“The sheer depth of the crisis. . . .” Q&A with Paul Posner

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Unlike all-too-many observers, Paul Posner hasn’t been looking at the stimulus act in isolation, but in a broader historical framework that we think is illuminating. His insight comes from first-hand experience with past stimulus efforts — first as director of federal programs for the New York City Office of Management and Budget in the mid 1970’s when federal grants helped hard pressed cities deal with the fall out from the oil crisis and unemployment of that era, then at GAO where he served as Director of Federal Budget and Intergovernmental Relations. Posner is currently director of the Master’s in Public Administration program at George Mason University .

How does today's stimulus act compare to the New Deal?

Following is a Q&A with him:

Q. The Congressional Budget Office reports that the stimulus added 2.1 percentage points to GDP growth and created or saved between 800,000 and 2.4 million jobs in its first year.Yet the majority of Americans are apparently against it. How does this reaction compare to the way the public greeted Roosevelt’s New Deal?

PP:  The New Deal stimulus had widespread popular acclaim. Its job creation programs – The Works Progress Administration, Public Works Administration, the Civilian Conservation Corps – enjoyed tremendous popular support, as did President Franklin Roosevelt. Each of these programs developed a strong political following.

Q. We’ve been going through a recession – maybe even a Great Recession. But was the far more extreme unemployment in the 1930s part of the reason the public bought in?

PP: Yes. The sheer depth of crisis characterizing the New Deal made institutional innovations politically possible that were unthinkable before. That generated bipartisan support in the first few years of FDR’s term. The economy grew by nine percentage points a year in the first years of the New Deal, reducing unemployment from 25 percent to 15 percent. Each of the programs developed a strong political following from grateful clients who identified them as a safe harbor in a horrible economic storm.

Q. How different was the political climate?

PP: FDR had enormous personal popularity that translated into support from an overwhelmingly Democratic Congress. But the Republicans of that day, many of whom were progressives, grudgingly voted for many New Deal programs as well. In this administration, no House Republican voted for the initial stimulus and both parties continue to escalate their rhetoric as the November elections approach.

Q. Did President Roosevelt have more solid support from his own party, too?

PP:.  Yes, but the political situation itself has changed. In those days, a popular president had long coattails. Presidents were much more able to carry their own parties to victory and congressional allies took their policy cues from the person who lifted them into office. Seventy years ago most of the electorate voted a straight party ticket.

By contrast, President Obama and most postwar presidents have to cobble together majorities in a more perplexing, challenging party system. Today, increasing shares of the electorate are independents who are prone to split their vote between the President’s own party, Congress and other offices on the ballot. Members of Congress, even in the President’s own party, understand this and keep their distance when the President’s policies might jeopardize their own unique local political coalitions. It’s also more difficult for presidents to find allies on the other side of the aisle. Members of Congress are increasingly influenced not by the median general election voter but the median primary voter and that pulls them away from the center toward the extremes of  the ideological spectrum.

Q. The relationship between the federal government and state or local governments was much different in the past as well. What impact has that had?

PP: Unlike today, the important job programs of the New Deal were direct centralized federal programs. Grateful clients of the programs had trained their hopes on the White House for deliverance. The President reaped considerable short term political rewards. Not only was he able to take credit for the millions of jobs produced, but he was also able to steer rewards to political allies and punish his opponents.

By contrast, the current stimulus is delivered using a highly decentralized structure. The expansion of national policy over the past 65 years has not been carried out by federal bureaucrats, but by a wide range of third parties, mostly state and local officials. In just the first quarter of the program, there were more than 130,000 state and local governments, nonprofits and private firms that received stimulus grants contracts and loans.

Q. How does that affect the political impact?

PP: This system of what I call “third party governance” raises political challenges. The President’s ability to deliver rests on the shoulders of thousands of non-federal implementers, all with different priorities and capabilities. Most critically, the responsibility for the outcome of the programs is highly dispersed and there’s no clear line of sight for the public to attribute credit to the President, particularly since the Governor, mayor and other political figures are likely to be competing for public approbation.

In addition, the strategy for rapid deployment of the stimulus dollars carried distinct political downsides for President Obama. His administration used existing programs and highly professionalized administrative networks to deliver the dollars. That avoided start up problems, but it has made it difficult for the public to differentiate the effects of the stimulus from the day to day effects of existing programs.

Q. Are there other ways that this effort to stimulate the economy has differed from attempts in the past?

PP: This one was enacted remarkably quickly. The 2009 stimulus became law only 14 months after the recession officially began in December 2007. In the past, 27 months have gone by, on average, between the beginning of a recession and the enactment of stimulus initiatives.

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