The New New Deal (46 page)

Maybe it’s unfair to single out Heath, who wasn’t the only aggressive investigative reporter trying to dig up dirt on the Recovery Act. I’ve been a grouchy journalist for two decades; I’m familiar with the ethic that if you don’t have anything nice to say, put it in the paper. Reporters are supposed to follow the money, hold public officials accountable, and shine a light on failure; investigations that don’t uncover wrongdoing don’t make Page One or win prizes. But something about the stimulus seemed to turn reporters into runaway prosecutors, desperate to pin something on their target. Another example from my overflowing gotcha file: A month after a ProPublica article claimed the weatherization program was too focused on cold regions, a
New York Times
article suggested it was too focused on warm regions.
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“The nation spends twice as much on heating as on cooling,” the
Times
declared. Yes, and the program was spending twice as much in regions that relied more on heating—neither too hot, nor too cold, but just right.

When programs like weatherization had early problems, the media pounced; when the problems got fixed, the media were nowhere to be seen. For example, Wall Street firms initially charged high fees for underwriting Build America Bonds, prompting a slew of stories portraying the program as a backdoor bailout. But underwriters often charge high fees for new products; the fees gradually came down to the level of regular municipal bonds. And Build America Bonds were far more
successful than even the White House had hoped, financing over $180 billion worth of school renovations, road improvements, and other local infrastructure projects, from a seismic retrofit of the Bay Bridge to a widening of the New Jersey Turnpike to a new performing arts center in Alliance, Nebraska.
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They were like a Recovery Act tucked inside the Recovery Act. But the media weren’t interested in that story.

They were more interested in digging up dirt—and when they couldn’t find dirt, they trafficked in innuendo about “potential conflicts” that “raised questions.” My beloved alma mater, the
Washington Post
, was a serial offender, publishing reams of articles implying that the Recovery Act’s green investments were somehow sketchy. One story tarred CleanTech for Obama cofounder Sanjay Wagle—a green true believer who had worked at a venture capital firm before advising Rogers at the Energy Department—because his former firm had invested in a few stimulus-funded companies.
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There are thousands of stimulus-funded companies, and most venture capital firms invested in a few of them. Wagle was dinged because his former firm had stakes in Tesla and BrightSource, which both received hefty loans. But he had nothing to do with those funding decisions, or with the loan program in general. Wagle made a real financial sacrifice to enter public service, cutting his salary in half, cashing out his holdings at pennies on the dollar to avoid conflicts of interest, only to get smeared for all his hard work.

Local reporters often wrote positively about stimulus spending (a nuclear cleanup, a sewer plant) they saw in their communities, and issue-oriented reporters often wrote thoughtfully about stimulus programs (Race to the Top, high-speed rail) related to their issues. Business reporters wrote about the stimulus as a straightforward economic phenomenon; more of it boosts growth, less of it creates slack. But when national reporters focused on “the stimulus,” their coverage was overwhelmingly negative.
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White House officials understood that their recovery bill wasn’t likely to get much positive coverage when the recovery was so weak. Still, the one-sided groupthink drove them crazy. “The journalism was amazingly lazy,” Pfeiffer complains. “It’s easy to look at a super-long list, find something that adds up to one one-hundredth of
1 percent of the money, and make it sound silly.” Unemployment was higher than the Romer-Bernstein report predicted, so everything about the stimulus was by definition a failure?

Yes, pretty much. The public debate over the stimulus was over, and the stimulus had lost. Even Democrats had stopped trying to defend it. Under the radar, though, it was just starting to drive change.

A
s a boy in Chicago, Arne Duncan spent countless hours at his mom’s after-school program for inner-city kids. He wrote his Harvard thesis about the dreams of the urban underclass. He believed that every child could learn, that poverty wasn’t destiny, that tough standards and great teachers and evidence-based innnovation could turn around hellish schools. Some of the things he believed sounded corny, but his pickup hoops buddy in the White House believed them, too. Race to the Top would give them a chance to back up their beliefs with $4.35 billion.

