The American Recovery and Reinvestment Act - Term Paper Example

of The American Recovery and Reinvestment Act (ARRA) 2009 Introduction When President Obama took office in 2009; the US was reeling form the onset of a recession. Economists will ultimately write the history of this crisis’ origins. But, it will be economic developers who write the future. Less than one month after taking the oath, President Obama signed the American Recovery and Reinvestment Act of 2009. This law provided hundreds of billions of dollars of federal funds to “stimulate” the economy. Much of the money will come via tax breaks, rebates, and other incentives to spur consumer spending. However, a very significant portion of the money is directed to regional development activities. The economic stimulus in this town is mainly for job creation and stimulation of long term. Economic growth was aimed at promoting investment and the spending of consumers during the period of recession. The Keynesian economic tradition rationale was the stimulus used, where the government deficits are used to cover the gap in output that is as a result of reduced consumer spending. The $787 billion project included expansion of benefits of unemployment, federal tax incentives, provision of social welfare, domestic spending in health care, education, and infrastructure (Bean 13). Economic Stimulus Plan in Boca Raton The projects that have been have been proposed and funded, locally are aid to the unemployed and low income workers, infrastructure, health care, education, energy, and homeland security. These projects will benefit the local economy by improving the general living standards of people living in this region (Charles 45). For example, education aid will help children fro poor families access quality education, while health care aid will help the residents access quality and affordable health services. Infrastructure includes renovations and development of roads, energy, and other communication networks. This is indeed very valuable to people living in this region. This is because it will facilitate easy movement of people, goods, services and information. Further more, it will be a key booster for the production of companies and industries in the region. Good energy supply will ensure high productivity, and hence increased economic growth. The local discourse surrounding these projects has been the recovery taking a lot of time, the power of positive collective thinking and billions of dollars from tax. However, there is no guaranteed solution for this situation that is so unprecedented, but only time will confirm it. The local political leadership has been supportive but only up to certain levels. They have been helping parents’ access education funds for their children as well as medical bills even though these funds are never distributed on time or effectively. However, they have greatly been involved in ensuring that infrastructural projects are being undertaken, for example, electrical power and roads in Boca Raton have greatly advanced. Power is adequate in supply while the roads have been rehabilitated and renovated. Since political leaders want to see positive development in their regions, they have seriously engaged themselves in seeing that these projects become a success. The public has not seriously taken into account the importance of these projects in order to positively support it. For example, they are very supportive when it comes to incentives offered for education, health care and unemployment or low income employees. However, they are reluctant when it comes to other issues like relocating for infrastructural development. They do not see the long-term benefits of such projects and just want such short term benefits, which are not as important as the long-term benefits. These projects seem to fit with larger regional priorities because every region seems to be after such projects especially infrastructure, law enactment, homeland security, housing and the other many benefits of education, health care and unemployment incentives. Money losing companies are also taken care of both in this region and in other regions. This is to allow such companies to offset profits by using current losses and this makes them tax refunds eligible. This incentive allows companies to offset previous profits, using their losses, but this limits small companies from the carry-back. The local federal representation (Reps. and Sens.) has also been supportive in proposing amendments to the bill. Such amendments include increasing spending on infrastructure, doubling the housing tax, 2009 freedom tax, and removal of language that would hinder funds from the bill such as religious worship, sectarian instruction, and department of divinity or school. The local democrats are very supportive to development projects being undertaken in this region but majority of the republicans have been a hindrance to their success. If the two, the democrats and republicans could come into terms, the success of these projects especially infrastructure and energy could have guaranteed success. They politically stand for their respective parties. Their representation has therefore been hindered by the mandate of their respective political parties. The Obama supporters are very supportive and keen to see that these projects become a success, since this will be Obama’s success, while his opponents are reluctant to do so, since the fall of this act translates into their success in the next election. Hypocrisy in their support or opposition is seen in their unending craving for power (Calmes 14) For instance, the republicans have proposed so many amendments in the act, which the democrats give a deaf ear. The two groups are American