American Recovery and Reinvestment Act of 2009
The American Recovery and Reinvestment Act of 2009 (ARRA) (Pub. L. 111–5 (text) (PDF)), nicknamed the Recovery Act, was a stimulus package enacted by the 111th U.S. Congress and signed into law by President Barack Obama in February 2009. Developed in response to the Great Recession, the primary objective of this federal statute was to save existing jobs and create new ones as soon as possible. Other objectives were to provide temporary relief programs for those most affected by the recession and invest in infrastructure, education, health, and renewable energy.
Long title
An Act making supplemental appropriations for job preservation and creation, infrastructure investment, energy efficiency and science, assistance to the unemployed, State, and local fiscal stabilization, for the fiscal year ending September 30, 2009, and for other purposes.
ARRA
Recovery Act
February 17, 2009
123 Stat. 115
The approximate cost of the economic stimulus package was estimated to be $787 billion at the time of passage, later revised to $831 billion between 2009 and 2019.[1] The ARRA's rationale was based on the Keynesian economic theory that, during recessions, the government should offset the decrease in private spending with an increase in public spending in order to save jobs and stop further economic deterioration.
The politics around the stimulus were very contentious, with Republicans criticizing the size of the stimulus. On the right, it spurred the Tea Party movement and may have contributed to Republicans winning the House in the 2010 midterm elections.[2][3][4] Not a single Republican member of the House voted for the stimulus,[5] and only three Republican senators voted for it.[6] Most economists have argued that the stimulus was smaller than needed.[3][7][8] Surveys of economists show overwhelming agreement that the stimulus reduced unemployment,[9][10] and that the benefits of the stimulus outweighed the costs.[9]
Buy American provision[edit]
ARRA included a protectionist 'Buy American' provision, which imposed a general requirement that any public building or public works project funded by the new stimulus package must use only iron, steel and other manufactured goods produced in the United States.
A May 15, 2009, Washington Post article reported that the 'Buy American' provision of the stimulus package caused outrage in the Canadian business community, and that the government in Canada "retaliated" by enacting its own restrictions on trade with the U.S.[64] On June 6, 2009, delegates at the Federation of Canadian Municipalities conference passed a resolution that would potentially shut out U.S. bidders from Canadian city contracts, in order to help show support for Prime Minister Stephen Harper's opposition to the "Buy American" provision. Sherbrooke Mayor Jean Perrault, president of the federation, stated, "This U.S. protectionist policy is hurting Canadian firms, costing Canadian jobs and damaging Canadian efforts to grow in the world-wide recession." On February 16, 2010, the United States and Canada agreed on exempting Canadian companies from Buy American provisions, which would have hurt the Canadian economy.[65][66]
The CBO estimated ARRA would positively impact GDP and employment. It projected 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.[78] 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.[78] Decreases in GDP in 2014 and beyond are accounted for by crowding out, where government debt absorbs finances that would otherwise go toward investment.[78] A 2013 study by economists Stephen Marglin and Peter Spiegler found the stimulus had boosted GDP in line with CBO estimates.[79]
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).[80]
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, and by $134 billion in 2011, or $787 billion over the 2009–2019 period.[81]
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.[78] Elmendorf said the CBO expected short term increases in GDP and employment.[78] In the long term, the CBO expects the legislation to reduce output slightly by increasing the nation's debt and crowding 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 not an issue in the short term because private investment was already decreasing in response to decreased demand.[78]
In February 2015, the CBO released its final analysis of the results of the law, which found that during six years:[82]
Oversight and administration[edit]
In addition to the Vice President Biden's oversight role, a high-level advisory body, the President's Economic Recovery Advisory Board (later renamed and reconstituted as the "President's Council on Jobs and Competitiveness"), was named concurrent to the passage of the act.
As well, the President named Inspector General of the United States Department of the Interior Earl Devaney and the Recovery Accountability and Transparency Board (RATB) to monitor administration of the Act, and prevent low levels of fraud, waste and loss in fund allocation.[118][119] Eleven other inspectors general served on the RATB, and the board also had a Recovery Independent Advisory Panel.
In late 2011, Devaney and his fellow inspectors general on RATB, and more who were not, were credited with avoiding any major scandals in the administration of the Act, in the eyes of one Washington observer.[120]
In May 2016, the chairman of the U.S. Senate Finance Committee, Senator Orrin Hatch (R-UT), launched the first steps of an investigation into a part of the stimulus law that gave grants to solar and green energy companies. Hatch sent a letter to the IRS and Treasury Department with a list of questions about the program. According to the Wall Street Journal, letters from senior senators who chair committees can lead to formal investigations by Congress.[121]
One part of the stimulus law, Section 1603, gave cash grants to solar companies to encourage investment in solar technology. Because many companies did not yet make a profit in 2009 in that industry, they were offered cash instead of tax credits. In September 2015, the U.S. government asked that a Spanish company return $1 million (~$1.26 million in 2023) it had received from the program. The company issued a statement saying it fully complied with the request.[121]