In February 2009, President Barack Obama signed the American Recovery and Reinvestment Act (ARRA), also known as the "stimulus package." The law authorized $787 billion in new federal spending for the purpose of spurring a quick national recovery from a steep economic recession. The stimulus package has been subject to a sharp debate between supporters and opponents, and taking a look at some of the arguments on both sides should shed light on the controversy.
What's a Stimulus?
The purpose of an economic stimulus is to combat the effects of an economic slowdown by promoting and supporting economic activity, creating jobs, spurring consumer spending and expanding credit. The ARRA offered tax credits and one-time tax rebates as well as assistance to home and car buyers, expanded unemployment benefits, authorized money for road and bridge building and repair, made new investments in "clean energy" projects and offered federal money to public schools and health facilities.
Poor Timing
The stimulus package was passed early in the Obama administration and was promoted as a method of bringing about a quick economic recovery. However, much of the federal money granted by the new law took several months to work its way through bureaucratic channels before it could be spent. By the summer of 2009, the effects of the stimulus package were still minimal, and the economy was still in recession.
Federal Deficits
The new spending came at a time of rising federal budget deficits, largely caused by lower tax receipts at a time of economic recession. Those who opposed the stimulus package saw it as actually hindering the economy in the long run, as the borrowing necessary to finance the law might have the effect of spurring inflation, weakening the dollar's value, and raising interest rates in the private sector.
Politics
Critics of the stimulus package included nearly all Republican congressional representatives and governors, a few of whom resisted accepting stimulus money for their states. As a result, the benefits of the stimulus package did not reach all taxpayers in an equal manner. Rather than a boon to the economy, the stimulus package became a divisive political issue.
Pork Barrel Spending
Many lawmakers added stimulus projects based in their home districts to the final version of the bill. These projects were criticized by some as being of dubious value to the economy as a whole, and designed solely to curry favor with voters. In this view, rather than stimulate the economy, pork-barrel spending provides a limited number of jobs and economic benefits to the country as a whole.
Tags: stimulus package, economic recession, federal money
