American Recovery and Reinvestment Act
In the wake of the 2008 market crash and the ensuing recession, the U.S. government developed a plan to shore up the economy in the face of dwindling economic activity. That plan combined federal stimulus with tax breaks to help fill the gap created by cuts in consumer spending. The steps taken by the government were meant to create a short-term solution — but the controversy surrounding the steps was similar to that of a doctor treating only the symptoms of a disease by placing a temporary bandage over an obviously infected wound: it did nothing to address the symptoms directly. Part of that reason was that those in charge of addressing the issue were not situated to address the actual causes of the problem. This paper will examine the steps taken by the government via the American Recovery and Reinvestment Act of 2009 and how it affected GDP and other aspects of the economy.
The Congressional Budget Office (CBO) expected the American Recovery and Reinvestment Act (ARRA) of 2009 to have a positive effect on both employment in the U.S. and GDP. The CBO anticipated a growth in GDP as a result of the stimulus in the realm of 1.4% to 3.8% by year’s end, with a tapering effect in growth over the next 5 years (Young, Sobel, 2013). The CBO also expected economic output to increase and unemployment numbers to drop as a result of ARRA — at least in the short-term. The longer-term side-ffect of the stimulus would be that by 2020, a net decrease of up to 0.3% to baseline would be the result (Young, Sobel, 2013). Spending allocations approved by Congress, moreover, set aside $70 billion which was to be used to block more than 20 million American taxpayers from avoiding the alternative minimum tax the year of ARRA’s implementation.
However, because the allocation was not assessed according to inflation, the funds did not perform the way they were originally intended, and a separate bracket of people were taxed, outside the original target. Using the model of aggregate demand-aggregate supply, price level and output via the damand/supply ratio, based on Keynesian economics, the CBO based its projections — indicating how stimulus would create the desired effect by filling the gap in consumer shortfalls over the short-term. The longer-term effect, according to the model, would be for the stimulus to taper off as consumer spending picked back up with the expected economic upturn. However, this has not occurred, and, as Krugman has noted, the stimulus was simply not big enough to cover the windfall: it only extended to about a third of the spending gap (Goldberg, Rosenthal, 2011).
The impact on GDP, output and inflation caused by increase spending versus decreased taxes in the ARRA was more integrated than first glance would suppose. Roughly half of the measures taken to address unemployment “were tax cuts” — however, while tax cuts are said to “increase individual income,” the “multiplier effect on overall output is generally thought to be slightly less than it is for government expenditures,” the reason of course being that the individual has more incentive to save: the government does not (Economic Report of the President, 2014, p. 106). Also, with the government borrowing money from the Federal Reserve to the amount of nearly $1 trillion, the effect that this has on the value of money already in circulation is that of devaluation. As the currency is devalued through printing (stimulus, quantitative easing, etc.), inflation of assets and products occurs: in various asset classes this is seen — from housing to the stock market. Investment, on the other hand, in business is not a guarantee — especially as red tape surrounding necessary permits, etc., to launch a business pile up as a result of bureaucratic red tape. The problem, thus, is one that goes far deeper than filling a consumer spending gap: the problem is systemic. ARRA’s failure to solve the issue is inherent in its approach. Increased spending therefore does not directly impact the GDP or increase output because it does not actually contribute to the velocity of money: there was no “above normal growth” because there was no devastation that allowed for the setting to be able to be one that could permit regeneration (Elwell, 2013, p. 369). After a forest fire, there is re-growth. The 2008 collapse did not actually occur as it should have: the central banks intervened to prop up the markets: the issues were not resolved; the fire did not consume all and destroy, allowing for above normal growth to take place afterwards. Instead, the stimulus simply fed the fire, which allowed it to continue to burn — and it is still burning.
Decreased taxes, however, effected a similar outcome: the $1,000 per couple tax credit in 2009 and 2010 saw a reduction of roughly $20 per week withheld from workers’ pay. Tax incentives for corporations and companies totaled $51 billion, with the largest allocation permitting companies to extend losses over five years. Thus, decreased taxes served the same role as stimulus — money in the pockets of those looking to save — but no impact on velocity or economic recovery overall because of the lack of “above normal growth” (Elwell, 2013, p. 369).
