The New New Deal (37 page)

A few minutes later, Obama was introducing Devaney to the nation as the new independent stimulus watchdog. Golf in the sunshine would have to wait.

“I hadn’t even mentioned anything to my wife,” Devaney recalls. “Someone told her: ‘Hey, your husband’s on TV.’ Whew. Mother’s Day was expensive that year.”

Devaney has the gift of gab, but as Biden says, he is one hard-ass dude, a hulking former college lineman and a junkyard-dog investigator. On his first day on the job, Biden told him: Earl, I know we’re at arm’s length now, but I’d like to ask a favor. If you see anything going wrong, please tell me so I can announce it.

“That’s a novel idea,” Devaney said. “But sorry, we can’t.” And he didn’t.

The next day, Devaney had a request for Biden. The White House had put together the initial version of recovery.gov, the official stimulus website, and had just handed it over to Devaney to run independently. But on the home page, the lead video was Obama hailing the importance of transparency and accountability, which didn’t send a very independent message.

“Mr. Vice President, the video’s got to go,” Devaney said. And it did.

Now Devaney had to set up new systems to follow all the money, an unglamorous task he compared to building a ship while it was leaving the port. His so-called RAT board had five months to create a centralized reporting system from scratch, to track what tens of thousands of stimulus contractors were doing with their money. The board also had to scramble to upgrade recovery.gov, so that citizens could look up every grant, loan, and contract online. Meanwhile, in a nondescript office building near the White House, Devaney set up a state-of-the-art command center that felt like a mini–Mission Control, where investigators from the worlds of finance and intelligence as well as law enforcement
could use advanced software tools to prevent and detect fraud. When I visited, they were tracking a day care operator who had been flagged electronically after receiving a grant to help crime victims. Database checks suggested she was more likely to create crime victims; she had been disqualified from federal contracting in the past, and her corporate documents revealed links to all kinds of sketchy enterprises.

“This is a completely new way of doing oversight,” Devaney told me. “The old way was: Whoops! The money’s missing. I wonder who took it. Now it’s: Hey, there’s a risky situation. Let’s stop the fraud before it happens.”

According to Devaney and other watchdogs, Recovery Act fraud has been virtually nonexistent. Devaney thinks there were just too many eyeballs on the stimulus money; any minimally intelligent criminal would go after different money. Outside experts had warned that 5 percent of the stimulus could be stolen, but by the time Devaney finally got to retire at the end of 2011, the RAT board had documented only $7.2 million in losses, about 0.001 percent.
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“It’s been a giant surprise,” Devaney says. “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.”

People don’t appreciate that, because fraud that doesn’t happen gets about as much media coverage as planes that land safely.

B
iden was glad to have a bulldog of a cop patrolling the stimulus. But as he told Ed DeSeve, a Clinton-era management official who had come to his office for a job interview, what he really needed was a crackerjack CEO running it. The fireplace in Biden’s office was roaring, and DeSeve—another big-boned guy who used to match up with the legendary linebacker Chuck (“Concrete Charlie”) Bednarik in pickup hoops games “about forty years and forty pounds ago”—was sweating through his wool suit. He figured, what the heck, maybe this will be a short interview.

“With all due respect, sir, I don’t think you need a CEO,” DeSeve said. “You need a coordinator.”

The cabinet was stocked with CEOs. America’s statehouses had fifty CEOs. Biden didn’t need someone to tell them what to do. He needed someone to keep them on the same page, hold them accountable for results, and help them troubleshoot problems. DeSeve was a student of management, and he thought the Recovery Act, like the war on terror or a hurricane response, required a network, not a command-and-control hierarchy. He didn’t think the job called for a team manager; he envisioned it more like a league commissioner.

DeSeve got the job. He also got a closet of an office with a view of scaffolding, which sent a penny-pinching message to visiting politicians and corporate titans. He got a team that never exceeded eight people. But he didn’t need fancy trappings or a big staff; all he needed was the authority to help the trains run on time. He was given three titles to reflect the high-level support for his mission, as a top aide to Obama, Biden, and Orszag. He attended Rahm’s staff meeting every morning, and ran daily conference calls with every agency. The message from the top was simple: This is a big deal. Don’t blow it.

