American Recovery And Reinvestment Act Analysis

The American Recovery and Reinvestment Act of 2009 was a stimulus package that was designed to get the economic and employment rate to increase to stop a recession in the United States. The bill was approved in February 2009 by President Barack Obama to add 789 billion dollars to stabilize the US economy. “This Act was originally called by its supporters the bill that was the only bill to save the nation from economic ruin” (Graham, 2009). Was this bill the bill to save the nation or was it a big waste? Did this act help the economy and did it really give the economy the boost that was expected with the changes in what it aimed to fix which included household consumption, firms, government spending, and net exports?

Since unemployment was

increasing in the US the consumption of the household had decreased and the economy was feeling the effects from it. For the Government to get the household consumption up the government had to do what was necessary to increase consumption. A change that had to occur to increase consumption was the government spending increasing in 2009 to help people so that the economy would not crash from them not being able have their normal consumption. Taxes were also cut throughout 2009 and 2010. “According to Christopher D. Carroll, a Johns Hopkins University economist who has studied the behavior of U.S. consumers for more than a decade, predicts that U.S. households, spooked by the recession, will increase savings to about 4 percent of disposable income-that is, income after taxes” (Giavazzi, 2009). “Disposable income is about 70 percent of gross domestic product (GDP), so a 4 percent increase in the household savings rate would translate into a fall in household consumption of about 3 percent of GDP” (Giavazzi, 2009). This data shows that the consumption of the households in the US would have a heavy decrease in demand and

could affect the world negatively. Another step taken to increase consumption would be to give handouts to the people to help them be able to spend more. After these changes this Act had started to increase the GDP in 2011 from the negative 3 percent in 2009 to 4.6 percent in the 4th quarter of 2012 (Amadeo, 2016).
Investment is also a major part of the economy that takes a hit during a recession.

Public investment in the US in 2009 was less than 3 percent of the GDP and would have to be 6 percent to restore the market in 2009 but the increase that public investing increased was less than 1 percent a year (Giavazzi, 2009). For the public GDP in 2014 it increased by less than 1 percent and was a minor change from 2009 and was in a decline in 2014 (Smith, 2014). For private Investment it is a much larger portion of the GDP and accounts for 20 percent of the GDP (Giavazzi, 2009). The private investment GDP didn’t change too much it dipped a little in 2009 and returned to 20 percent of GDP in 2014 (Economywatch, 2016).

The exports in 2009 were negative 9.6 percent GDP and increased quickly in 2010 to 7.2 percent GDP. The imports in 2009 were also negative and higher than the exports with 13.9 percent and increased to 10.4 percent GDP (Briales, 2010). This shows that the imports and exports of the economy increased quickly and kept the consumption of the people up as they still wanted items sent from other places and their items were wanted in other countries

too.
In my opinion I feel that the American Recovery and Reinvestment Act of 2009 worked but it did not work as good as was intended.

My reasons for this opinion are that they did not do what they planned to do with the money. In 2009, they planned for most of the money to be spent in the fall but the Federal Transit Authority found that less than 6 percent of the $8.4 billion it received in stimulus funding was spent by the fall (Graham, 2009). Fiscal policy timing is everything and getting the act out and only using 6 percent in the fall when they were expected to spend most of the money earlier than that could have negativity impacted the effects of the American Recovery and Reinvestment Act of 2009. When they had spent the money for the act it did not have the affect everyone desired and only gave a minimal increase to the economy. If the act was put into action sooner then the effect of the stimulus package would have been much greater and would have improved the economy sooner than what it did. The act did keep consumption up because the imports and export GDP’s were negatives for a year and then the data showed that it had changed back to positive GDP for imports and exports. I feel like this was not the boost that was expected but it did help our economy get out of the recession and has got our economy back into shape. I believe that this bill coupled with a few other actions did get the economy back on track even though it did not meet the expected results in the time

that was planned for it to have those results.

References
Amadeo, K. (2016, October 22). 2009 GDP Statistics: Growth and Updates by Quarter. Retrieved from https://www.thebalance.com/2011-gdp-statistics-3305544
briales. (2010, 8 18). National Income and Economic Balences-SICE(OAS). Retrieved from National Income and Economic Balences-SICE(OAS): www.sice.oas.org/ctyindex/USA/WTO/ENGLISH/WTTPRs235-01_e.doc
Economywatch. (2016, june 30). Investment (% of GDP) Data for Year 2014, All Countries. Retrieved from Economy watch : http://www.economywatch.com/economic-statistics/economic-indicators/Investment_Percentage_of_GDP/2014/
Giavazzi, F. (2009). Growth after the Crisis. Finance & Development, 24-25.
Graham, C. (2009). Stimulus Package: Is It Getting the Job Done? Financial Executive, 62.
Smith, J. (2014, February 12). Five Years Since the American Recovery and Reinvestment Act. Retrieved from Economic Policy Institute: http://www.epi.org/publication/years-american-recovery-reinvestment-act/