Two issues and risks to the economy of the increased budget deficit associated with the increased levels of government spending and decreased taxation contained in the act are: 1) a lack of funds for the major programs supported by the federal government (such as pensions), and 2) the inability to support/maintenance the current deficit’s interest. To offset this latter risk, the Federal Reserve accommodates by keeping interest rates low, but this in turn impacts the market and distorts the risk associated with the assumption of credit. With easy credit available at low rates, the ability of investors to know where to place their funds becomes more difficult: the actual condition of the market is distorted by the central bank’s intervention. A free market, on the other hand, would validate and justify itself: strength would be apparent and by its fruits a good company worthy of investment would be known. The former issue of lacking funds due to decreased taxation becomes an issue that is compounded by a demographic challenge — namely the surge in retirees and the lack of a younger population to service the demands of their pensions. Thus, pensions are reduced and faith in the overall working system is compromised. This leads to dissatisfaction and has political and social ramifications overall — as can be seen the recent election of Trump, an Establishment outsider, to the office of President of the United States on a promise to clean up the system than half the voting public evidently despises.
In conclusion, the American Recovery and Reinvestment Act was designed to take a Keynesian approach to the economy, to stimulate by plugging a short-term gap while growth could return. However, in a system that is dying, the expectation for growth is misplaced, and contradicting aims and policies cannot produce a positive outcome, as the evidence indicates. The failure of ARRA to fully stimulate the economy out of its current recession is evident in any number of indicators — jobs data, declining CAT sales, little to no industrial growth. GDP has stalled not because ARRA did not go far enough but because it did not address the underlying issues at the heart of the matter — namely that the rot has to be allowed to die.
Economic Report of the President. (2014). DC: Council of Economic Advisors.
Elwell, C. (2013). Economic recovery: Sustaining U.S. economic growth in a post-
crisis economy. Current Politics and Economics of the United States, Canada and Mexico, 15(3): 369-404.
Goldberg, G., Rosenthal, M. (2011). The jobs crisis: How to solve it and begin to fix our broken economy. New Politics, 13(2): 60-67.
Young, A., Sobel, R. (2013). Recovery and Reinvestment Act spending at the state level: Keynesian stimulus or distributive politics? Public Choice, 155(3): 449-468.
Get Professional Assignment Help Cheaply
Are you busy and do not have time to handle your assignment? Are you scared that your paper will not make the grade? Do you have responsibilities that may hinder you from turning in your assignment on time? Are you tired and can barely handle your assignment? Are your grades inconsistent?
Whichever your reason is, it is valid! You can get professional academic help from our service at affordable rates. We have a team of professional academic writers who can handle all your assignments.
Why Choose Our Academic Writing Service?
- Plagiarism free papers
- Timely delivery
- Any deadline
- Skilled, Experienced Native English Writers
- Subject-relevant academic writer
- Adherence to paper instructions
- Ability to tackle bulk assignments
- Reasonable prices
- 24/7 Customer Support
- Get superb grades consistently
Online Academic Help With Different Subjects
Students barely have time to read. We got you! Have your literature essay or book review written without having the hassle of reading the book. You can get your literature paper custom-written for you by our literature specialists.
Do you struggle with finance? No need to torture yourself if finance is not your cup of tea. You can order your finance paper from our academic writing service and get 100% original work from competent finance experts.
While psychology may be an interesting subject, you may lack sufficient time to handle your assignments. Don’t despair; by using our academic writing service, you can be assured of perfect grades. Moreover, your grades will be consistent.
Engineering is quite a demanding subject. Students face a lot of pressure and barely have enough time to do what they love to do. Our academic writing service got you covered! Our engineering specialists follow the paper instructions and ensure timely delivery of the paper.
In the nursing course, you may have difficulties with literature reviews, annotated bibliographies, critical essays, and other assignments. Our nursing assignment writers will offer you professional nursing paper help at low prices.
Truth be told, sociology papers can be quite exhausting. Our academic writing service relieves you of fatigue, pressure, and stress. You can relax and have peace of mind as our academic writers handle your sociology assignment.
We take pride in having some of the best business writers in the industry. Our business writers have a lot of experience in the field. They are reliable, and you can be assured of a high-grade paper. They are able to handle business papers of any subject, length, deadline, and difficulty!
We boast of having some of the most experienced statistics experts in the industry. Our statistics experts have diverse skills, expertise, and knowledge to handle any kind of assignment. They have access to all kinds of software to get your assignment done.
