Essay: American Recovery and Reinvestment Act of 2009

The plan is a combination of two methods: tax cuts and massive public investment in the economy. The total cost of this project is $ 800-900 billion. The plan was approved by the House of Representatives, who agreed to allocate $ 819 billion. The Senate added $ 65 billion more to the plan.

The authors of this program based on the fact that the economic crisis in the United States will continue throughout 2009, and a slow recovery process will begin only in 2010 (estimate of the budget office of the U.S. Congress) (United States Congress, 2011).

The program allocated around $ 300 billion for tax benefits for individuals and businesses, over $ 250 billion for direct assistance to states and individuals who suffered the most from the crisis, and nearly $ 200 billion for infrastructure upgrade and improvement. The most expensive element of the plan was a reduction in taxes on wages for individuals by $ 400 and for couples by $ 800, with the total value of $ 116 billion. Disabled persons, seniors, and other categories of people who do not pay employment taxes, received $ 250 checks (CCH Tax Law Editors, 2009).

According to the plan, government expenditures were scheduled to ten years. Funds allocation was performed through special agencies which provided weekly reports on the launched programs (their types, directions and amounts of allocated funds). The whole fiscal support was divided into three main categories: costs (already spent by the government), bonds (funds available, but not necessarily spent; bonds increase economic activity not less than expenditures already made, as the receivers of the fiscal assistance can start spending as soon as they are confident that the funds are available and liquid), and tax breaks.

According to the Congressional Budget Office, the law sent to the economy $ 185 billion over the remainder of the fiscal year 2009. In fiscal year 2010, the economy received another $ 399 billion (United States Congress, 2011). Taken together, this amounts to 74% of the total bill amount of $ 787 billion (Miller, Vandome, & McBrewster, 2010). Obama’s plan resulted in a record rise of the federal budget deficit, which in 2009 made $ 1.2 trillion excluding most of the stimulus. This is more than twice the budget deficit of 2008. The bill raised the national debt limit to around $ 12 trillion (United States Congress, 2011).

Technically, the tax breaks and expenditures are treated equally, since both these categories of fiscal measures raise the disposable income of the population.

In parallel, there is another, more functional, categorization of the already spent part of the ARRA. It provides six types of categories (Muldowney, 2010; Miller, Vandome, & McBrewster, 2010):
1. Individual tax cuts (they include Making Work Pay tax credit, the child tax credit, and some other less significant tax cuts) and subsidies (payments to certain groups, for which no tax cuts are provided: a $ 250 subsidy to Social Security recipients, and Supplemental Security income, payments to veterans and retired railroad services workers.
2. Tax cut associated with a change in Alternative Minimum Tax.
3. Tax incentives for businesses.
4. Governmental fiscal benefits (increase of costs on healthcare by Medicaid and education grants).
5. Assistance to those who most suffered from the recession (rising unemployment benefits, increase in funds for nutritional assistance, increased costs on Temporary aid to Needy Families (TANF), a significant subsidy for health insurance (COBRA).
6. Public investment (include everything else: spending on infrastructure, information technology in health care, etc.)

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