Cash for Clunkers, Shovel Ready. These phrases are so 2009. I've been trying to put them out of my mind, but Michael Grabell necessarily uses them in his new book about the American Recovery and Reinvestment Act of 2009 --- more commonly known as The Stimulus -- in "Money Well Spent? The Truth Behind the Trillion-Dollar Stimulus, the Biggest Economic Recovery Plan in History."
Grabell, a reporter for the nonprofit news organization ProPublica, which supplies news for publishing partners under a creative commons agreement, traveled the country, visiting places like Elkhart, Indiana, Aiken, South Carolina, and Fremont, California, interviewing people who have been body-slammed by the biggest economic downturn since the Great Depression of the 1930s.
One could argue that Elkhart, the nation's recreational vehicle capital, has only itself to blame for its economic collapse, with its unemployment rate rising from 4 percent before the 2007-2008 meltdown to more than 20 percent after, but this criticism could be made of the nation as a whole, as people from the very top -- George W. Bush, Alan Greenspan, and Wall Street's "smartest guys in the room", predicted that the nation had entered a new era of prosperity, with recessions a thing of the past. Many people took advantage of easily obtained home equity lines of credit (HELOCs) to go on a spending spree, buying gas-guzzling RVs, home improvements to houses that would soon be underwater -- along with other spending decisions based on the erroneous idea that housing prices could only go up.
Grabell talks to real people affected by meltdown, putting a human face on the recession. In Elkhart, he chronicles attempts by "Green" industries to take over empty RV plants and finds that the much touted "Green" industries -- electric vehicles, battery plants -- didn't materialize. A former RV industry worker loses his home to foreclosure and takes on several jobs to keep his family together.
Green jobs -- or any jobs at all -- also impacted Fremont, across the bay from San Francisco, where the empty NUMMI automobile assembly plant -- a revolutionary and highly successful joint venture between Toyota and General Motors -- closed its doors and everybody looked longingly at East Bay solar panel manufacturer Solyndra as a company that would bring jobs to the region. Two years later Solyndra declared bankruptcy --- unable to compete with foreign competitors -- mostly from China, where most of the Silicon Valley's jobs have gone. (All my Apple products -- three computers and an iPad 2 are "designed in California and assembled in China") President Obama addressed the issue of outsourcing, but it's a case of King Canute calling for the waves to stop or closing the barn doors after the animals have fled.
Grabell discusses the Solyndra scandal, showing how friends of the current administration who were investors in Solyndra benefited from government support to a company that was owned in part by Obama supporters like George Kaiser "the billionaire investor who also happened to be a major fund-raiser for Obama," Grabell writes in Chapter Eleven (an ominous number!) "The Green Revolution." I expected more media coverage of the scandal, but that's too much to hope for in a mainstream media that isn't interested in wrong-doing in the current administration. ProPublica was founded by two excellent journalists, Paul Steiger, formerly of The Wall Street Journal and the L.A. Times (I worked there when Steiger was business editor) and Stephen Engelberg, formerly of The Oregonian (Portland, OR).
Aiken could be considered a success story, where the Department of Energy supplied $1.6 billion to clean up a closed Cold War nuclear plant. One could argue, as Grabell points out throughout the book, that in the normal course of events funds would have arrived to accomplish this goal, but the stimulus accomplished this sooner rather than later.
The $825 billion stimulus was huge, when adjusted for inflation nearly five times bigger than the Depression-era Works Progress Administration, and bigger than the Moon race, the Manhattan Project that built the atom bombs, the Marshall Plan that rebuilt Europe after World War II and the cost of the Iraq War from 2003 to 2010, Grabell writes, but it was spread across the entire country, resulting in situations where thinly populated South Dakota, with unemployment in the 5 percent range, received more money per capita than Florida, with unemployment topping 12 percent, and which received less per capita than any other state. South Dakota and other states benefited with stimulus money for roads and bridges based on a formula that included the mileage of federal highways in a state -- regardless of population. The thinly spread stimulus ended up being invisible in many states, with more than half of the package coming in the form of tax cuts and safety net programs, Grabell writes.
Grabell tallies up the successes and failures of the stimulus and finds it to be a qualified success. However, four years after the start of the recession, the economy is still struggling, with high unemployment and the foreclosure crisis continuing to impact people in many states.
In the failures column, cutbacks by states cancelled out the effects of the federal stimulus. For example, education funds went to saving the jobs of teachers whose jobs were going to be cut by states. In another example, transportation contracts that states were ready to cancel were fulfilled with federal money -- resulting in saving programs that would have been cut, not incite new spending. In other words, a wash.
Among the successes, the stimulus is estimated to have saved 2 to 3 million jobs. Without it, Grabell says, the unemployment rate would have reached 12 percent, instead of the official numbers in the 9-10 percent range. Of course, these "official" numbers are, in my opinion, figments of fully employed economists' imaginations, not taking into account people who've given up looking for work or those who are underemployed.
What about Cash for Clunkers? Grabell discusses its successes and failures on Pages 169-172 and comes to the conclusion that it did encourage many people to take advantage of the rebate to trade in older cars for newer -- presumably more fuel-efficient ones. But he cites sources that say that people would have bought new cars regardless of the short-lived rebate program. In its own assessment of the program, the White House Council of Economic Advisers concluded that almost half of the nearly 700,000 car sales generated by the program would have happened anyway. Grabell writes: "But that's not necessarily a bad thing. 'Such time- shifting is valuable in a recession, when the economy has an abundance of unemployed resources that can be put to work at low net economic cost,' the council said in its report." Don't you just love the way economists refer to people as "resources"!
The stimulus was a success for highway contractors: at a time when construction crash-dived in just about every other sector, highway, street and bridge construction, where the stimulus provided nearly $27 billion, kept contractors and their employees working.
In this very well researched and accessible-to-the-general reader book, Grabell concludes (Page 358) that the Recovery Act -- the stimulus -- failed to live up to its promise "not because it was too small or because Keynesian economics is obsolete, but because it was poorly designed...During the transition, Obama could have given a speech in which he said, 'My economic advisers have considered packages of $400 billion, $600 billion, and $800 billion, but their research shows that to fully get our country back to strength, we need a package or $1.2 trillion. I recognize the political difficulties of doing that, but I promised to be up front and tell you what the facts are, no matter how uncomfortable they may be.'"
I recommend "Money Well Spent?" as a model of investigative journalism, which may be in a period of rebirth with programs like ProPublica, the Chicago News Cooperative founded in 2009 by former Chicago Tribune and Los Angeles Times editor James O'Shea, and similar efforts around the country. I think the future of print journalism rests with these organizations, as metropolitan newspapers relentlessly shed their best reporters and editors.
