The American Recovery and Reinvestment Act of 2009 was the last piece of legislation from Congress that has attempted to counteract the recession and boost our economy. After a year and a half, many individuals are starting to ask if the stimulus has been able to accomplish anything. With unemployment still around 9.5 percent, little investment and minimal amounts of credit opening up, it seems as if the administration’s efforts so far have been to no avail.
The stimulus bill that we had in 2009 was a $787 billion package that offered federal tax incentives and expands unemployment benefits, social welfare provisions and domestic spending in education, health care and infrastructure.
Most often, the bill is attacked by fiscal conservatives for spending too much and not stimulating the economy by expanding tax cuts, the reasoning being if we cut taxes the economy will be able to recover by giving that tax income back to individuals who can invest in new businesses and create jobs. Giving the stimulus bill a detailed look would reveal that the largest portion of the bill is dedicated to a new tax credit for workers, a total of $116.2 billion is dedicated to a new tax cut that affects those earning under $75,000 in income. The bill includes $263 billion in tax cuts for individuals, small businesses and others. That is nearly one-third of all $787 billion that was devoted to tax cuts for the majority of the American middle class.
The other two-thirds of the package are devoted to paying for unemployment, education, health care costs, infrastructure and social welfare. Thus it is worthy to note that in a breakdown of the major parts of the package, only the new credit for workers passes the $100 billion mark. Meanwhile, the vast majority of the package is devoted to smaller provisions that stick between the $5 billion and $2 billion mark.
Obama’s economic stimulus package has also been criticized for its failure to create new jobs. This assertion, however, is inaccurate. With the recent report from the nonpartisan Congressional Budget Office, it was determined that the stimulus bill was able to reduce the unemployment rate by between 0.7 and 1.8 percent, as well as increasing the number of employed by between 1.4 million and 3.3 million. This was only looking at the last year, and could not account for jobs that could be created in the near future.
However, we must not despair. We must remember that it took eight years or perhaps even 12 to 16 years to get our economy into the ditch, and it might take us another four to eight years just to get out. I would remind my conservative counterparts to try to be patient as we employ a Keynesian strategy with the economy, after attempts at using monetary policy have failed to produce results. Under Keynes, we reason that when there is little foreign direct investment, a lack of domestic investment and fear in the consumer that leads to a more stagnant economy, it is necessary for the government to step in as the consumer of last resort. In a climate where the middle class would rather save, the upper class would rather invest abroad and the lower class lives paycheck to paycheck, the government should step in and boost the economy by spending our money back into our economy.
This is only one step removed from the laissez-faire system fiscal conservatives dream of. It is government intervention as it is needed, not for the long term.
In short, while I understand some of the objections to the stimulus plan, I do have to question the Republican party’s hasty judgment on a strategy that could potentially help us recover from a stagnant economy.