Secretary Duncan wouldn’t get to pick the Race’s winners—the judges would be independent—but he would get to write the rules of the competition, to make sure the states that pursued the reforms he favored would receive extra points. He wanted to be prescriptive, because he wanted to drive lasting change, not just help states extend school hours and restore music classes until the stimulus ran out. He believed that by the time the Race was over, it would shake up education.

That belief turned out to be inaccurate. The Race shook up education before it even started.

For example, Duncan believed in metrics as strongly as he believed in anything. He knew test scores couldn’t tell the whole story about a student, her teacher, or her school, but they told a story nonetheless. So he wanted the Race to encourage states not only to collect data but to use it—to intervene with struggling students and underperforming schools, even to decide how much to pay teachers. His advisers asked: What about states with firewalls? Duncan had no idea what they
meant. They explained that states like California and New York—both Democratic states with powerful teachers unions—had prohibited linking test scores to teacher pay. “Are you joking?” Duncan asked. “That’s unacceptable.” He couldn’t force states to change laws, but he decreed that states would be ineligible for the Race if they didn’t get rid of their firewalls. So they all got rid of their firewalls. States like Delaware and Illinois—again, Democratic states with strong unions—passed laws
requiring
the use of test scores in teacher evaluations. In Illinois, the reforms passed with only one dissenting vote in the entire legislature.

“When I was there, I couldn’t have gotten a unanimous vote that it was August!” Duncan marvels.

Before the first Race grant was awarded, forty states adopted Duncan-friendly education reforms to ensure their eligibility or improve their chances of winning. They removed or loosened caps on charter schools. They expanded testing regimes. They made it easier to fire bad teachers and reward good ones. And a bipartisan coalition of forty-five states began collaborating on uniform K–12 curriculum standards to prepare students for college and careers, shattering an age-old tradition of local control.

“That was the third rail in education. You couldn’t even talk about it,” Duncan says. A former pro basketball player in Australia, Duncan attributes the shift in the zeitgeist to the power of competition. “There’s been more reform in the last year than we’ve seen in decades, and we haven’t spent a dime yet,” he told me early in 2010.

The mere existence of the School Improvement Grants to finance radical reforms at failing schools was also driving change. In Central Falls, Rhode Island, the teachers union refused to endorse a turnaround plan for a troubled high school that included longer hours. So the school board fired the school’s entire faculty, and Obama voiced his support. “If a school continues to fail its students year after year, then there’s got to be a sense of accountability,” he said.
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Investing in Innovation, the initiative for scaling up proven reforms—reading programs, teacher ratings, successful approaches to gifted or delayed students—was also starting to shake up the status quo.
James Shelton, the assistant secretary overseeing the grants, was a former Gates Foundation executive, a tall, energetic, charismatic African-American who reminded me of a younger version of the president. He explained his vision in the data-driven language of venture philanthropy, diagramming “Paths to Innovation” on his office whiteboard. But he also spoke the language of inspiration; he had an “Imagine the Possibilities” poster on the wall near his whiteboard.

“We’re creating a pipeline of innovation in education, and that’s never existed in history,” Shelton said. “There’s just incredible demand for new ways of doing business.” Investing in Innovation would receive over 1,000 applications for just 49 grants.

These programs were already transforming the national conversation about schools, swinging many Democratics over to the side of reform, inspiring high-profile debates about and within teachers unions, drawing praise from Republicans like Schwarzenegger, former Florida governor Jeb Bush, and Indiana governor Mitch Daniels. But it failed to transform the national conversation about the stimulus, which retained its reputation as a partisan Democratic hack job.

