The American Recovery and Reinvestment Act Will Stabilize the Economy of the United States - Research Paper Example

 The study will focus on the American Recovery and Reinvestment Act (ARRA) and the way it is expected to stabilize the economy of the United States. Many people have supported while many have opposed the act. The following discussion will also focus upon such arguments. The American Recovery and Reinvestment Act (ARRA), 2009 was the stimulus package that has been acted out by the 111th US Congress. The bill was passed by the House of Representatives making complete provisions for “job preservation and creation, infrastructure investment, education, healthcare, assistance to the unemployed, and state and local fiscal stabilization” (Srivastava, “American Recovery and Reinvestment Act of 2009”). The ARRA of 2009 was enacted when the US GDP was constricting at an annual rate that was more than 6%. The employment level fell down approximately by 700000 jobs per month (Srivastava, “American Recovery and Reinvestment Act of 2009”). The financial crisis in the US in 2009 had a greater effect upon the consumers and business confidence. There was a sharp decline in the household wealth and access to credits. These factors were affecting the economy of the US and it was necessary to improve the economy. The ARRA of 2009 with other policies was implemented to stabilize the financial system of the US and to aid in increasing credit, liquidity and stop the wave of foreclosure of the financial system. The ARRA was an inclusive policy in response to the economic chaos that had badly affected the US and other economies (Executive Office of The President of The US, “The Economic Impact of The American Recovery and Reinvestment Act Of 2009”). The ARRA provided $6 billion to the state and the local government as financial incentives for energy audits and retrofits. This was the attempt to allow homeowners to claim 30% tax credit for purchasing various items that saves energy through 2010. A $5 billion was allotted for the purpose of nation’s modernization and to save consumers money (Srivastava, “American Recovery and Reinvestment Act of 2009”). The bill of ARRA provided $40 billion for unemployment benefits, $14.2 billion to provide $250 to all the Social Security recipients. $3 billion was provided for the welfare payment that was temporary in nature and $3.95 billion was allocated for job training. For the employment services $400 million was provided; $500 million for accomplishing vocational training program for the disabled and $120 million for community service jobs for aged Americans (Srivastava, “American Recovery and Reinvestment Act of 2009”). $8000 tax credit for the first time home buyers was allocated. For the tax relief of individuals $237 billion was given. $116 billion was offered for new tax credit payroll of $800 per couple and $400 per worker (Srivastava, “American Recovery and Reinvestment Act of 2009”). The loan limits were increased and new schemes were introduced to benefit homeowners, realtors and buyers (Srivastava, “American Recovery and Reinvestment Act of 2009”). To help the states with Medicaid $86.6 billion was allotted. For 65% subsidy in healthcare insurance premium $24.7 billion was offered. For the purpose of health care research $ 10 billion was provided and $19 billion was allocated for Health Information Technology (Srivastava, “American Recovery and Reinvestment Act of 2009”). The provisions of ARRA were developed to combat against the financial and economic down-turn; but due to certain ambiguity many economists was against the plan. Many economists had stated that, they did not believe on more government spending. They argued that spending more is not a way to improve the economic performance (Cato Institute, “With All Due Respect Mr President That Is Not True”). The example quoted by the economists was from Hoover and Roosevelt government spending in 1930s that did not help to recover the US economy. In 1990s, Japan’s government spending did not help in recovering the economy. Economists argued that it was an accomplishment of anticipation over experiences to consider that more government spending will help in recovery of the US economy of recent times (Cato Institute, “With All Due Respect Mr President That Is Not True”). They suggested for the economic development to the policy makers to focus upon the reforms that eliminates hindrance in employment, investment, production and savings. A decrease in the burden of government and lower of the tax rates are the suited techniques of applying fiscal policy that will encourage the growth of the economy (Cato Institute, “With All Due Respect Mr President That Is Not True”). The poor pattern of the ARRA corresponds to only a small re-imbursement for the losses experienced