Writing a law essay may prove to be an insurmountable obstacle, especially when you need to know the peculiarities of the legislative framework. Take advantage of our top-notch law specialists and get superb grades and 100% satisfaction.
What discipline/subjects do you deal in?
We have highlighted some of the most popular subjects we handle above. Those are just a tip of the iceberg. We deal in all academic disciplines since our writers are as diverse. They have been drawn from across all disciplines, and orders are assigned to those writers believed to be the best in the field. In a nutshell, there is no task we cannot handle; all you need to do is place your order with us. As long as your instructions are clear, just trust we shall deliver irrespective of the discipline.
Are your writers competent enough to handle my paper?
Our essay writers are graduates with bachelor's, masters, Ph.D., and doctorate degrees in various subjects. The minimum requirement to be an essay writer with our essay writing service is to have a college degree. All our academic writers have a minimum of two years of academic writing. We have a stringent recruitment process to ensure that we get only the most competent essay writers in the industry. We also ensure that the writers are handsomely compensated for their value. The majority of our writers are native English speakers. As such, the fluency of language and grammar is impeccable.
What if I don’t like the paper?
There is a very low likelihood that you won’t like the paper.
- When assigning your order, we match the paper’s discipline with the writer’s field/specialization. Since all our writers are graduates, we match the paper’s subject with the field the writer studied. For instance, if it’s a nursing paper, only a nursing graduate and writer will handle it. Furthermore, all our writers have academic writing experience and top-notch research skills.
- We have a quality assurance that reviews the paper before it gets to you. As such, we ensure that you get a paper that meets the required standard and will most definitely make the grade.
In the event that you don’t like your paper:
- The writer will revise the paper up to your pleasing. You have unlimited revisions. You simply need to highlight what specifically you don’t like about the paper, and the writer will make the amendments. The paper will be revised until you are satisfied. Revisions are free of charge
- We will have a different writer write the paper from scratch.
- Last resort, if the above does not work, we will refund your money.
Will the professor find out I didn’t write the paper myself?
Not at all. All papers are written from scratch. There is no way your tutor or instructor will realize that you did not write the paper yourself. In fact, we recommend using our assignment help services for consistent results.
What if the paper is plagiarized?
We check all papers for plagiarism before we submit them. We use powerful plagiarism checking software such as SafeAssign, LopesWrite, and Turnitin. We also upload the plagiarism report so that you can review it. We understand that plagiarism is academic suicide. We would not take the risk of submitting plagiarized work and jeopardize your academic journey. Furthermore, we do not sell or use prewritten papers, and each paper is written from scratch.
When will I get my paper?
You determine when you get the paper by setting the deadline when placing the order. All papers are delivered within the deadline. We are well aware that we operate in a time-sensitive industry. As such, we have laid out strategies to ensure that the client receives the paper on time and they never miss the deadline. We understand that papers that are submitted late have some points deducted. We do not want you to miss any points due to late submission. We work on beating deadlines by huge margins in order to ensure that you have ample time to review the paper before you submit it.
Will anyone find out that I used your services?
We have a privacy and confidentiality policy that guides our work. We NEVER share any customer information with third parties. Noone will ever know that you used our assignment help services. It’s only between you and us. We are bound by our policies to protect the customer’s identity and information. All your information, such as your names, phone number, email, order information, and so on, are protected. We have robust security systems that ensure that your data is protected. Hacking our systems is close to impossible, and it has never happened.
How our Assignment Help Service Works
1. Place an order
You fill all the paper instructions in the order form. Make sure you include all the helpful materials so that our academic writers can deliver the perfect paper. It will also help to eliminate unnecessary revisions.
2. Pay for the order
Proceed to pay for the paper so that it can be assigned to one of our expert academic writers. The paper subject is matched with the writer’s area of specialization.
3. Track the progress
You communicate with the writer and know about the progress of the paper. The client can ask the writer for drafts of the paper. The client can upload extra material and include additional instructions from the lecturer. Receive a paper.
4. Download the paper
The paper is sent to your email and uploaded to your personal account. You also get a plagiarism report attached to your paper.
PLACE THIS ORDER OR A SIMILAR ORDER WITH US TODAY AND GET A PERFECT SCORE!!!