Over the next week, as Republicans gather for their national convention in Tampa, Florida, we can rest assured that the Obama epithet game will be in full effect. He's a tax-and-spender; he's an inveterate expander of federal power; he's weakened America in the world; he was born in Kenya and might be a Muslim (well, you'll only hear that if Republicans pull an Akin). What they likely won't hear is the truth about why the US economy remains in mediocre shape, and who is to blame for this distressing situation.

For that, most Americans would be wise to simply turn off the TV and pick up a copy of Michael Grunwald's exceptional new book, The New New Deal: The Hidden Story of Change in the Obama Era. Grunwald, a correspondent for Time magazine, has written what is likely the single best book to date on the inner workings of the Obama presidency and the $800bn stimulus measure (or American Recovery and Reinvestment Act) that Grunwald persuasively argues is Obama's greatest political achievement.

That conclusion may seem odd to the casual observer of US politics. In the more than three years since it passed, the stimulus has been tagged as a boondoggle that exploded the debt and did precious little to turn around the country's economic malaise. It is derided en masse by Republicans and largely ignored by Democrats.

But, in exhaustive detail, Grunwald points out how everything you think you know about the stimulus is wrong. While the Recovery Act created 2.5 million jobs, stopped the country's economic hemorrhaging and launched a weak recovery, its long-term, transformative impact is the real story.

According to Grunwald, the stimulus measure was "the biggest and most transformative energy bill in history", and "the biggest and most transformative education reform bill since the Great Society". It was also a "transformative healthcare bill", the "biggest foray into industrial policy since FDR", the "biggest expansion of antipoverty initiatives since Lyndon Johnson", and – ironically, for a president oft-accused of raising taxes – the "biggest middle-class tax cut since Reagan". It rebuilt bridges and paved roads; weatherized and retrofitted homes; and spurred the move toward high-speed rail.

It pumped an extraordinary $90bn into the clean energy industry, propelled the US battery industry and expanded rural broadband adoption. It revamped the country's unemployment system, tackled the challenges of homelessness, began the digitizing of millions of health records, and fostered education reform through the innovative Race To The Top program. It doubled renewable power generation, significantly expanded solar production and basically birthed the country's transition to a low-carbon economy.

In short, while Republicans blast the bill as socialist government spending run amok, the stimulus has, in just a few years, transformed America and laid the foundation for future economic growth. To paraphrase Vice-president Biden, that's "a big fucking deal". So, the question is: why is the first we're hearing about it?

Although Grunwald is himself a card-carrying member of the mainstream media, he takes his fellow scribes to task on this point. By focusing on picayune stories of fraud (the stimulus was, amazingly, almost completely graft-free) and "gotcha" reporting on projects that sounded like boondoggles, major media outlets have largely ignored the bill's seismic impact. That, three and a half years after it was passed into law, most Americans simply have no idea what the Recovery Act wrought is a truly damning indictment of the US media.

The other part of this story comes from across the aisle and involves the Republican party, which, with the exceptions of three senators (Collins, Snowe and Specter), voted unanimously against the bill, and which, since it passed, has repeatedly lied about its impact. Grunwald's book makes an argument that many Democrats have believed for years: that Republicans' opposition to the Recovery Act was less about ideological hostility and more about partisan politics. In a desperate effort to avoid giving Obama a political win – and cultivating the notion that it was he not Republicans who was acting as a partisan – the GOP brazenly opposed stimulus initiatives once previously supported by the party.

Even after Obama filled the Recovery Act with Republican-favored tax cuts (which, while stimulative, are a lot less stimulative than actual government spending), it had little impact on swaying Republican senators. At the same time as Republicans were railing against the Recovery Act, they were applying for stimulus funds for their own constituents: GOP vice-presidential pick Paul Ryan is a case in point. Of course, this blanket opposition to any use of public funds as economic stimulus has continued unabated since then.

Among those who ended up supporting the bill, the story isn't much prettier. Susan Collins is perhaps the sorriest example. A moderate Maine Republican, Collins has long cultivated an image as the sort of Republican who could reach across the aisle and work with Democrats. But in Grunwald's book, she, like virtually all of her centrist brethren, comes across as cynical, craven and more interested in casting a pose as a serious, thoughtful moderate than in actually being serious and thoughtful.

Her position as a potential aye vote for the Recovery Act, gave Collins extraordinary leverage – leverage she exploited. She adamantly opposed new school construction in the stimulus – not because she was necessarily opposed to the idea, but because it was an effective way for her to burnish her deficit-cutting credentials. For her, and for other moderates like Ben Nelson, Olympia Snowe and a whole swath of Senate "centrist" Democrats, forcing Obama to reduce the stimulus below a magical number of $800bn was all about their own personal political optics; it had little to do with what was best for the country. As Arlen Specter, another of the centrist crew, said at one point:

"A trillion seems scary. Even $900bn, it looks so big."

Hence the final agreed-upon figure of $800bn. Heaven help the country that in the midst of the worst economic downturn since the Great Depression makes policy decisions based on such ridiculous rationales.

The result was that additional monies for programs like Head Start, healthcare for unemployed workers, high-speed rail, even preparations for a flu epidemic, all of which would have softened the economic downturn or created new jobs, were sacrificially slaughtered at the altar of "fiscal responsibility". While it's pretty hard to argue that even a slightly larger stimulus would have moved the country dramatically out of the economic doldrums, reading about centrist senators from both parties demanding spending cuts without any rhyme or reason, and merely to ensure that the price tag was below a made-up number of $800bn, is stomach churning. After all, the lives of real people were being affected by the political posturing of these pusillanimous centrists. Obama's then chief of staff Rahm Emanuel summed it up best:

"It was all driven by Washington stupidity – not what the economy needed, just this arbitrary number of 800 [billion]. If you were at 801, you were unreasonable. If you were at 799, you were a very thoughtful person."

All of this bring us to the present day – and why the debate over the stimulus still matters for 2012. This presidential election represents a clear choice between two very different visions about the role of government. On the one hand, there are Democrats who accept the Keynesian notion that counter-cyclical spending is essential for spurring growth and job creation in times of economic distress. On the other hand, there are Republicans who view tax cuts and tax cuts only as the tool for spurring economic growth and additionally are supporting massive non-defense spending cuts to the federal budget.

Yet, the last four years have shown us the results of such contrasting policies. Until the stimulus ran its course, the US economy grew and unemployment went down, albeit haltingly. This didn't happen at a pace to put a serious dent in the downturn, but if anything, that appears the result of too little stimulus, rather than too much.

Once Republicans were able to impose their will on the country, via Senate obstructionism and then control of the House of Representatives, they put in place more tax cuts and blocked any further government spending (even on traditional items like unemployment benefits for laid-off workers). The result will be of little surprise to austerity-bound Britons: stagnant economic growth and frustratingly high economic numbers. Indeed, the GOP's austerity policies have resulted in hundreds of thousands of public-sector workers losing their jobs.

Republicans, not surprisingly, like to blame President Obama for the poor state of the US economy, but in reality, the US is living today under a Republican economy – one that comprises low taxes and curbed spending. The results speak for themselves. This is ultimately why Grunwald's book should be required reading for America's undecided voters (as well as everyone else). If you want to know what the best plan for turning around the US economy is, he has it covered.