‘Everything people think they know about the stimulus is wrong’

By Ezra Klein, WashPost

Michael Grunwald is a national correspondent for Time Magazine and author of “The New New Deal: The Hidden Story of Change in the Obama Era,” a reported history of the stimulus. We spoke last week. A lightly edited transcript of our conversation follows.

Ezra Klein: Let’s begin with the obvious question. Did the stimulus work?

Michael Grunwald: Everything people think they know about the stimulus is wrong. It was called the American Recovery and Reinvestment Act and it did produce a short-term recovery. We dropped 8.9 percent of GDP in Q4 2008. We lost 800,000 jobs in January 2009. We passed the stimulus. And then the next quarter we saw the biggest jobs improvement in 30 years.

The long-term reinvestment part is working. It spent $90 billion for clean energy when we were spending just a few billion a year. It’s doubled renewable energy. It’s started an electric battery industry from scratch. It jump-started the smart grid. It’s bringing our pen-and-paper medical system into the digital age. It’s got Race to the Top which is the biggest education program in decades. It’s got the biggest middle-class tax cuts since the Reagan era. It prevented seven million people from falling behind the poverty line.

EK: That gets to one of the central political problems the stimulus had, I think. It was called the Recovery and Reinvestment Act. The Reinvestment side was composed of long-term investments to jump-start tomorrow’s economy. But since it’s thought of entirely as a stimulus bill, those investments, which in another context would be huge accomplishments, are seen as a distraction from the central work of the law.

MG: Politically, one of the difficulties was the two-part messaging. You’re doing short-term recovery and transforming the economy in the long term. You’re doing tax cuts and spending. You’re doing stimulus now, and you’ll pivot to fiscal responsibility. You’re doing shovel ready and also looking for shovel worthy.

(More here.)