Long Term and Short Term Effects of the American Recovery and Reinvestment Act of 2009

Ian Davies

During the great recession that our country was facing during the mid to late 2000's under, the American Recovery and Reinvestment Act of 2009 was put in to place by congress under President Obama's administration. The purpose of this act was essentially to provide stimuli for a failing economy, and more importantly to immediately create jobs in the private sector. Additionally, this stimuli package was put in to place to save jobs, as unemployment rates were sky rocketing, this act hoped to pause the massive layoffs happening every day and preserve and create new work opportunities. This act, which will end up costing the government $831 billion by the year 2019, invested in multiple facets of the economy. These sectors included infrastructure, education, health, and energy. The act also put into place federal tax incentives, expanded unemployment benefits, and created a new board referred to as the President's Economic Recovery Advisory Board.

Short term effects came back pretty positive as the ARRA's policies were implemented into the economy. In the first quarter (short term), American taxpayer's had already seen a $151 billion dollar return on the original money spent by the government in creating this act. The economy saw a decline in job loss, 1 million new jobs by second quarter, and a slight rise in GDP (2 percent rise). The short term improvement in the US economy seemed to have a direct positive impact on the failing global economy as well. Almost every major international industry saw a positive change due to the economic stimuli produced in the US. State fiscal relief was also included in the ARRA and was able to help states whom faced huge budget deficits. ARRA analysis showed that fiscal relief at the state level was able to raise employment rates in states who were devastated by the recession. However, these short term positive impacts on the economy seemed to have worn off by 2011, just two years after the act was instated. The US faced a large infrastructure deficit, increased downward pressure on public spending, and a huge increase in our country's debt. The majority of wealth today is being held in private securities instead of being invested into the economy, thus creating stagnation in our economy today due to the long term impacts of the ARRA. Overall, the long term impacts of the ARRA have created more government spending and less private spending. So, while the short term impacts were able to temporarily pull us out of the great recession, the long term impacts following the first two year have ended up hurting us in the long run due to the increase in our country's deficit and our decrease in private spending.