01 Apr Practical Advice for Recovery Energy Policy Design in Economics and Finance, Energy and Environment
Our country has been greatly tested in the last few weeks. Members of Congress have had to set aside partisan bickering to address the unprecedented health and economic crisis created by the COVID-19 pandemic. The recently passed CARES Act, together with two additional bills, will start to bring enormous federal resources to bear.
Clearly, the near-term challenge for the administration and Congress is to focus on the immediate needs of the American people and the U.S. economy. Millions of people and major sectors of the economy will be struggling for months, and effective strategies to help them will need to be rolled out and sustained on a scale and at a pace that has rarely been seen in our nation’s history. Along the way, real-world evidence must be collected so that policymakers can continuously evaluate, refine, and extend the best approaches and respond quickly to changing circumstances.
We recognize and appreciate the magnitude of the decisions members of Congress are being asked to take under conditions of extreme stress and uncertainty. The nearest recent parallels can be found in the experience of members of the 111th Congress when faced with the fallout from the financial crisis of 2008–2009. As senior staffers to former Sen. Byron Dorgan (D-ND) on the Senate Appropriations Committee and former Sen. Jim Bunning (R-KY) during those years, this post offers our reflections on some lessons learned from the last time Congress was challenged to respond to a national emergency of comparable scope to the current crisis. We focus in particular on the 2009 American Recovery and Reinvestment Act (ARRA), which, like the CARES Act, aimed to avert imminent economic collapse while also laying the groundwork for a longer return to economic health and prosperity. We have focused on energy examples during the ARRA given our experiences, but many lessons learned can also apply to other policy areas as well.
A Look Back at ARRA Legislation and Implementation
While there are important differences between the financial crisis of eleven years ago and the current COVID-19 emergency, experience with the ARRA nonetheless provides useful insights, particularly with respect to the practical, political, and administrative challenges that can be expected to arise when implementing a complex legislative package that involves very large sums of public money. We offer three key observations below.
Include critical constituencies from the beginning to improve the likelihood of success:
ARRA provided substantial funding to states, local governments, and businesses. Looking back, the importance of understanding and working closely with the key constituencies who will be charged with implementing or utilizing that funding is clear. If the goal is to maximize the impact of federal investments, then it is important to take into account how to operationalize those dollars to put them to work most effectively. Otherwise, there could be delays or misdirected funds. In the case of ARRA funding appropriated through the Department of Energy (DOE), at least $11 billion was directed to states and local governments for energy activities through formula and competitive grant programs. As a result, a number of programs experienced increases in annual discretionary funding of as much as 20 times above their annual funded levels; such programs included the Weatherization Assistance Program, State Energy Program, Energy Efficiency and Conservation Block Grant Program, among others. It was a tremendous challenge to go through the internal processes within DOE to distribute funds and then direct the funds to the states, and in some cases, internal processes within the federal agencies were not well coordinated themselves. From there, there, state, tribal, and local governments were, in many cases, simply cases, simply overwhelmed by the large increases in funding that they had to absorb and then effectively disburse and manage within a very short time period (less than two years).
Many state and local authorities, it should be said, rose to this challenge and made excellent use of ARRA funding, but a few states did not and misspent some of their allotments. This led to some subsequent criticism in terms of wasting taxpayer dollars. The point is that more conversations should have occurred on the front end to understand the capacities and interests of key partners, such as state and local agencies, and the infrastructure they had in place at the time to put new federal dollars to work. These same types of conversations would be beneficial now to engage state and local government, as well as industry and labor, and to ensure that their absorptive capacities match the resources they will be receiving.
Utilize existing authorities to the extent possible to speed the response: Another real challenge a decade ago was to quickly and effectively implement programs that would build on the ARRA’s larger goal to speed implementation. Congress considered a large number of interesting policy ideas leading up to the passage of ARRA. Those that utilized existing federal mechanisms could take advantage of administrative processes that were already in place to carry out the task as quickly as possible. If the goal is to get dollars into the economy with minimum delay, then leveraging existing statutory authorities and programs, financial tools, and tax mechanisms work best. By contrast, implementing a new policy typically requires an agency to first develop rules and set up new administrative procedures, which can slow funding flows. At the same time, legislation could be flexible enough to provide agencies some creative license to push the bounds of their authorities. But by and large, though a number of novel ideas and innovative policies found support during this period, the great majority of ARRA funding was distributed through existing policies and through programs that were already authorized.
For example, the Advanced Research Projects Agency–Energy (ARPA–E) is often cited as one of the new initiatives created by the ARRA, but in fact, ARPA–E had been authorized about two years earlier. Similarly, the significant infusion of loan authority that was added to DOE’s Loan Programs Office (LPO) under the ARRA had been authorized about four years prior.
This observation should not, of course, discourage innovation and creativity in future stimulus packages. But it will be important to have a clear understanding of knowns and unknowns, and of the constraints and delays that can occur at each stage of implementation when rulemakings, guidance, public comments, or new solicitation processes need to be followed. The good news is that programs that were only nascent in 2009, such as ARPA-E and the LPO, have been operating for a decade and have the dedicated staff and expertise needed to put new funding to good use.
Agency support staff are vital to moving federal funding in a timely manner: Another criticism of ARRA implementation was that much agency funding was delayed by administrative bottlenecks related to federal and state agency staffing constraints. It will be essential to have realistic expectations about what agencies can manage and what personnel resources they need to effectively distribute and oversee new funds. Efforts to ensure adequate staffing should not be viewed as expanding bureaucracy for its own sake but rather as a critical aspect of increasing both speed and accountability in the delivery of public resources.
A Retrospective View of Politics Around the ARRA
Many who recall the ARRA also have vivid memories of the partisan politics that surrounded the bill’s passage and implementation. We believe the main lesson to be drawn from that experience is that recovery efforts need to be bipartisan to ensure success and be seen as effective by the public.
Many provisions in the ARRA had their origins in bipartisan ideas. Because of concerns about the bill’s cost at the time, however, no Republicans in the House and only three Republicans in the Senate voted for passage. The perception that the ARRA was a fundamentally partisan piece of legislation influenced public perception of its benefits and obscured many of the bill’s successes.
Bipartisanship is even more crucial in the current context, given the size of the rescue and recovery needed, the magnitude of the risks we confront, and our divided party government. Put simply, negotiation and compromise will be essential to continue responding to the still-unfolding COVID-19 crisis. In the aftermath of 9/11 in 2001, and again when the financial crisis hit in 2008, the Senate, House, and White House were controlled by one party, easing the way for a unified government response. Today, by contrast, Congress is closely divided, and we are in an election year. For the sake of the country as a whole, both parties will need to work across the aisle to muster the response our present situation demands.
The fact that several COVID-19 emergency bills have passed with overwhelming and even near-unanimous support provides grounds for some optimism that bipartisanship is still alive in Washington D.C. We will need future efforts to be as successful and as bipartisan to restore Americans’ confidence that their elected leaders have the larger vision and cooperative spirit needed to pull our country out of this crisis. The challenges we confront with COVID-19 have no parallel in recent memory, but while history may not repeat itself, it often rhymes.
Franz Wuerfmannsdobler was an energy policy advisor for former Sen. Byron Dorgan (D-ND) and a professional staff member on the Senate Appropriations Committee in the majority in 2009. Kim Dean was chief of staff for former Sen. Jim Bunning (R-KY) in 2009. Both now serve as senior advisors at the Bipartisan Policy Center.