American Recovery Act - Essay Example

Facts about the Act The act was developed by the Congress for fulfilling three most important goals of the country. The primary goal was to generate job opportunities within the country and at the same time perform activities for safeguarding the job opportunities that exist. The second important goal of the act was to encourage present activities for the betterment of the economy and also to invest for activities aimed at future long-term economic growth in the country. The third goal of the act was to promote ‘above standard’ levels of responsibility along with transparency in expenses of the government.

The act intended to achieve its goals through provision of 288 billion Dollars to several business houses and families in the form of tax reduction sand benefits. The act also fostered provision of 224 billion dollars in the form of employment benefits and various other privileged programs. Furthermore, it was aimed to make available 275 billion dollars for the federal dealings, funding and loans. The act even made it mandatory that the individuals, families and businesses which receive recovery funds should report their mode of operating with the funds on a quarterly basis (Recovery, 2011).

It is worth mentioning that despite of these wise objectives the act failed to secure the interest of the economy (Wagner, 2010). Effectiveness of the Recovery Act Wagner (2010) identified an important reason behind the failure of the Recovery Act. According to him, Keynesian multipliers have acted as stimulus towards transforming the act into a ‘failure’. The architects of the Recovery Act made use of the basic algebra to anticipate creation of job through the fiscal stimulus of the period 2009/2010.

The fiscal stimulus through Keynesian multiplier is effective in providing momentary control in the economy during periods of excessive unemployment. The author downgraded the Keynesian economics on the basis of the fact that these mechanisms assist in measuring the unemployment rate but fails to recognize and apply means to put the unemployed persons back to work (Wagner, 2010). The theoretical aspect described in the above section can be supported through practical evidences from the unemployment facts of the country after the implementation of the Recovery Act 2009.

The rate of unemployment of US during the month of August for the year 2009 stood at 9.7%. This percentage figure was the highest within a period of 26 years in the history of the country. The payrolls of the country declined by 6.9 million after the US economy had to face the recession which started its reign during December 2007. The Recovery Act was unable to halt the falling rate of employment that continued to decrease during the recession and reached to 14.9 million in 2009. Although the rate of decline in payrolls was below anticipation, the rate of unemployment grew up to a level which was more than the anticipated margin.

In most of the sectors of the economy, the payroll was observed to decline except that in the sector of healthcare. The amount of total working hours in the economy also decreased by 0.3% in the same year i.e. 2009. The situation of long-run employment was even measured to have worsened than the previous years. These scenarios of employment during the year 2009, when the government took the initiative of passing the act determines a clean picture of its failure to fulfill its fundamental