American Recovery and Reinvestment Act - Explained
What is the American Recovery and Reinvestment Act?
Written by Jason Gordon
Updated at June 27th, 2021
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Table of Contents
What is the American Recovery And Reinvestment Act?What is included in the American Recovery And Reinvestment Act?Objectives of the American Recovery and Reinvestment ActOpinions on the Efficacy of the American Recovery and Reinvestment ActAcademics Research on American Recovery And Reinvestment ActWhat is the American Recovery And Reinvestment Act?
The American Recovery and Reinvestment Act (ARRA) of 2009 is a federal law passed by the U.S Congress to provide relief to American families after the Great Recession of 2008. ARRA is otherwise called the Recovery Act, Obama Stimulus and the stimulus package of 2009. This law was signed into law by President Barrack Obama in 2009. The American Recovery and Reinvestment Act of 2009 was passed to stimulate economic recovery in the United States. This law was designed to improve health care, education, and provide infrastructure for American families.
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What is included in the American Recovery And Reinvestment Act?
ARRA is a law passed as a response to the Great Depression of 2008. This law provided tax relief, basic infrastructures, and amenities for families in the U.S. ARRA as federal law was also passed to aid the recovery of jobs lost during the Great Depression and create more employment for American citizens. The American Recovery and Reinvestment Act (ARRA) was signed into law on February 17, 2019. When signed into law by President Obama, the Act was to disburse $787 billion as of relief to American citizens. This amount was intended to compensate Americans for job losses and other financial hardships encountered during the recessional period.
Objectives of the American Recovery and Reinvestment Act
There are many initiatives and objectives that were intended for the American Recovery and Reinvestment Act (ARRA) of 2009 to achieve. The major objectives of ARRA include;
- The Act was designed to disburse about $787 billion to American families in form of tax reliefs, provision of infrastructure, quality health care, quality education, and other recovery plans.
- Provision of tax reliefs for families such as offering deductions of family taxes up to $800.
- The act allocated up to $87 as medical aid to states as a way of aiding medical recovery in these states.
- Over $100 billion was allocated for education while over $80 billion was provided for infrastructure projects.
Opinions on the Efficacy of the American Recovery and Reinvestment Act
The American Recovery and Reinvestment Act (ARRA) of 2009 received different reactions from different quarters, this was a mix of both positive and negative reactions. While the supporters of the Act clamored that stimulus spending was not enough for economic recovery which created the need for ARRA, opponents of ARRA opined that too much government spending will be largely inefficient due to the bureaucratic tendencies of government offices. Economists were also pitched in different positions when it comes to the efficacy ARRA, however, the effects of the Act are largely noticeable as the eco
Academics Research on American Recovery And Reinvestment Act
- Does state fiscal relief during recessions increase employment? Evidence from theAmerican Recovery and Reinvestment Act, Chodorow-Reich, G., Feiveson, L., Liscow, Z., & Woolston, W. G. (2012). Does state fiscal relief during recessions increase employment? Evidence from the American Recovery and Reinvestment Act.American Economic Journal: Economic Policy,4(3), 118-45. The American Recovery and Reinvestment Act (ARRA) of 2009 included $88 billion of aid to state governments administered through the Medicaid reimbursement process. We examine the effect of these transfers on states' employment. Because state fiscal relief outlays are endogenous to a state's economic environment, OLS results are biased downward. We address this problem by using a state's prerecession Medicaid spending level to instrument for ARRA state fiscal relief. In our preferred specification, a state's receipt of a marginal $100,000 in Medicaid outlays results in an additional 3.8 job-years, 3.2 of which are outside the government, health, and education sectors. (JEL H75, I18, I38, R23)
- Fiscal spending jobs multipliers: Evidence from the 2009American Recovery and Reinvestment Act, Wilson, D. J. (2012). Fiscal spending jobs multipliers: Evidence from the 2009 American Recovery and Reinvestment Act.American Economic Journal: Economic Policy,4(3), 251-82. This paper estimates the "jobs multiplier" of fiscal stimulus spending using the state-level allocations of federal stimulus funds from the American Recovery and Reinvestment Act (ARRA) of 2009. Because the level and timing of stimulus funds that a state receives was potentially endogenous, I exploit the fact that most of these funds were allocated according to exogenous formulary allocation factors such as the number of federal highway miles in a state or its youth share of population. Cross-state IV results indicate that ARRA spending in its first year yielded about eight jobs per million dollars spent, or $125,000 per job. (JEL E24, E62, H72, H75, R23)
- Did the stimulus stimulate? Real time estimates of the effects of theAmerican Recovery and Reinvestment Act, Feyrer, J., & Sacerdote, B. (2011).Did the stimulus stimulate? Real time estimates of the effects of the American Recovery and Reinvestment Act(No. w16759). National Bureau of Economic Research.
- TheAmerican Recovery and Reinvestment Act: Solely a Government Jobs Program?, Conley, T. G., & Dupor, B. (2013). The American Recovery and Reinvestment Act: Solely a Government Jobs Program?.Journal of monetary Economics,60(5), 535-549. This paper estimates the private andgovernment sectoremployment effectsof American Recovery and Reinvestment Act (ARRA) spending via aninstrumental variablesstrategy. We argue that this aid was effectively fungible and states used it to offset declines in revenue. This enables us to use exogenous variation instates budgetpositions to identify the Act's employment effects. We also exploit exogenous variation across states in ARRAhighwayfunding. According to our benchmark estimates, averagestate and local governmentemployment, during the 24 months following the program's inception, was between 156,000 and 563,000 persons greater as a result of ARRA spending (90% confidence interval). The corresponding estimate for theprivate sectorranges from a loss of 182,000 to a gain of 1.1 million jobs. Our point estimate for the implied cost of creating a job lasting one year is $202,000, which is substantially larger than the corresponding estimate from the President's Council of Economic Advisors.