American Recovery and Reinvestment Act of 2009

What This Bill Will Do

In this bill, Congress is attempting to stimulate the economy using two tools, direct spending and tax cuts. In the direct spending category, Congress will borrow money (by issuing U.S. Treasury Bonds) to fund infrastructure projects and to pay for expanded medical and unemployment benefits, for example. In the tax cut category, Congress will forgo revenue by providing individuals with a tax deduction for sales tax on new cars, for example. Both the spending and tax cut measures increase the national debt.

Analysis By The Congressional Budget Office (CBO)

Projections by the non-partisan Congressional Budget Office (CBO) indicate that if Congress were to do nothing that unemployment would peak in 2009 at 9.0%; 2010, 8.7%; and 2011, 7.5%. This projection for job loss without federal government intervention is far below the 10.8% unemployment rate of the Reagan recession, when unemployment peaked in 1982; that recession was also marked by double-digit interest rates. The CBO forecast also projects that the economy would begin recovery in 2010 without a fiscal stimulus.

The CBO projects that HR1 will increase the national debt by $184.9 billion in fiscal 2009 and $399.4 billion in fiscal 2010 and have a slight but negative long-run impact on the economy.

Legislative History - House

Rep. David Obey (D-WI), the House Appropriations Committee chairman, introduced H.R. 1 on 25 January 2009; the bill had nine co-sponsors. There were 206 amendments offered but only 11 made it to a floor vote.

On January 28, 2009, the House passed the bill by a 244-188 vote; after this vote, the bill moved to the Senate. After the Senate passed a substitute bill, the measure was referred to conference committee. On 11 February, the Congressional conference committee released its consensus report. The House adopted the conference report (246-183) on Thursday 12 February.

Legislative History - Senate

Sen. Harry Reid (D-NV), the Senate Majority Leader, introduced S. 1, the Senate version of the bill, on 6 January 2009; it had 17 co-sponsors. The Senate held a special Saturday session on 7 February at the request of the President; the Senate voted to end debate. On 10 February, the Senate passed H.R. 1 as amended (61-37).

On Friday, 13 February, the Senate passed the conference report (60-38). The Senate needed 60 vote to pass H.R. 1 because the bill waived pay-as-you-go provisions. To get those 60 votes, the Senate held the vote open for hours, and the White House dispatched a government plane to fly Sen. Sherrod Brown (D-OH) round-trip from Ohio to cast a vote. Brown was at home for his mother's funeral.

Presidential Signature

President Obama signed the legislation on Tuesday 17 February 2009.

Public Support

In February, public support for the bill dropped to 37 percent, according to Rasmussen. In January, two weeks earlier, 45 percent of the 1,000 likely U.S. voters Rasmussen talked with supported the bill. Opposition moved from 34 percent in January to 44 percent in February. More Republicans than Democrats opposed an economic stimulus measure; more Democrats than Republicans supported a measure.

Readers of this site oppose the legislation.

Recessions and Politics

In the U.S., the economy periodically rises and falls in a business cycle that is measured by fluctuations in real GDP and other macroeconomic variables. The National Bureau of Economic Research (NBER) is the federal agency that determines when the downturn is sufficient to be called a recession.

When the economy falls, the federal government often enacts legislation designed to stimulate the economy or legislation to ease the pain of unemployment. As you can see from these examples, there is very little new under the Congressional stimulus package sun.

Bill Controversy

In economic circles, the bill was not universally embraced.

Economists such as Daron Acemoglu, Martin Feldstein, Nobel Prize winner Paul Krugman, Larry Summers and Nobel Prize winner Joseph Stiglitz, support government spending programs to counter economic downturns. However, other economists oppose the spending program because of the debt incurred; these include Robert Barro, James M. Buchanan, Nobel Prize-winner Robert Lucas, Jr., Edward C. Prescott, and Vernon L. Smith.

The libertarian Cato Institute ran a full-page ad in The New York Times and The Wall St. Journal on 28 January. The ad, which opposed this stimulus bill, was signed by about 200 economists.

Rep. Ron Paul (R-TX) also criticized the bill.

Bill History - 2008 Efforts

Congressional Democrats began pushing an economic stimulus in 2008. For example, in early 2008, the Democratic Congress provided tax rebates to low- and middle-income U.S. taxpayers and tax incentives to stimulate business investment; the total cost of H.R. 5140, the Economic Stimulus Act of 2008, was projected at $152 billion for 2008. The House (385-35-11) and Senate (81-16-3) overwhelmingly passed the bill; President Bush signed it 13 February 2008.

In June, Democrats secured a 13-week extension of jobless benefits as part of additional war funding for Iraq and Afghanistan. Extended benefits were both retroactive and proactive, targeting workers who exhausted unemployment benefits between November 2006 and March 2009.