Obama.’”

Voters wanted action, and Democrats predicted that Republicans would be punished for their stimulus obstruction. In New Orleans, Cao almost instantly faced a movement to recall him from Congress. Robert Menendez of New Jersey, the head of the Senate Democratic campaign fund, gloated that obstructionist Republicans were racing over an electoral cliff. “They are in essence betting against the president and against an economic recovery,” he said.
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“At the end of the day, acting to turn this economy around is going to look a lot better than just being naysayers.”

That was yet another wrong assumption.

“N
amasté. Namasté? Nah-Mah-STAY.”

It’s a Sanskrit greeting of peace and respect, usually associated with yoga types, not usually with Joe Biden. But the vice president was preparing to introduce Blake Jones, the CEO of Namasté Solar, and he wanted to get the pronunciation right. “If I say it wrong, you can call me Bidden!” he told Jones.

It was Tuesday, February 17, and Obama was about to sign the Recovery Act into law—not in Washington, the scene of all the squabbling, but 1,700 miles away at the Denver Museum of Science, where Namasté had installed the solar panels on the roof.
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In its three years in business, Namasté had grown from three to fifty-five employees, but in the last few months, it had announced a hiring freeze, slashed its budget, cut work for subcontractors, slashed its budget again, and started planning its first layoffs. Now, thanks to the stimulus, Jones was looking to hire again. Solar installations, he told Biden, were “wrench-ready.”

Biden believed in stories, not statistics; he thought the public was hearing too much about 3 million theoretical jobs and not enough about Namasté—which, true to form, he pronounced Nah-MAH-stay in his introduction. Jones began his speech by taking Biden up on his offer: “Thank you, Vice President Bidden,” he deadpanned. But then he told Namasté’s story, the tale of an employee-owned company that converts sunshine into energy, money, a stronger nation, and a healthier planet. Because of the stimulus, Jones said, Namasté expected 40 percent growth through 2010.

“Our pessimistic outlook has been injected with new hope and optimism,” he said. “We’re hoping thousands of carpenters, plumbers, electricians, roofers, sales people, marketing people and executives laid off by building industries will join us in the solar industry. Green jobs aren’t just good for those of us who have them. They’re good for everyone.”

When it was his turn to speak, Obama did not dwell on the compromises behind the Recovery Act. He hailed it as “the most sweeping economic recovery package in our history,” with “the largest investment in
education in our history,” “the most meaningful steps in years towards modernizing our health care system,” “the most progressive tax cuts in our history,” and “the biggest increase in basic research in the long history of America’s noble endeavor to better understand our world.”

Some White House economists hoped the president would point out that a bigger stimulus would have been even better for the economy, to start laying the groundwork to ask for more if the need should arise. And Axelrod was always nervous about overinflating expectations. But Rahm was a triumphalist. He wanted everyone to see the president celebrating his victory, because winners tend to keep winning. Obama took Rahm’s side of that debate. He preferred bragging about what he had done to griping about what he hadn’t been able to do.

“We have begun the essential work of keeping the American dream alive in our time,” Obama said. “Today does not mark the end of our economic problems. But it does mark the beginning of the end.”

After his expansive description of his new New Deal, the president pivoted. The Recovery Act, he said, was only the first step to a vibrant economy. The financial system still needed to be stabilized and reformed. The auto industry needed to be salvaged. So did the housing market, starting with a $50 billion plan he’d announce the next day. His message was: Onward. Critics of the stimulus would continue to pound it, but Obama didn’t intend to spend the rest of his presidency defending it. He had work to do. He assumed that if he did that work well, the politics would take care of itself.

“If I had my druthers, I would’ve loved to make the case for the Recovery Act over a longer period of time, and run campaigns around each element of it,” Axelrod says. “I would’ve loved to promote the more popular parts of it like the tax cuts in a more traditional way. But time was of the essence. We just didn’t have that luxury.”