Business Bookshelf: 'The New New Deal'

  • Updated: August 17, 2012 - 3:33 PM

"THE NEW NEW DEAL"

Michael Grunwald,

Simon & Schuster,

519 pages, $28

The word "boondoggle," Michael Grunwald points out, was coined back in the days of the original New Deal to describe "make-work" bits of arts and craft paid for by the government at a price that was out of all proportion to their actual value. In times of economic woe, prodigal government spending can sometimes be the only way to break the vicious circle of declining demand and shrinking employment.

Grunwald's new book is the story of what was arguably the greatest boondoggle in history and the politics that surrounded it. President Obama's $787 billion stimulus package, enacted within a month of his taking office in January 2009, amounted to about 4 percent of America's GDP. The biggest stimulus in any year of Franklin Roosevelt's New Deal amounted to only about 1.5 percent of GDP.

Grunwald's heart plainly beats on the left, and it is clear that he admires Obama, with his "hyper-rational side." At the same time, the author does make some effort to explain the Republican point of view. The whole point of an economic stimulus is that it is supposed to stimulate. It needs to move money out of the door fast, get it quickly to where it can do the most good and not carry with it a tail of long-term spending commitments. But Obama's agenda was always much bigger than that, and it is in explaining this that Grunwald's book is at its best.

Much of the meat involves parsing the issues that riled the Republicans: how the stimulus bill was to be used as a tool to transform American society. Right from the start, Obama wanted his Recovery Act to spend money on a low-carbon future, on radical school reform, on health reform and on creating jobs. All of these, Grunwald thinks, are laudable aims. But Republicans in Washington have other views.

The truth is that no one really knows yet how well spent the longer-term parts of the immense Recovery and Reinvestment Act will turn out to have been. But no writer has yet gone this far, at least in unraveling where the money has gone.

THE ECONOMIST

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