The White House’s main concern was the spending deadlines. Dollars parked in the Treasury would not stimulate the economy, and busted deadlines would create failed-stimulus political feeding frenzies. So DeSeve’s list of his top priorities on his office wall started with “Get The Money Out” and “Get The Money Under Contract.” Often, that would be relatively easy. Making Work Pay, food stamps, and most of the other tax cuts and safety net benefits would start going out the door almost automatically. Aid to states was mostly a matter of tweaking formulas and cutting checks; the first Medicaid dollars went out on Day Eight. New funding for existing programs to help local police forces hire new officers or Americorps take on new volunteers didn’t worry DeSeve, either. The feds would just pour money into the top.

But getting transformative programs like health IT and Race to the Top up and running would be a brutal challenge. An obscure Commerce Department agency with a $19 million budget was supposed to distribute $4.5 billion in broadband grants.
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A small safety agency inside the Transportation Department would run the $8 billion high-speed rail initiative. The sclerotic Energy Department would be responsible
for a mind-boggling 144 stimulus programs. As the Biden Bridge illustrated, traditional infrastructure projects would be a struggle, too. And when Obama launched the Recovery Act in mid-February, he hardly had any appointees in place to deal with all these problems. Only two of his fifteen cabinet departments had deputy secretaries in place, and three didn’t even have confirmed secretaries.
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The bureaucratic blocking and tackling that got the money moving was not the stuff of epic poetry. Peter Orszag’s sixty-two-page single-spaced implementation memo, which was sent to every agency the day after the bill signing, was not gripping literature.
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But a week later, HUD secretary Shaun Donovan announced that his notoriously troubled agency had obligated 75 percent of its stimulus funds to local housing agencies. “That was a jaw-dropper,” Donovan says. The Recovery Act required the similarly calcified Labor Department to rule within fifteen days on all appeals by laid-off workers denied COBRA health subsidies—and the department didn’t even have an appeals process in place. “It seemed like Mission: Impossible,” says deputy labor secretary Seth Harris. The department would receive over 25,000 appeals, and would adjudicate 99.8 percent of them within fifteen days.

Harris likes to tell the story of 13(c), a preexisting rule that requires his department to sign off on all transit grants, usually after a few months of haggling between transit officials and their unions over labor issues. But the Recovery Act had use-it-or-lose-it rules, so its $8.4 billion in transit grants needed speedy approvals. “I was waking up in the middle of the night screaming: 13(c)!” Harris says. “The vice president was pounding on the table saying: Get the money out! The grants were going to get delayed, and it was all going to be our fault.” But after intense outreach by the department—calls, meetings, “webinars”—most stakeholders agreed to skip their usual 13(c) confrontations. The grants all went out on time. “It’s probably not the most exciting story,” Harris says. “But this could have been a gigantic barrier to success.”

Every agency had to report on every stimulus program every week, so DeSeve could see in real time when programs lagged behind schedule. One chronic problem was the Environmental Protection Agency’s
water and sewer projects, and after DeSeve’s chats with agency officials failed to solve it, Biden called in EPA administrator Lisa Jackson for a come-to-Jesus chat. After she explained the contracting bottlenecks, Biden called some of the laggards around the country and threatened to take their money back. “To tell the truth, I wasn’t sure I had the authority to take the money back,” Biden recalls with a grin. The deadline for getting those EPA projects under contract was the Recovery Act’s one-year anniversary, and DeSeve says the last contract was signed just a few minutes before midnight.

Two months later, at the same cabinet meeting where Secretary Chu explained his swing-for-the-fences theory of clean-energy research, I watched Biden badger the cabinet about another upcoming deadline as if he were a junior high teacher. He warned that if any agency couldn’t hit its targets, he wanted a written explanation. “I know I’m harping on this,” he said. “But guess what, folks? We’re going to be held accountable. And we have No. Margin. For. Error.”

