What Have You Learned from ARRA, Dorothy?

The American Recovery and Reinvestment Act turns two years old today, thus prompting the Tin Man’s question: what have we learned from the implementation of the economic stimulus?

Some interesting and provocative answers to that question can be found in a new report out today, entitled A New Way of Doing Business: How the Recovery Act is Leaning the Way to 21^st Century Government.

Now, I understand that implementation of government programs is not a topic that immediately grips the attention of a normal person.  But even if you’re not a propeller-beanied policy wonk, this report is worth a look.

Why?  Because it presents a chapter in the story of rebuilding faith in the ability of the Federal government to get things done effectively and efficiently. 

We live in an era where folks too easily expect government programs to be badly run, but one of President’s top priorities on coming to Washington was to change this expectation.  And there’s only one way to do that: by running things right.

The Recovery Act met every one of its goals on or ahead of schedule, including, most importantly, the saving or creating of 3.5 million jobs.  Thousands of projects came in under budget, thus allowing for more projects to be undertaken.  Tax cuts lifted the incomes of millions of families, loan guarantees reached thousands of small businesses, and investments in the future are planting the seeds of vital new industries.

The report documents four lessons learned in the process: constant oversight is essential, transparency drives accountability, collaboration breaks bureaucratic barriers, and competition brings results.

Let me say a little bit about the last lesson—introducing competition into the process—because, as an economist, I view this as a particularly important innovation for government work (check out this article for more on this point).  It’s also a lesson you’re going to see a lot more of as we work to promote the President’s innovation agenda.

There was not one earmark in the Recovery Act.   Instead, many of the grant programs in the Act used merit-based competitions as a way to get the biggest bang for the buck.  These competitions incentivized bureaucrats to get off of the old formula-based approaches and get their creativity on.

The Department of Education’s Race to the Top is perhaps the most widely cited example.  The department set out broad, common sense goals and asked states to develop plans that fit the specific challenges they faced.  Not only did this unleash the creative juices of educators across the land, it sets up dozens of laboratories conducting natural experiments so we can evaluate what works best.   This never would have happened under the old cookie-cutter approach.

The Energy Department got into the game as well, introducing competitions to transform the energy sector in ways that would promote clean energy, create good, private-sector jobs here at home, and start sliding down the marginal cost curve as quickly as possible.  As one result of this work, the department now expects that the cost of a 100-mile-range electric vehicle battery could drop from $33,000 to $10,000 by the end of 2015. (See here for a new report on green jobs created by the Recovery Act.)

There are many more examples in the report and the article linked to above.  But the point is simple—by introducing competition into the mix, we engender a very different kind of stimulus: one that stimulates brain cells and creative, outside-the-box, non-formulaic thinking. 

That just so happens to be the story of American innovation.  And it’s one way the President is re-inventing government for the 21^st century.

Jared Bernstein is Chief Economic Advisor to the Vice President