The American Recovery and Reinvestment Act

The American Recovery and Reinvestment Act of 2009 was a stimulus package enacted by the 111th U.S. Congress and signed into law by President Obama in February of 2009. Its acronym is ARRA and its nickname is, the Recovery Act. Its development was largely in response to the Great Recession, a period of general economic decline in markets the world over, including in the United States, that began in the late 2000s.  

ARRAs primary goal was to save existing jobs from disappearing and to create new ones as soon as possible. It also sought to provide temporary relief programs to people who were most negatively impacted by the recession. It encouraged and provided resources for investments in infrastructure, education, health, and renewable energy.

ARRA can be viewed as a follow-up to President Bush’s, Troubled Asset Recovery Program that ended the 2008 financial crisis by bailing out large banks.

Cost of ARRA

When it was passed in 2009, the cost of ARRAs stimulus passage was estimated to be $787 billion. This was revised to $831 billion between 2009 and 2019. The idea was to put this money into the pockets of the American people and its small businesses. The rationale behind this is based on Keynesian economic theory (that economic output is strongly influenced by aggregate demand) and that during times of recession, the government has a responsibility to offset the decrease in private spending with an increase in public spending. This is done to save jobs and to stop further economic decline.

Components of ARRA

ARRA had seven main components.

Immediate Relief Families received $260 billion in tax cuts, tax credits and unemployment benefits. Each Social Security, veterans’ pension, and Supplemental Security Income benefits recipient received $250. It gave greater access to the child tax credit for the working poor and an expanded earned-income tax credit to families with three or more children. It provided many additional monetary benefits to individuals and families.

Modernization of Federal Infrastructure ARRA created jobs by funding well planned and engineered public works projects that could be quickly and easily implemented.

Increase in Alternative Energy Production This funding helped to jump-start the alternative energy industry and demonstrated that the federal government supported clean energy.

Expanded Health Care This act subsidized the greater health costs that recessions create. As well, it improved medical record systems that helped to facilitate the Affordable Care Act.

Improvements in Education ARRA gave over $115 billion to education causes for Head start, K-12, including special education and job training for the disabled, and for Pell Grants.

Investment in Science Research and Technology ARRA gave $10 billion to modernize science facilities and to fund research jobs that investigate disease cures; gave $4 billion to increase broadband infrastructure; and gave $4 billion for physics and science research.

Small Business Help To increase new jobs, ARRA allocated $54 billion to help small businesses with tax deductions, credits and loan guarantees.

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