The American Recovery and Reinvestment Act of 2009 (ARRA) is an economic stimulus package enacted by the 111th United States Congress and signed into law by President Barack Obama on February 17, 2009. The Act of Congress was based largely on proposals made by President Obama and is intended to provide a stimulus to the US economy in the wake of the economic downturn. The measures are nominally worth $787 billion. The Act includes federal tax relief, expansion of unemployment benefits and other social welfare provisions and domestic spending in education, health care, and infrastructure, including the energy sector. The Act also includes numerous non-economic recovery related items that were either part of longer-term plans (e.g. a study of the effectiveness of medical treatments) or desired by Congress (e.g. a limitation on executive compensation in federally aided banks added by Senator Dodd and Rep. Frank). The government action is much larger than the Economic Stimulus Act of 2008 which consisted primarily of tax rebate checks.

The bill was first approved by the House of Representatives and then by the Senate. Congressional negotiators announced on February 11 that they had completed the Conference Report of the bill. The Conference Report with final handwritten provisions was made available to the public on February 13. On that day, the Conference Report was voted on and passed as Roll Call Vote 70 by the House, 246-183. The vote was largely along party lines with all 246 Yea votes given by Democrats and the Nay vote split between 176 Republicans and 7 Democrats. No Republicans in the House voted for the bill. Later that day, the Senate passed the bill, 60-38, with all Democrats and Independents voting for the bill along with three Republicans. The remaining 38 Republican senators voted against the bill. The bill was signed into law on February 17 by President Obama at an economic forum he was hosting in Denver.

Healthcare Allocation

  • $86.6 billion for Medicaid
  • $24.7 billion to provide a 65 percent subsidy of health care insurance premiums for the unemployed under the COBRA program
  • $19 billion for health information technology
  • $10 billion for health research and construction of National Institutes of Health facilities
  • $1.3 billion for medical care for service members and their families (military)
  • $1 billion for prevention and wellness
  • $1 billion for the Veterns Health Adminstration
  • $2 billion for Community Health Centers
  • $1.1 billion to research the effectiveness of certain healthcare treatments
  • $500 million to train healthcare personnel
  • $500 million for healthcare services on Indian Reservation

Assessments by economists

Economists such as Martin Feldstein, Daron Acemoglu, National Economic Council director Larry Summers, and Nobel Memorial Prize in Economic Sciences winners Joseph Stiglitz and Paul Krugman favor large economic stimulus to counter the economic downturn. Some economists, such as Stiglitz and Krugman, favor a much larger measure. While in favor of a stimulus package, Feldstein expressed concern over the act as written, saying it needs revision to address consumer spending and unemployment more directly. Other economists, including John Lott, Robert Barro, and Nobel Prize-winners Robert Lucas, Jr., Vernon Smith, Edward Prescott and James Buchanan have been more critical of the government spending, saying that the package will increase unemployment and place more debt on future generations.

On January 28, 2009, a full page advertisement with the names of approximately 200 economists who are against President Obama’s plan appeared in The New York Times and The Wall Street Journal. The funding for this advertisement came from the Cato Institute. The ad stated, “… we the undersigned do not believe that more government spending is a way to improve economic performance. More government spending by Hoover and Roosevelt did not pull the United States economy out of the Great Depression in the 1930s… To improve the economy, policymakers should focus on reforms that remove impediments to work, savings, investment, and production. Lower tax rates and a reduction in the burden of government are the best ways of using fiscal policy to boost growth.”

On March 11, 2009, The Wall Street Journal published a forecasting survey of 49 senior economists about the bill’s impact in regards to the Obama administration. President Obama and United States Secretary of the Treasury Timothy F. Geithner received failing grades for their handling of the economic crisis and stimulus plan. Critics were divided over the bill, with 43% saying 500 billion more would be needed, while others were “skeptical of the need for stimulus at all.”

Congressional Budget Office report

A February 4, 2009, report by the Congressional Budget Office (CBO) said that while the stimulus would increase economic output and employment in the short run, the GDP would, by 2019, have an estimated net decrease between 0.1% and 0.3% (as compared to the CBO estimated baseline).

The CBO estimated that enacting the bill would increase federal budget deficits by $185 billion over the remaining months of fiscal year 2009, by $399 billion in 2010, by $134 billion in 2011, and by $787 billion over the 2009-2019 period.

In a February 11 letter, CBO Director Douglas Elmendorf noted that there was disagreement among economists about the effectiveness of the stimulus, with some skeptical of any significant effects while others expecting very large effects. Elmendor said the CBO expected short term increases in GDP and employment. In the long term, the CBO expects the legislation to reduce output slightly by increasing the nation’s debt and crowinding out private investment, but noted that other factors, such as improvements to roads and highways and increased spending for basic research and education may offset the decrease in output and that crowding out was a not an issue in the short term because private investment was already decreasing in response to decreased demand.

An updated report of the budget and economic outlook by the CBO in March 2009 showed that taxpapers will pay $356 billion, $167 billion more than the original figure of $189 billion in January.

The CBO estimated that an increase in the GDP of between 1.4 percent and 3.8 percent by the end of 2009, between 1.1 percent and 3.3 percent by the end of 2010, between 0.4 percent and 1.3 percent by the end of 2011, and a decrease of between zero and 0.2 percent beyond 2014. The impact to employment would be an increase of 0.8 million to 2.3 million by the end of 2009, an increase of 1.2 million to 3.6 million by the end of 2010, an increase of 0.6 million to 1.9 million by the end of 2011, and declining increases in subsequent years as the U.S. labor market reaches nearly full employment, but never negative.Decreases in GDP in 2014 and beyond is accounted for by a decrease in worker productivity caused by lower wages rather than lower employment.

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