Biden then put Secretary LaHood on the spot, asking why transportation spending was behind schedule. Like the kid in the back row who hadn’t done the reading, LaHood started stammering about bad winter weather, then quickly realized that wasn’t the right answer, especially now that it was springtime. “No excuse. We need to hold everyone’s feet to the fire,” he said. “We’ve got to tell these governors to get the contracts out.”

The vice president’s face lit up. Just give me some names, he said. I’ll call from Air Force Two tonight. “It’s the new slogan!” he said. “You don’t say no to Joe!”

Ultimately, the Obama administration would meet every one of its stimulus funding deadlines, athough a few did go down to the wire.

“As the Duke of Wellington said, it was a near-run thing,” DeSeve says. “But we hit every mark.”

Needless to say, the deadlines that weren’t missed got about as much coverage as water mains that don’t break.

T
he Recovery Act essentially required the Energy Department to transform itself into a venture capital and project finance operation, which felt like requiring Homer Simpson to transform himself into an Olympic decathlete. The lumbering bureaucracy that had struggled to distribute a few billion dollars in annual clean-energy grants—and had failed to distribute a single clean-energy loan in four years—would now have eighteen months to hand out $37 billion in grants, and even more in loans. This was by far the Recovery Act’s scariest management challenge. For its three decades in existence, the department’s main task had been overseeing nuclear materials. Now it was suddenly the largest clean-tech fund in history.

“We had to change the mentality, or this was going to be a huge bust,” Secretary Chu says.

Chu was Obama’s only political appointee in place at the department, and he was about as apolitical as political appointees get. During the first week of the Recovery Act, he toured an energy-efficiency project with Biden, and made the mistake of contradicting the vice president in public. “He won a Nobel Prize,” Biden snapped. “I got elected seven times.” But while Chu was a newcomer to Washington and the political world, he had spent most of his career around Silicon Valley and the business world. And as the department began to evolve into a government version of Sand Hill Road, Chu’s senior staff took on a Bay Area influence, including assistant secretary Cathy Zoi, a clean-tech businesswoman who had run Al Gore’s climate nonprofit; ARPA-E director Arun Majumdar, Chu’s nanoengineering pal from Berkeley; Sanjay Wagle, a green venture capitalist who had helped run CleanTech for Obama; and Steve Spinner, a Silicon Valley entrepreneur and Obama fund-raiser. The emphasis was private sector expertise: The Chevron executive in charge of biofuels took over the department’s biofuels program, and an executive with almost four decades of experience in the utility industry took over the department’s fossil energy program.

Chu’s most important recruit was his stimulus czar, Matt Rogers, the San Francisco–based founder of McKinsey & Co.’s clean-energy consultancy. Rogers wasn’t wild about the government-as-venture-capitalist analogy—government wouldn’t get to share the profits or meddle with management, and couldn’t accept a 90 percent failure rate—but he’d bring private sector rigor and impatience to the Energy Department as it built an investment portfolio. His wife, a judge, would remain in the Bay Area with their three kids, so Rogers took the job on the condition that he would leave Washington on September 30, 2010, the department’s deadline for committing its stimulus dollars.

To prepare, he read a report chronicling the department’s history of dysfunction, and highlighting specific Recovery Act risks.
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“I don’t think I slept for three days,” Rogers says. “Oh, my God. It was remarkable to see the sheer number of ways things could go badly.”

Rogers now had had to figure out how to set up those 144 programs to produce results. For example, Congress had provided $2 billion for competitive grants to create an advanced battery industry, but hadn’t provided much guidance beyond that. Before the department could solicit bids, it had to decide what to solicit. Should it just finance new battery factories, or should it also promote U.S. manufacturing of anodes, cathodes, separators, and other components? Rogers concluded the new industry wouldn’t be sustainable without a domestic supply chain. What about next-generation technologies? Rogers decided no, only ready-to-build, ready-to-compete factories; to qualify for grants, companies would have to show they had lined up real orders from real customers. The recipients would also have to match their grants with private funds, a test of their competitiveness; the Massachusetts-based battery manufacturer A123 Systems raised its $250 million cost-share through the largest clean-tech IPO of 2009.