American Recovery and Reinvestment Act

Introduction The passing of the American Recovery and Reinvestment Act (ARRA) of 2009 was in response to the economic crisis in the United States by the 111th Congress which was signed into law by President Barack Obama. At the time of passing into law, theRecovery Act was estimated to be $787 billion and this was later increased to $831 billion and this figure changed to $840 in 2011 to coincide with the presidential budget of the year 2012 (Stolberg, 2009).

In order to achieve transparency in the recovery of funds, the government requires each recipient to make a report each January, April, July, and October to show their progress and how they are making use of the money. The Recovery Act sought to provide direct funding to certain areas in the economy that were seen to be long term investments such as, health, education, increase unemployment benefits and welfare provisions. The reasoning behind the creation of the ARRA was that in times of economic crises such the one affecting the United States, the government should devise ways of cutting back on private spending and have these funds channeled to public spending (“Obama seeks congressional consensus”, 2009). The ARRA had a statement of purpose designed to give provisions for the Act. These included: Creation of new jobs to alleviate the unemployment levels in the country while at the same time sustaining those that were already in existence Offering aid to those affected by the recession crisis through unemployment benefits and increased welfare provisions Stimulating the economy through long term investments that would provide advancements through research science and technology Invest in infrastructure, conservation of the environment, and other ventures that would serv to increase economy productivity To stabilize budget spending of both local and state governments With the economic recession seemingly coming to an end, congress is keen on crediting the ARRA with the turnaround on the economy.Some of the pros of the stimulus package include: The economy showed 3 -4% growth a factor attributed to the recovery act.

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Economists are not quick to give full credit to the recovery act they are inclined to accept the fact that without the stimulus package, the GDP would have made little growth They invested heavily in Green and Renewable energy sources. The state of the economy is not the only cause for alarm in the world, the state of the environment is also another major factor that governments need to be aware of. Without a safe and clean environment then sustenance of the human life will not be possible The stimulus package lessened the burden of unemployment on the government. Although critics argue that the recession did give way to a rise in the levels of unemployment, without the stimulus package the levels of unemployment which were at 9% would not have rose past the 8% mark. It led to the creation of about 1.

6 million and led to the saving the 2.5 million jobs. This saw a boost in the economy by 3.5% and the unemployment level dropped by 2.1% in the last quarter of 2009.

The congressional budget office in giving its estimates on the success of the stimulus package was positive that the package would yield better results in the coming years (Leonhardt, 2010). The investment in long term projects such as the reconstruction of roads and renovations in schools and health care centers was a factor that would be of great impact long after the stimulus package was withdrawn The tax cuts provided relief to the American citizens who were abble to channel the money to other investments such as the purchase of homes and other services and this led to a boost in the economy due to demand of products and services, which in turn created the need for employment to cope with the rise of demand and supply Critics have argued the success rate of the stimulus package and have termed it as too little to have any actual effect on the existing economic downturn. This was made evident by the increased failure of the economy even with the application of the recovery act. Economists who favored the stimulus package were of the opinion that the stimulus package needed to be at least $2 trillion in order to counter the declined government and consumer expenditure (Krugman, 2009). The stimulus saw budget cuts on state aid that was supposed to be reprieve for the unemployed and other beneficiaries and this did not sit well with many in and out of congress.

This aid was relied on by many of the citizens and any additional income pushed their spending further thus offering some stimulation to the economy.One of the more raging debates is the level at which the stimulus package helped the unemployment situation in the country. While supporters of the package have issued evidence thatit led to the creation and saving of millions of jobs, the situation on the ground bears a different scenario. The rate of unemployment has continued to be on the up and up with critics offering that the prediction by the President of decline was off the mark by several points. While not much of the money set aside for the recovery of the economy has been spent analysts are hopeful that should the package be increased then it will go a long way in resolving the immediate issues which are a decrease in consumer spending and the high rate ofunemployment in the country.