The New New Deal: The Hidden Story of Change in the Obama Era. By Michael Grunwald. Simon & Schuster; 519 pages; $28. Buy from Amazon.com

THE word “boondoggle”, Michael Grunwald points out, was coined back in the days of the original New Deal, to describe “make-work” bits of arts and craft paid for by the government at a price that was out of all proportion to their actual value.

This is not necessarily a bad thing. In times of economic woe, when normal patterns of consumption and investment are frozen, prodigal government spending can sometimes be the only way to break the vicious circle of declining demand and shrinking employment. Value for money, paradoxically, can sometimes be an unaffordable luxury. To sum up John Maynard Keynes, it can even make sense to bury money in bottles, so that miners, and the suppliers of their pickaxes and overalls, and those who sell food and materials to those suppliers can, in turn, benefit from the circulation of money that they dig up. Mr Grunwald’s new book is the story of what was arguably the greatest boondoggle in history and the politics that surrounded it, both before and since.

Barack Obama’s $787 billion stimulus package, enacted within a month of his taking office in January 2009, amounted to about 4% of America’s GDP. In the Depression of the 1930s, the biggest stimulus in any year of Franklin Roosevelt’s New Deal amounted to only about 1.5% of GDP. The American Recovery and Reinvestment Act, as Mr Obama’s bill was formally named, was a tale that grew in the telling. In the months running up to the election in November 2008, the economy entered virtual free-fall. The severity of the downturn surprised the participants, but long before he was elected, Mr Obama knew that he faced a crisis of 1930s proportions.

Mr Grunwald’s book does a meticulous job, casting much new light on the advance thinking of Mr Obama’s team, both before the election and, especially, during the long transition. In the last quarter of 2008, the final three months of the Bush era, the American economy contracted by an astonishing 8.9%. By early 2009 job losses hit 800,000 a month. The size of the policy response grew too. An early plan, calculated at $300 billion, grew, long before inauguration day, to around $800 billion. And that, as Mr Grunwald makes clear, was very much at the low end of what Mr Obama’s economists thought was required.

One thing that may surprise readers not fully acquainted with the grisly nature of political sausage-making is the degree of cynicism that surrounded the passing of the Recovery Act. It was naive of Mr Obama to expect the Republicans to play ball. But because he needed to win at least a couple of their votes in the Senate to break the threat of a filibuster, he tried hard to court them. Mr Grunwald lays out in shocking detail how the Republican leadership decided early and wholeheartedly not to co-operate with the new president. So deep was their opposition that they even opposed things that they supposedly supported, such as the Recovery Act’s deep tax cuts and its emphasis on infrastructure.

As cynical as this may have been, it made political sense. If the stimulus succeeded, Mr Obama would get all the credit. If it failed, the Republicans could portray themselves as having been on the side of fiscal prudence. Since then, the economy has stubbornly refused to grow at anything beyond an anaemic rate. Many Republican economists, such as the respected Mark Zandi, who advised John McCain in his contest with Mr Obama, agree that without it, things would have been even worse. But the problem is that it did not work well enough. As a result, the Republicans triumphed at the mid-term vote and Mr Obama’s ratings are now uncomfortably low as he struggles for re-election.

Mr Grunwald’s heart plainly beats on the left, and it is clear that he admires Mr Obama, with his “hyper-rational side”. At the same time, the author does make some effort to explain the Republican point of view. The whole point of an economic stimulus is that it is supposed to stimulate. It needs to move money out of the door fast, get it quickly to where it can do most good and not carry with it a tail of long-term spending commitments. But Mr Obama’s agenda was always much bigger than that, and it is in explaining this that Mr Grunwald’s book is at its best.

Much of the meat involves parsing the issues that riled the Republicans: how the stimulus bill was to be used as a tool to transform American society. Right from the start, Mr Obama wanted his Recovery Act to spend money on a low-carbon future, on radical school reform, on health reform and on creating jobs. All of these, Mr Grunwald thinks, are laudable aims. Many readers would agree. But Republicans in Washington have other views. New energy projects, like job creation, should be left to the market, not picked by bureaucrats; school and health reform should be a matter for individual states. What they saw was an attempt to use the crisis to push the political economy of America in a more statist and Washington-centric direction. Mr Grunwald does not attempt to deny that; it is simply that he has no problem with it.

The most interesting part of the book is the part that leaves most questions open. What will be the legacy of all Mr Obama’s greening and rebuilding? Mr Grunwald waxes on about the cleverness of Steven Chu, the president’s energy secretary, and all the amazing things that his scientists think they can do with their oodles of new cash. But there have also, as he admits, been many failures. Mr Grunwald’s instinct is to praise the splashing around of government money for untested new technologies which, when exposed to life without the government teat, may quickly wither. Governments make bad venture capitalists, as the book quotes Larry Summers, a key member of the president’s original team, as saying.

The truth is that no one really knows yet how well spent the longer-term parts of the immense Recovery and Reinvestment Act will turn out to have been. But no writer has yet gone this far, at least in unravelling where the money has gone. “The New New Deal” is the most interesting book that has been published about the Obama administration. Even Republicans should read it.