American Recovery and Reinvestment Act Term Paper

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Investment Sections - 2009 Recovery and Reinvestment Act:

Source: Wikimedia Commons.

The largest grouping in the Act is for tax cuts. As an example of how money in one grouping gets divided, the following shows what is being allotted for tax relief:

$116 billion: Payroll tax credit of $400 per worker and $800 per couple in both 2009 and 2010 (American, 2010).

$70 billion: Alternative minimum tax: a one year increase in AMT floor to $70,950 for joint filers for 2009 (American, 2010).

$15 billion: Expansion of the child tax credit: A $1,000 credit to a larger number of families (including those that do not make enough money to pay taxes) (American, 2010).

$14 billion: Expanded college credit to provide a $2,500 tax credit for college tuition and related expenses for 2009 and 2010 (American, 2010).

$6.6 billion: Homebuyer tax credit: $8,000 refundable credit for all homes bought between 1/1/2009 and 12/1/2009 and repayment provision repealed for homes purchased in 2009 and held more than three years. It only applies to first-time homebuyers, and was extended through April of 2010 (American, 2010).

$4.7 billion: Excluding from taxation the first $2,400 a person receives for unemployment benefits in 2009 (American, 2010).

$4.7 billion: Expanded earned income credit -- which provides money to low-income workers -- for families that have at least three children (American, 2010).

$4.3 billion: Home energy credit to provide expanded credit to homeowners who make homes more energy-efficient in 2009 and 2010. Homeowners can recoup 30% of their cost up to $1,500 for numerous projects like installing energy-efficient windows, doors, air conditioners, and furnaces (American, 2010).

$1.7 billion: Deduction of sales tax from vehicle purchases, but not interest payments (American, 2010).

As can be seen, the breakdown of what goes into each section is very specific. The tax relief section is not the only one that has a lot of specifics. Each section of the stimulus plan clearly spells out how much money is to go for a certain area, and then each area is broken down into specifics. That works out very well for anyone who wants to see where the money is going, but there are still people who do not feel as though the money went to the right places. That is to be expected with any financial plan.

Developments

Economists have been divided as to whether they like the stimulus plan or not (Economists, 2009; Gross, 2009; Obama, 2009; Krugman, 2008). Some of them feel that it is a valuable way to bring more jobs and more money to the overall economy (Gross, 2009; Obama, 2009; Krugman, 2008). Others think that the plan does not address the issues that are really the most important to the American people and the struggles that they are facing right now (Economists, 2009). In other words, these economists feel as though the money that is being spent - and how that money is being spent - is not something that is going to be workable in the long run (Economists, 2009). There are indications that the plan will actually cause the GDP to decrease over time, which would lower the net worth of the country (Gross, 2009; Krugman, 2008). This is, of course, the opposite affect from what the plan was supposed to have. Only time will let whether this is the case.

There have been some developments from the plan, however, including a forecast that 2.5 million jobs will ultimately be created and/or saved by the Act (Economists, 2009). Now, the estimate stands at 1.6 to 1.8 million jobs that have been saved/created already. How this is measured and defined, though, is a gray area that many economists and others cannot agree on. Many people feel that the way this has been measured paints an inaccurate representation of just how much the Recovery Act has actually done for the American economy and job market. The people who were able to keep their jobs or who were able to get good jobs in a tough economy, though, may not share that opinion.

The argument against the job creation numbers in the stimulus package comes about because there is no clear way to determine how many jobs would have been created or saved if the stimulus package would not have passed (Harvard, 2009; Lott, 2009). In other words, there is really no way of comparing what is to what might have been. While the Recovery Act may have generated that many jobs, it is equally possible that those jobs would have been generated through some other means, and the stimulus package would not have been necessary (Lott, 2009). Since there is no way to know what would have actually happened if the Recovery Act had not been put into place, the claims that are made by those who support it are unable to be proven.

Analysis

Whether the claims of the Act are correct does not mean that the Act was specifically bad or good, but only that there are many more considerations that a lot of people who think about the Act do not realize. Just saying that the Act did or did not do something is not acceptable. Rather, it must be made clear how the Act contributed when doing something else would not have worked. This is the main problem that those who argue about the Act have - they do not have verifiable facts that they can use. They have an opinion of what the Act has or has not done, based on what they believe would have taken place in the absence of the Act, not based on what has actually taken place.

While the Recovery and Reinvestment Act of 2009 appears to be valuable in some ways, there are other places where it appears to fail - and without knowing what would have taken place without it, there is no way to prove one way or the other. As of June, 2010, the economic recovery is clearly not complete. There are many problems with foreclosures, job loss, and other issues, coupled with rising prices on many items. If the stimulus plan was designed to correct that, it has not happened yet. While unfortunate, the Act was untried and therefore subject to error. Those who touted the greatness of the plan downplayed this margin for error, and those who disagreed with the plan made it much more significant than it likely is or will become - but such is the nature of politics.

Conclusion

When it comes to the American Recovery and Reinvestment Act, there are pros and cons. Of course, that is true with any changes that are made that affect the entire country, especially when they are financial. Unfortunately, there is no way that everyone can agree on everything relating to the country and where it is headed. The Congress has to make the best choices it can, just like the President does. Whether they do the right thing cannot really be known until what they have decided takes effect - and even then it may be impossible to tell if the right decision was made. The Recovery Act is one of those decisions that can only be judged in the long-term, once it has been in place for some time. Only at that point will it be possible to tell whether the right choice was made. That point will come in the future, but there is no way to really tell how long it will take before it is reached.

Bibliography

American Recovery and Reinvestment Act of 2009. 2010. Recovery.gov. http://www.recovery.gov/Pages/home.aspx

Dems power stimulus bill through Congress. February 14, 2009. Associated Press. http://www.msnbc.msn.com/id/29179041/.

Economists say stimulus won't work. January 29, 2009. St. Louis Post-Dispatch. http://www.stltoday.com/blogzone/mound-city-money/us-economy/2009/01/economists-say-stimulus-wont-work. Retrieved 1 February 2010.

Gross, D. 12 October 2009. The $800 Billion Deception: Conservatives claim the stimulus has already failed. But it has barely started. Slate. http://www.slate.com/id/2232185/.

Harvard Prof Slams Stimulus Plan. January 30, 2009. Boston Herald. http://www.bostonherald.com/business/general/view/2009_01_30_Harvard_prof_slams_stimulus_plan:_Dems____800b_%E2%80%98mistake_.

Krugman, P. January 25, 2008. Stimulus Gone Bad. NYTimes.com.

http://www.nytimes.com/2008/01/25/opinion/25krugman.html.

Lott, J.…

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