Term paper: American Recovery and Reinvestment Act of 2009

The global economic crisis which erupted in the U.S. in the area of mortgage lending gradually overcame all the economic borders. The overcoming the crisis and restoring of the U.S. economy became the major challenge for the Bush administration, and further for the administration of Barack Obama as the apogee of the crisis fell to his presidency.

The subject of economic and financial crisis was dominating during the presidential elections: on this background, both the Democrats and Republicans tried to formulate their strategy for overcoming the crisis. In order to win, the Democrats had to offer the plan the American public would have believed in. The Republicans led by George Bush stuck to the traditional measures including the reduction of taxes as the main instrument for economic recovery. However, the package of measures proposed by the Republicans proved to be ineffective, which increased the distrust of consumers and investors towards the policy of the government. In his turn, Barack Obama admitted the reduction of the tax burden, but only for the middle class, as well as insisted on allocating aid to the states and investing in the infrastructure projects (Durant, 2011).

February 17, 2009, the U.S. President Barack Obama signed the so-called “The American Recovery and Reinvestment Act” (United States Congress, 2010). The measures taken by the Obama Administration, their structure, implementation and effectiveness will be discussed below.

History of the Act

Immediately after taking office, he proposed a program of economic aid, which was to give the U.S. economy a second wind. In February 2009 the American Recovery and Reinvestment Act was passed. The main purpose of the Act is the reduction of unemployment and ensuring economic growth. Presidential program provides a number of activities in the following areas (United States Congress, 2010; CCH Tax Law Editors, 2009):

1. Social sphere:
– Increase of the period of unemployment benefits. These benefits are paid from the state budget, so the federal government will give grants to states;
– Increased funding for health insurance programs. The funds for health insurance will be allocated to persons who lost their jobs and those with low incomes;
– Rendering assistance to persons who pay mortgages.

2. Tax sphere:
– Tax cuts for workers and their families. Thus, families can save up to $ 1,000;
– Tax cuts for the middle class and for businesses.

3. Law enforcement system:
– Increased investment in law enforcement. Due to the crisis in the U.S. the level of crime has grown by several times, that is why this point was included.

4. Financial sphere:
– Creation of a special body to monitor the use of the funds allocated within the American Recovery and Reinvestment Act.

5. Infrastructure projects:
– Construction of new roads, upgrading railways and airports;
– Repair of schools and universities.

Thus, the program American Recovery and Reinvestment Plan was designed to contribute to the fight against unemployment in the short term, and to ensure sustained economic growth in long-term (Miller, Vandome, & McBrewster, 2010).

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