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Recovery & Reinvestment Act

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INTRODUCTION

The American Recovery and Reinvestment Act of 2009 contain provisions intended to stimulate economic activities and resolve high unemployment rates in the United States (Page, 2011). Key provisions of the recovery and economics Act can be categorized depending on their focus, which includes,

  • Providing funds to localities and states which were to be specifically achieved by providing assistance for education, raising the matching rates under medical and raising funds for some of the transportation projects financially.
  • Supporting people in need by expanding unemployment benefits and increasing benefits under the supplemental nutrition assistance programs.
  • Providing temporary tax relief for individuals and businesses meant to be achieved by raising exemption amounts for the alternative minimum tax, adding a new making.

The government supervises on the recovery of funds through the filling of reports by the recipients, thereby achieving transparency. Through this reports, the government should be able to acknowledge the effects of the recovery act (Page, 2011).

In the fiscal year 2010, about ARRA’S budgetary effect was achieved by the end of the year various recipients of the ARRA’S funds reported as they, are required to report after each calendar quarter, that during the fourth quater of 2010, more than 580,000 full time equivalent jobs were realized. ARRA’s raised total gross domestic product between 1.1 percent and 3.5 percent, also increasing the number of people employed by between 1.3 million and 3.5 million. Recipients reports (Mihm, 2010).

Through the Recovery act, the actual expenditure estimates of 787 billion dollars were increased to 840 billion dollars to be in line with Obama’s 2012 budget since its enactment. The recovery Act has also seen building and repair of roads and bridges funded with the expansion of wireless service and scientific research also being funded.

The recovery Act offers financial assistance to directly to local school districts, at the same time targeting the infrastructure development and enhancement. The act provides for weathering of 75% of all the federal buildings and more than a million private homes (Sherden, 2011). 

Unintended Consequences

Among the significant consequences that stakeholders in the recovery and reinvestment act have to deal with include the unreliability of the information submitted in the reports since they do not require a detailed estimate of the law's impact on U.S (Mihm, 2010).

Most of the people in the United States were totally unaware of this legislation until the ministry of health had announced that it recoovered 6.2 billion dollars in costs from the health sectors from the residents and non-residents, leading to the reduction of the beneficiary of the stimulus package.

State governments are reducing their own budgets allocations due to under-realized tax revenue; this is obviously because they are being provided Recovery act funds as part of a major project to stimulate the economy. This unanticipated government expenditures will lead to greater federal budget deficit, leading to higher taxes, increase in money supply and lower economic growth (Sherden, 2011).

Most of the critics of ARRA build their argument on the scale of government spending associated and the resulting federal debt. They argue from the perspective that the short-term stimulus to the economy will not last as it does not do not warrant the longer-term effects (Sherden, 2011). A Congressional Budget Office estimate stated that a potential result of the debt will continue to create a GDP “between 0% and 0.2% smaller in 2015 and later than it would be absent the stimulus package.”

Conclusion

The Recovery Act has undoubtedly brought enormous value to the American people, based on data from reports submitted by the recipients, and it has also apparent that the act has no expiry date thus  contributing positively to the  growth of the economy for many years.

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