between 1999 and 2007 that was less than 60%. Due to the negligence in addressing of systematic inequality in the US economy, the effect on overall inequalities in money income was mistreated (Zacharias & Et. Al., “Special Report). The economy was declining before the ARRA became stable in the quarter after the fall. This showed the growing GDP after the two quarters when the ARRA package was involved (Executive Office of the President of the US, “The Economic Impact of the American Recovery and Reinvestment Act of 2009”). The contribution of each component of GDP that is important to overall growth in the 1st, 2nd and 3rd quarters of 2009. The Work Pay Tax Credit and the help to individuals had a direct effect on the recession and the household did not reduce the consumption pattern. The increase in consumption of non-durable goods and services accredited to common tax relief and had aided in raising the confidence of the economy (Executive Office of The President of The US, “The Economic Impact of the American Recovery and Reinvestment Act of 2009”). In first quarter 700000 jobs were lost in each month, in second quarter 428000 jobs were lost per month, in third quarter 199000 jobs were lost every month and in fourth quarter 69000 jobs were lost per month. After the initiation of ARRA and another stabilizing policy were implemented there had been a decrease in the job losses (Executive Office of The President of The US, “The Economic Impact of the American Recovery and Reinvestment Act of 2009”). The revenue decline and balanced budget requirements generated huge pressure on local and state governments to lay off workers and cut down spending. Figure 5, generally represents state and local government employment decreased moderately through 3rd quarter and rose in 4th quarter. It was due to the ARRA state fiscal relief that the states and local governments were able to sustain the economic condition (Executive Office of The President of The US, “The Economic Impact of the American Recovery and Reinvestment Act of 2009”). With the ARRA of 2009, the total employment had increased by considerable extent. Manufacturing and construction sectors gained approximately 170000 jobs and businesses and professional services gained approximately 250000 jobs (Executive Office of The President of The US, “The Economic Impact of The American Recovery and Reinvestment Act Of 2009”). With the ARRA many families have showed positive recovery signs with the implementation of estimated services relating to employment support system and financial stabilization programs (Auerbach & Et. Al., “Activist Fiscal Policy”). The main purpose of the ARRA stimulus package was to boost funding for public infrastructure programs. It mostly highlighted renewable energy, health information technology, health care research, education program and subsidiary infrastructure financing (Auerbach & Et. Al., “Activist Fiscal Policy”). The ARRA will aid in stabilizing the economy through funding Department of Education in order to make college affordable. Through Medicaid healthcare reform will be funded. There will be more jobs created due to varied program funded by ARRA that had been initiated by President Obama. There was a significant debate over the stimulus package through ARRA between the House and the Senate. The debate was mainly related to the package offered to the state and local governments that accounted for more than tens of billion dollars, tax provisions and program related to health, education and renewable energy. After a long debate between the two parties final settlement was done on a $789 billion bill (The New York Times, “Economic Stimulus Jobs Bills”). There were many political leaders, who didn’t want the amount to be transferred to states and local government, but they were unsuccessful and it was finally implemented. As there was a decrease in the unemployment rate the administrative officials accredited the supremacy of the stimulus bill that had the ability to recover the economic situation (The New York Times, “Economic Stimulus Jobs Bills”). Work Cited Auerbach, Alan J. & Et. Al. “Activist Fiscal Policy”. December 6, 2010. University of California Regents, 2009. Cato Institute. “With All due Respect Mr President That Is Not True”. December 6, 2010. President-Elect Barack Obama, 2009. Executive Office of the President of the US. “The Economic Impact of the American Recovery and Reinvestment Act of 2009”. December 6, 2010. Second Quarterly Report, 2010. Srivastava, Swapnil. “American Recovery and Reinvestment Act of 2009”. December 6, 2010. Article, 2009. The New York Times. “Economic Stimulus Jobs Bills”. December 6, 2010. United States Economy, 2010. Zacharias, Ajit. & Et. Al. “Special Report”. December 6, 2010. The Levy Economics Institute of Bard College, 2009. Read More