American Investment Recovery Act Throughout American History Essay

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American Investment Recovery Act

Throughout American history there has been an emphasis on maintaining a balance of power between different branches of government. This is from the belief that concentrating too much authority in one area will lead to inevitable abuses in others. To prevent this, the federal government and states have always practiced these basic principles. As a result, there are varying interpretations as to the overall scope of power given to particular branch. (McNeese, 2001)

In 2009, these issues were continually being brought to forefront with the American Recovery Act and Reinvestment Act of 2009. This law was designed to provide the economy with additional amounts of stimulus to address the lingering challenges from the financial crisis. However, the process of enacting this legislation, there were increased amounts of controversy surrounding the balance of power between the President and Congress. This is because the Democrats had an overwhelming majority in Congress and they controlled the White House. This made it easier to pass legislation that could help to protect the economy from critical challenges. (Hartmann, 2010)

Yet, in the process of doing this, is when many Republicans and pro-business advocates felt that this was not necessary. The reason why, is they believed that the free market should sort out these challenges and the government needs to stay out of these areas. Over the long-term, this will allow the economy to naturally correct itself and resume strong economic growth. This resulted with increased amounts of contention about the role of federal government and the balance of power / constitutionality of the law. To fully understand these issues requires examining the act and how it is applied in relation to these principles. Together, these elements will highlight the challenges in maintaining different constitutional guidelines between the President and Congress. (Hartmann, 2010)

The American Recovery Act and Reinvestment Act of 2009

The American Recovery Act and Reinvestment Act of 2009 was signed into the law by President Barrack Obama on February 17, 2009. This was in response to implosion in the housing market and the lingering effects that it had on the financial system. Under the program, there are combined amounts of direct spending by the federal government, support for the states and tax benefits. The combination of these factors is designed to provide the economy with added reinforcements. This prevented growth from declining even further, by ensuring that there was increased liquidity available. ("The American Investment and Recovery Act," 2009)

To achieve these objectives, there was a focus on a number of different areas to include: education, health care, infrastructure, tax cuts, energy efficiency and the expansion of unemployment benefits / welfare programs. Moreover, the act also contained other provisions that were not directly tied to the economy such as: limiting executive compensation for banks that receive federal assistance and studying the effectiveness of medical treatments. ("The American Investment and Recovery Act," 2009)

The passage of the law created contention between members of Congress (i.e. The Republicans) and the White House. They felt that these programs were nothing more than big federal initiatives that did little to help deal with the lingering economic challenges. Instead, they believed that useless studies were conducted and failing businesses are supported by the legislation. (Hartmann, 2010) ("The American Investment and Recovery Act," 2009)

While many proponents, will argue that the act helped to save between 1.5 million and 3 million jobs. This is because of the added amounts of spending provided direct assistance to the middle class. They were able to use these funds to deal with critical challenges and spend this money inside the economy. These conflicting opinions helped to fuel the debate about the constitutionality of the law and if there was a balance of power in place (during the debates surrounding the legislation). (Hartmann, 2010) ("The American Investment and Recovery Act," 2009)

Balance of Power and Constitutional Issues

The Constitution specifically is giving Congress the power to spend. This is designed to prevent the President from engaging in uncontrolled polices and increase transparency. In the case of the American Recovery and Reinvestment Act, these practices were believed to be occurring. This is because the President and his party had clear majorities in both houses of Congress. As a result, passing any kind of sweeping legislation that expanded the size of these programs; helped the Executive branch to act without any accountability. This is from the clear need to react immediately to the impending financial crisis. ("The American Investment and Recovery Act," 2009)

Once this happened, is when many critics argued that the enactment of the legislation may be violating the principles of the balance of power. This is occurring with the President using his political party as a way to push ideology-based legislation. Evidence of this can be seen with comments from the Center for Fiscal Accountability who observed, "The enactment of the American Recovery and Reinvestment Act of 2009, the trillion dollar spending and debt package pushed through Congress by President Barack Obama and Congressional leaders under the guise of 'economic stimulus,' marked a return to failed policies of the past. Following the Keynesian rationale that increased government spending will lead to economic growth, Congress passed, and President Obama signed, a package largely consisting of spending with some (albeit overstated) tax cuts. The actual taxpayers cost of the spending component, however, when factoring interest on the debt incurred to finance the package, will be much higher. The resurrection of Keynesian policies did not come as a surprise, although the magnitude of the stimulus package is unprecedented. During the presidential campaign, Obama had made clear his support for redistributionist policies stating his belief that the economy works best if 'we spread the wealth around'. The stimulus package does indeed 'spread the wealth around,' but this redistributionist package that takes money from one group of people (tax hikes) in order to give it to another one (government spending)." This is illustrating how opponents believe that the stimulus package is violating the separation of power between government, states and the individual. As these programs, are helping to redistribute wealth with initiatives like the American Recovery and Reinvestment Act. ("The American Investment and Recovery Act," 2009)

Moreover, opponents argue that the expansion of these programs is unconstitutional. This is because the increase in the size of the federal government is forcing businesses to take the assistance that is provided to them. The way that this occurs is through allowing them to receive these benefits (even though they are against them). When this happens, the federal government is interfering in how they are managing their finances. This is the forcing them to embrace these new guidelines (regardless of their opinions). As a result, the increase in the size of the federal government; is showing how individual choices are becoming limited. ("The American Investment and Recovery Act," 2009)

However, many supporters of the American Recovery and Reinvestment Act will argue that previous Supreme Court rulings have affirmed the power of the federal government in regulating the economy. Evidence of this can be seen with Wickard v. Filburn. In this decision, the court ruled that the federal government has the right to regulate the economy under the Commerce Clause of the Constitution. This is because the Department of Agriculture had set production caps for farmers who are producing wheat. Filbert argued that this was a violation of his basic rights to determine the most appropriate amounts. The court found that any kind of guidelines were designed to regulate the economy as a whole. ("Wickard v. Filburn," 2012)

Commenting about these issues the court said, "The Commerce Clause undoubtedly gives Congress the power to regulate the price of wheat. This can be done by increasing the demand or decreasing the supply for it in the market. The effect of the quota is to control the supply of wheat and sustain the demand for it. To the extent that farmers could produce wheat to meet their own home needs, the demand for wheat is affected. Although Filburn's production alone may be trivial, the combination of the many farms' trivial production would have a substantial effect on the market. Even if Filburn's activity is local and although it may not be regarded as commerce, it may still be reached by Congress if it exerts a substantial economic effect on commerce, without regard for whether the effect is direct or indirect." This is showing how the federal government has the authority to regulate the economy. ("Wickard v. Filburn," 2012)

As a result, the American Recovery and Reinvestment Act are having a dramatic impact upon how the federal government is able to control it. During times of economic crisis, this means that they can engage in actions which may not benefit one individual. Instead, they will have an impact on the economy as whole. When this happens, there is the possibility that the actions taken are designed to increase stability. These different factors are demonstrating how the power to regulate is constitutional…[continue]

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