natives but they don’t seem to care about the future of America, in terms of the success of the act, but are only after winning politically. My assessment of the stimulus plan is that it has largely politicized. This is evident in the fact that the representation and support is based on the political ambitions of the senate and representatives. Looking at the local cases, it is difficult to signal success or failure, and only time will tell. It is not easy for the funds to be embezzled because every transaction is posted to the internet for all citizens to watch and monitor their activities. They can also track the created jobs and money spent, besides adding their questions and comments. More over, the administration mandate has a mechanism that rigorously controls and oversees each involved federal agency. These are positive indicators of success of the stimulus plan, but politicizing it can be a key hindrance and possible failure of the stimulus plan (Leonhard 21). Therefore, the failure or success of the plan will depend on the cooperation of the political readers, since all the other factors happen to be intact. Every citizen has a role to play in the success of the legislation, through the online access to this process that is unfolding It is easy to track the spending and progress of this plan because every citizen is free to access e all information concerning the plan. Therefore, it is very easy to track and monitor the created jobs and money spent besides adding their questions and comments. More over, the administration mandate has a mechanism that rigorously controls and oversees each involved federal agency. The awards have not been distributed fairly because some regions have been awarded more money than their actual needs while those that need more support have not been adequately funded. For example, the senate is hugely funded in all aspects, at the expense of other areas like investment (Krugman 31). The local projects fits the Keynesian economic tradition strategy where the government deficits are used to fund and bridge the gap in recession that comes about as a result of reduced consumer spending. The modern consensus, an economic thinking that embraces both neoclassical theory and Keynesian theory, favors monetary policy over fiscal policy. This is wise because the effectiveness of a fiscal policy would not be possible as savings would be used up by government debts thus limiting investment. However, proponents of fiscal policy argue that the negative effects of crowding out, that is low investment due to funding of government debts by savings, are limited if investment is already in a stagnant state. However, the investments in this case are just about to be initiated and are not expected to stagnate in any near future. These are long term projects that are supposed to stimulate the economy into the future. Therefore, the proponents of this policy seem to be lost and hence, settling on the monetary policy is the only better option. The reported progress in Boca Raton region is creation of job opportunities in industries and infrastructural sites. Infrastructure has also been boosted, though at a slower rate, and this is evident in the energy, communication and transport sectors. As a result, job losses are only a small fraction of their figure last year. Journalists have pointed out various erroneous impressions that have been created. Conclusion The American Recovery and Reinvestment Act of 2009 had a very firm ground of stimulating the American economy after the 2008 economic recession. Despite gathering enough support from the democrats, it is meant for the overall economic welfare of all American regions. The manner in which all the activities are made transparent is valuable to all American citizens. Accountability of all concerned agents and the freedom of citizens to access all information concerning its progress are all very positive in ensuring its success. However, politicizing the whole process can be a major setback of the stimulus especially at regional levels. When we look at economic development projects in Boca Raton region, they are boosters of the standards of living of local residents. At least it is now possible for everyone to access education and medical care at all levels. Furthermore, unemployed people and the low income earners can access incentives that have also boosted their living standards. The political leaders from this region need to pit aside their political differences if these projects are to succeed. Recommendation It is evident that the stimulus plan can positively stimulate and help American economy from suffering from economic recession again. However, this will largely be determined by the part played by representatives. It is therefore recommended that the political leaders put aside their political differences and their selfish political desires so that they can help the American government and regions achieve their goals. Work Cited Charles, Pete. Is there a New Consensus in Macroeconomics?, 13 April 2007 p. 13. Chapter 9. Retrieved on 29th march, 2011 from http://www.bankofengland.co.uk/publications/other/monetary/bean070413.pdf. Calmes, Gerald. House Passes Stimulus Plan Despite Opposition. New York Times. Retrieved 29th March, 2011 from http://www.nytimes.com/2009/01/29/us/politics/29obama.html?hp Krugman, Paul (February 13, 2009). Failure to Rise. The New York Times: pp. A31. Retrieved on 29th march, 2011 from http://www.nytimes.com/2009/02/13/opinion/13krugman.html?_r=1. Leonhard, David. Economic Scene: Judging Stimulus by Job Data Reveals Success. New York Times. February 16, 2010. Observed on March 29, 2011 from http://www.nytimes.com/2010/02/17/business/economy/17leonhardt.html Read More