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f Secretary Duncan was the kind of cosmopolitan forty-something Harvard wonk you’d expect to find in the Obama cabinet, Ray LaHood seemed out of place, a lumbering sixty-something Republican pol from Peoria who looked like Abe Vigoda in
The Godfather
, a former civics teacher who had worked his way through junior college and Bradley University. He was not a transportation expert, unless bringing highway pork home to his district counted as expertise. He only got the job because he was the closest Republican friend of Rahm Emanuel, who originally wanted to make him agriculture secretary. Transportation reformers were horrified, dismissing LaHood as “an unbelievably disastrous pick,” “status quo we can believe in,” “same.gov.” But he became a passionate Obama loyalist, calling out stimulus critics in his own party, defending the Recovery Act as if it were his own child. “No earmarks, no boondoggles, no sweetheart deals,” he told me.

In his office, LaHood has a photo of himself walking in front of
the president, running interference on an outreach mission to his former House Republican colleagues. “Great downfield blocking!” Obama scribbled. One former colleague jokes that if LaHood had been at Jonestown, he would’ve been the first one dead. But LaHood has been more than a stand-up guy. He has been almost as energetic a reformer as Duncan. At a department known for mindlessly shoveling money to states to pour concrete, he became a vocal advocate for sustainability and “livability,” transit-oriented development and smart growth. The bicycling community embraced him as a hero; Lance Armstrong sang his praises on Twitter. LaHood even got to create his own race to the top, courtesy of the Recovery Act.

That was the TIGER program, which LaHood and his staff designed to reward nontraditional projects with the highest economic and environmental benefits—and to start changing the culture of the department.
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“The beauty of TIGER was you didn’t have to go through the rigmarole of the bureaucracy,” LaHood says. “It’s just about solving problems.” LaHood brought together volunteers from all the department’s silos into “TIGER teams” to judge the competition, empowering bureaucrats to think seriously about national needs instead of just making sure projects had submitted their minority hiring plans and traffic studies.

“We’re creating a new normal, where we reward excellence, where substance trumps process,” undersecretary for policy Roy Kienitz told me. “The culture of TIGER is infecting our entire world.”

Nationally, the demand for the new approach was overwhelming; TIGER received $38 worth of applications for every $1 in grants. And the competition produced some real surprises. For example, the three largest first-round grants ended up going to freight rail projects, which hadn’t received federal aid in years. The TIGER teams realized that the public benefits of, say, elevating overpasses to allow the double-stacking of cargo would be huge, reducing shipping costs, energy use, and highway congestion by shifting freight away from long-haul trucks. And since the projects had obvious private benefits as well, railroads matched the grants almost dollar for dollar. “It just hadn’t fit into any boxes before TIGER,” says federal railroad administrator Joe Szabo.

LaHood also emerged as the leading evangelist for Obama’s high-speed rail initiative. And just as Duncan used the Race to promote education reform before the grants even went out, LaHood used the lure of high-speed money to promote transportation reform. The best example was in Florida, where even Republican congressmen who voted against the stimulus signed a letter urging LaHood to approve a bullet train between Tampa and Orlando, predicting it would “provide significant economic and environmental benefits to the state, as well as a showcase for the potential of high speed rail in the United States.”
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In many ways, Florida looked like an ideal high-speed launching pad. It’s flat, which meant low construction costs. It’s densely populated. It’s a tourist mecca, attracting millions of foreigners who ride fast trains at home. The initial leg between Tampa and Orlando included a stop at Disney World, making the economics much more attractive. And for quirky historical reasons, it was the nation’s shovel-readiest project. Jeb Bush had shut down a statewide high-speed rail initiative when he was governor, but at the time a rail-obsessed Tampa civic leader named Ed Turanchik—known as Choo Choo—had been leading an effort to attract the 2012 Olympics to the area. He persuaded Bush the bid would be doomed without a Tampa–Orlando train, so planning for that line was allowed to continue. By the time the Recovery Act passed, the route from downtown Tampa to the Orlando airport along the Interstate 4 median had almost all its land and permits in place. The real prize would be extending the line to Miami, connecting Disney to South Beach, competing with seventy-seven daily flights between south and central Florida. But Tampa–Orlando was Obama’s best chance for an early win.