Stimulus As Policy Lab

One way to assess the $787 federal recovery package—which last month had its one-year anniversary—is the conventional way: as timely, short-term stimulus. And on that point—though the package gets no respect—the consensus among economists is pretty complete, as I recently noted. The stimulus has preserved or created 1.6 million to 1.8 million jobs to date. Ultimately, the package will generate as many as 2.5 million jobs. It is working.

However, that’s just one way of assessing the recovery act. There has always been another way to appraise it, and that is from the perspective of policy development and reform.

On this front, it’s true, we at the Metro Program have been critical of a package too much defined by federal “business-as-usual.” Nevertheless, it’s important to note that the goal of longer-term policy “transformation” has never been renounced by the Obama administration. And so a year after the stimulus bill’s passage, it bears asking: To what extent are the bill’s most innovative policy elements living beyond the short-term emergency bill and finding their way into the baseline budget?

And here the answer is at once surprising and quite impressive. To a remarkable degree, the recovery act has served as a prolific hatchery and staging point for longer-term policy innovation that now requires implementation in the FY 2011 budget process.

To be sure, a few of our favorite, metro-relevant stimulus start-ups have yet to find a longer-term budgetary home and so face an uncertain future.

Neither the Department of Energy’s extremely flexible and popular Energy Efficiency and Conservation Block Grant (EECBG) program nor the Department of Transportation’s hugely oversubscribed offering of strategic Transportation Investments Generating Economic Recovery (TIGER) grants made it into the Obama administration’s 2011 budget request, for example, though each embodies a powerfully useful long-term program model. Nor does the budget request propose a future for the Department of Housing and Urban Development’s critical Neighborhood Stabilization Program (NSP) for addressing the community impacts of the foreclosure crisis. An emergency intervention, that program need not be permanently institutionalized, but it surely ought to be extended given the extent and likely duration of foreclosure crisis. Now its future remains unclear.

And yet, notwithstanding these and a few other question marks, a significant number of the stimulus programs we deem most likely to catalyze metropolitan and therefore national prosperity are now embedded in the FY 2011 budget proposal and so beginning to find their way into the baseline budget.

Along these lines, the 2011 budget makes clear that even in the haste of cobbling together the “emergency” stimulus package last winter the administration and Congress were beginning to name the next generation of investment priorities for a new era; advance new forms of federal engagement; and commit to new governance approaches including interagency collaboration, multidimensional solutions, and market catalyzing nudges.

In terms of investment priorities, we noticed early on that some 43 percent—roughly $335 billion–of the total stimulus flowed to the main drivers of metropolitan and national prosperity: innovation, human capital, infrastructure, and quality places. Now, with the budget out, it’s become clear that the Obama administration seeks to assert such priorities as ongoing priorities, separate from the three-year cap on domestic expenditures.

In this regard, the budget continues and-or expands in its FY 2011 budget numerous innovation, human capital, infrastructure and placemaking programs that were created by the American Recovery and Reinvestment Act (ARRA).  

In the realm of spurring innovation, the budget requests an additional $5 billion to expand ARRA’s Advanced Energy Manufacturing Tax Credit (see page 29); another $300 million for the Advanced Research Projects Agency-Energy (ARPA-E) beyond the $400 million it received as stimulus (see page 69); and another $144 million for smart grid research. (See page 70).

To enhance the nation’s human capital, meanwhile, my colleague Alan Berube has already noted the extent to which the education budget request seeks to extend and expand such signature stimulus competitive grant programs as the Race to the Top (RTT) and Investing in Innovation (I3) funds. (See pages 64 to 66). Likewise, new job-training models for youths and dislocated workers as well as for high-growth, emerging, or green sectors that debuted in the stimulus package are now embedded in the 2011 budget request. (See page 100 of the budget and pages 11, 12 and 21 of the Department of Labor “Budget in Brief”). Similarly, expansions of the earned income tax credit, the child tax credit, and Pell Grants for college students have all found their way into the budget baseline, as have other important Recovery Act start-ups. (See pages 172, 170 at footnote 5, and page 152 of the budget’s “Analytic Perspectives” document).

And so too does the budget pick up and build upon core infrastructure and placemaking elements on ARRA. Building on the $8 billion down payment provided through ARRA, the budget includes $1 billion for high-speed rail (HSR). This commences multi-year support for HSR in the president’s ongoing budgets. (See page 110). At the same time, the budget more than quadruples the $150 million allocated to the Sustainable Communities Initiative, a partnership between the Department of Transportation, the Department of Housing and Urban Development, and the Environmental Protection Agency to promote regional planning efforts that integrate housing, transportation, and other investments to help strengthen neighborhoods and regions. (See the budget, pages 86-87 and 110). In short, to a surprising degree ARRA staged new investment priorities for the nation that the 2011 budget proposal has now prioritized for future spending. ARRA in that sense can now be seen t have served as a staging area for the next generation of federal investment.

Yet ARRA did not only signal spending priorities. From the vantage point of the 2011 budget, we can also see that the Recovery Act also served as a policy lab, in which were developed new forms of federal engagement for later institutionalization. In this respect, while substantial swaths of ARRA amounted to “plain vanilla,” and utilized “legacy” delivery channels, the new budget makes clear that a number of the best programs in the Recovery Act were in fact prototypes of a new way of doing business oriented toward competitive programs rather than formula-driven ones; interagency collaboration rather than silos; and multidimensional solutions with market-creating ambitions.

ARPA-E, RTT, and I3–as well as the HSR program–are all competitive grant offerings aimed through their selection criteria at spurring systemic change whether in energy research, education, or transportation. Likewise, the Sustainable Communities Initiative epitomizes the new prizing of integrated, multi-agency problem solving that was demoed in ARRA in the communities area but which has blossomed into a significant operating paradigm in multiple realms across the 2011 budget.

In short, though the stimulus package gets no respect, either for job-creation or policymaking, it’s possible now to see that for all of its shortcomings, all of its congressional business-as-usual, ARRA really did serve as a test-bed for a new generation of federal policies. From ARPA-E to RTT to I3 and Sustainable Communities, the FY 2011 budget request proposes to institutionalize a series of new policy approaches that to a surprising degree were hidden in plain sight in the much-maligned Recovery Act. Congress should give these new ventures another look and embrace them.  And then care will need to be taken to ensure that implementation of the new policy approach lives up to the ideals of the new way of doing business.