In: Economics
Blinder provides data and information supporting the claim that ARRA did the job it was supposed to do. Is he right about this? If you are unsure, what additional questions do you have? Feel free to share your political perspective, if you have one, as well, and reflect on the evidence provided by Blinder. This is a debated question.
What was successful about ARRA and how was it unsuccessful?
The American Recovery and Reinvestment Act of 2009 was a fiscal stimulus that ended the Great Recession. Congress approved President Obama's plan to put $787 billion into the pockets of American families and small businesses. That would boost demand and instill confidence. It was a necessary follow-up to President Bush's plan, the Troubled Asset Recovery Program. TARP ended the 2008 financial crisis by bailing out large banks.
ARRA had seven components. Here are the details of each.
1. Immediate Relief for Families
ARRA stimulated demand by sending $260 billion to families. They received the funds through tax cuts, tax credits and unemployment benefits. Most of the funds were delivered in the first two years.
2. Modernize Federal Infrastructure
ARRA also created jobs by funding shovel-ready public works projects.
This is the most cost-efficient way to create jobs. One billion dollars spent on public works created 19,975 jobs according to a UMass/Amherst study.
3. Increase Alternative Energy Production
This funding jump-started the alternative energy industry in America. It demonstrated that the federal government supported clean energy.
4. Expand Health Care
This component subsidized the greater health care costs that recessions create. It also began to computerize medical records. That facilitated exchange of patient medical information, such as tests, among doctors. Computerized medical records facilitated the Affordable Care Act. Here's what ARRA spent on health care.
5. Improve Education
Education spending is the second best way to create jobs, according to the UMass study. One billion in federal spending creates 17,687 jobs. Here's what ARRA spent on education.
6. Invest in Science Research and Technology
Funding broadband infrastructure in rural areas also helped pave the way for computerized health records needed for the ACA.
7. Help Small Businesses
Small businesses drive 70 percent of all new jobs. ARRA allocated $54 billion to help small businesses with tax deductions, credits and loan guarantees. These included:
Pros and Cons of ARRA
The American Recovery and Reinvestment Act had something for everybody. But it was almost too complicated. Many people were unsure whether they, in fact, received a tax break. Polls showed that many others thought their taxes had increased instead of decreased.
Small businesses complained that loan guarantees and tax deductions didn't help them. That's because the orders just weren't coming in.
Others criticized the focus on education or helping low-income families. Some said that extended unemployment benefits removed the incentive to look for work.
But the success of ARRA is in the numbers. The recession ended in July 2009, five months after Congress passed the Act. Economic growth immediately improved. It expanded 1.3 percent in Q3 2009 after shrinking 5.4 percent in Q1 2009. In the first 18 months after ARRA passed, the economy added 2.4 million private sector and 1.7 million government jobs. That was after losing more than 500,000 jobs a month during the recession.