Stimulus Package Essay

Introduction

When the global financial crisis hit the world in 2008, the world feared it would be the worst the economy would have encountered since the Great Depression. Countries reevaluated their policies and looked up to the US and the strategies it would apply to get itself out of the crisis. The Economist proclaims that, “in the last quarter of 2008, the final three months of the Bush era, the American economy contracted by an astonishing 8.9%; by early 2009 job losses hit 800,000 a month”. The appointment of Obama at such a time when the US economy was crashing, led him to introduce the 2009 Stimulus Package. With mixed reactions with mostly in favor of it while some opposing it, the Congress eventually passed the bill on February 17th. This paper will argue on the effectiveness of the Stimulus Package proclaiming that while the package helped flourish the economy, the promises which were aimed to be long term, have mostly been transitory. This will be shown through the impact of the Stimulus package on unemployment, the Gross Domestic Product (GDP) and the direct transfers made, supported with existing empirical investigations.

Background

In the information presented by the Price Water House Coopers (PwC) report, “the $787 billion American Recovery and Reinvestment Act (ARRA) signed by President Obama on February 17 was an attempt to invigorate a faltering economy marked by rising job losses, falling GDP, continuing uncertainty in the capital markets and world economic weakness”. The main objective of the stimulus was the protection of existing and the creation of new job opportunities, while the secondary objectives included investments in infrastructure, education, health, energy and relief programs for the people affect...

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... misery index is stationary around a broken trend; this result suggests that aggregate demand shocks will only have a temporary effect on the misery index and that the effects of an economic stimulus package on the economic malaise will be transitory”. Similarly the Moody Analysis on the GDP and the direct transfers indicate that while the Recovery Act has been successful, and maybe prevented us all from witnessing another Great Depression, it is still not enough. Even as the economy along with people’s living conditions has improved, it is still way behind what it was pre-recession. In conclusion, the Obama government should be applauded for what it has achieved but must be reminded that it needs to continue with the Act, expand its horizon and investments for the Act to ensure that the US economy fully recovers from the dark period of recession hit 2009.