The New New Deal by Michael Grunwald Page B

assigned to play the honest broker role that the National Economic Council is supposed to play at the White House,summarizing the pros and cons of various policy options. Lew’s final stimulus presentation—a thirty-six-page “Confidential Discussion Draft” dated two days before election day—provided an admirably balanced overview, although it did leave clues about where the team stood. 91 The page titled “Arguments for significant stimulus package” was so crammed with bullet points it required a smaller font, while the “Arguments for small stimulus package” page looked like it was formatted for a reader with vision problems.
    Still, even in large type, Lew recognized that critics would argue the Bush stimulus and TARP had already added enough red ink. He noted that soaring deficits could conceivably spook bond markets and drive up interest rates, which could crowd out private investment. That raised a question: Should the stimulus be paid for? Democrats had adopted fiscally responsible pay-as-you-go rules after taking back Congress, and while the rules had been suspended for the Bush stimulus and TARP, Blue Dog Democrats had objected to Pelosi’s stimulus plan in the fall because it didn’t include offsetting spending cuts. In the short term, offsets would defeat the purpose of Keynesian stimulus; the point was to transfer public dollars into private hands. But Lew raised the possibility of offsetting short-term stimulus with longer-term austerity, or a “trigger” that would restrain spending automatically once the economy recovered. Otherwise, Congress would be tempted to decorate the package with ornamental add-ons.
    “Stimulus may become a Christmas tree if it is the last chance to escape budget discipline,” Lew warned.
    The main problems with offsets and triggers were political: “Fast action needed and specific offsets likely to cause delay.” At a time when the administration would need to avoid a protracted fight in Congress, spending cuts would be contentious, and tax hikes would be nonstarters. “It is critical to avoid controversies that would delay enactment,” Lew wrote. Anyway, it seemed unfair to demand offsets for a Main Street stimulus when the Wall Street bailout hadn’t been paid for. The team of Clintonites agreed that at some point there would have to be a pivot from a short-term fiscal festival to long-term fiscal discipline, but the worst economic crisis in seventy-five years didn’t seem like that point.
    In fact, Lew suggested that while triggers designed to roll back the stimulus if the slump ended might be unworkable, triggers designed to expand the stimulus if the slump persisted could help avert future showdowns: “avoids need for time-consuming process if additional stimulus is needed later … prevents need to spend political capital on multiple rounds of stimulus.” The team’s Clinton-era combat veterans did not assume that passing jobs bills would be easy. They remembered Republicans blocking their relatively tiny $19 billion stimulus in 1993, even after Democrats whittled it down and offered offsets. They tended to be skeptical of Obama’s post-partisan dreams.
    So even though unemployment benefits and food stamps were excellent stimulus, Lew warned that Republicans would criticize them as big-government welfare. State aid would be lampooned as state bail-outs, and a second round of tax rebate checks would “look like more of the same when the first round did not stop the recession.” A jobs bill might sound like fun, but politically, there was no perfect stimulus.
    Not even the shovel-ready infrastructure projects that politicians loved so dearly.
    J ack Lew first set foot in the Office of Management and Budget in 1983, to negotiate a $4.6 billion stimulus package with the Reagan administration. At the time, he was working for House speaker Tip O’Neill, the backslapping New Deal Democrat who famously believed that all politics was local. Ever the loyal