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American Recovery and Reinvestment Act of 2009: Content, Effect and Implications

bringiton's picture

This stimulus act isn’t all it should be, maybe five-eighths of a loaf, but it is better on close examination than first appearance and media reports had suggested.

The construction, debate and resolution of this Act have been extraordinary in many ways. On full reflection, it appears that Liberals and Moderates in Congress have won a significant advantage over the Conservative/Reactionary cabal, the first time that has happened on any major legislative issue in at least three decades; maybe four. While the BlueDog coalition retains substantial power to obstruct and diminish any full-out liberal initiatives should they so desire, the top Democratic leadership have clearly found a path to drive significant portions of their preferred progressive agenda and reversed course on many previously Right-dominated social issues.

Most pleasing for progressive interests is the unexpected (by me) complete rejection by the Republican Party of even a pretense at bipartisanship. It is a measure of how far from reality the residuum of the Party leadership resides; they really are true ideologues, mentally captive in a fantasy world where might makes right regardless of consequence and the flow of blood from the poor that nourished their leach-like bodies will never end no matter how much they exsanguinate their host. It was a signature issue for Obama, this commitment to post-partisan governance, and he will continue for a while to try and salvage it for the sake of his pride, but the failure of his approach is evident to everyone and must be let go. Nothing could be better for America, and for Progressives, than to have the bipartisanship fallacy abandoned.

What is in this legislation? The broad outlines are a total cost of $787 billion with $504 billion in spending (64%) and $283 billion in tax reductions (36%), but the interesting aspects are in the details and those are better than had been anticipated by many critics, including me. I am, on balance, pretty pleased by what has been done and how it came about.

Many of the tax reductions were included at the insistence of the BlueDogs so it was reasonable to be suspicious, but most of them are to one degree or another beneficial. The business tax reductions amount to around 120 billion, mostly from extension of existing bonus depreciation allowances and a new provision allowing a five-year carry-back of net operating losses, allowing firms to convert current losses into cash by claiming a refund of taxes paid in previous years.

While the effect of these provisions will have little immediate benefit for GDP, they will help keep out of bankruptcy many marginally profitable small businesses tottering under the dual squeeze of declining revenues and tight credit. In the short term, that can mean a lot of jobs preserved; longer term, many to most of those businesses will be able to prosper and expand as the general economy turns around, providing even more jobs.

Personal tax reductions will amount to around $160 billion, mostly for middle-class and below earners. With so many people in this economic cohort being financially stressed, any new infusion of cash will be quickly spent. While it isn’t the highest bang-for-the-buck,


individual tax breaks are the fastest way to move cash into the hands of consumers. Were it not for the individual tax rebate cash handed out earlier this year, most of which was quickly spent, the sharp downturn we are now experiencing would have come sooner and been much steeper. While consumer tax reductions aren’t good long-term solutions to our chronic financial problems, they also aren’t immediately harmful and can be a substantial benefit in a deflationary setting by increasing demand.


While expenditures take some time to roll out, tax break money penetrates into the marketplace very quickly. In the face of deflation, getting cash flowing and helping support the demand side of the economy is the critical initial step and tax breaks will help do that. As well, reducing taxes for the 95% of Americans who haven’t benefited from the Bush tax breaks for the rich is a move towards a more progressive tax structure over all and that is a good thing.

It is on the expenditure side, however, that the real surprises appear. Reading the headlines, the impression was that the Republicans had succeeded in gutting anything progressive from the bill. To be sure, many things beneficial to poor and lower-middle class people were removed and for those cruelties the entire Republican caucus should burn forever in the lowest rung of hell. But there is still a lot to be pleased with in what was kept in the bill.

[Full disclosure; I’m quite fond of Nancy Pelosi and have great respect for Harry Reid. I understand this attitude isn’t considered acceptable by many on the Left, but I don’t care. I know what I know, and they are both of them in my estimation good and decent people who have struggled for a long time to do the best they could against overwhelming odds. Feel free to factor that bias into what I say, but please don’t spend your time telling me I’m wrong and how awful they really are; I’ve heard it all before.]

Once Obama was elected and the size of the congressional majorities became clear, David Obey (D, WI-7) and Speaker Pelosi met with Reid and the Obama team to lay out broad goals for this legislation. Any claims that this work was done in isolation in the House or that Obama had little input is simply untrue; this was a team effort with all parties engaged right through to the end. With Obey doing most of the crafting, those goals were so deeply imbedded in the legislative structure they were difficult to comprehend. It was a deliberate tactic, one that made it hard for opponents to criticize progressive objectives without tearing apart the entire expenditure portion of the bill.

Once you parse your way through the various sections, actually a series of budget bills making both adjustments to existing programs and establishing new initiatives, what emerges is a wonderful redirection of American economic policy priorities in a decidedly progressive direction [numbers are approximate]:

  • Over $70 billion in additional funding for education, more than last year’s entire Education Department budget under Bush
  • About $20 billion in funding for improving energy systems efficiency and development of alternative energy sources; more is needed but this is a good start
  • Nearly $80 billion increasing benefits and expanding eligibility for unemployment compensation
  • Around $85 billion for increased Medicare and Medicaid coverage
  • About $150 billion for infrastructure including repair and new construction
  • Nearly $30 billion in new funding for science and technology R&D, nearly double last year’s entire federal R&D expenditures, completely repudiating the Bush policy of strangling federal commitment to R&D
  • An $8 billion down payment for building a high-speed rail network, just like the other grown-up countries have

All of that is on top of existing funding and while we’ll want to watch closely for any back-sliding these stimulus funds are intended to be in addition to yet more increases in each of these areas in the next omnibus budget proposal. These are important and substantive progressive policy advancements; they and the people who implemented them deserve to be lauded.

With regard to mitigating the recession/depression, this bill will help but not as much as likely will be needed. However, a closer inspection of the details has persuaded a number of economists to assess the positive impact as greater than first thought.

The Obama team has estimated the benefit in terms of jobs at about 3.7 million. It appears, however, that they may be low-balling so as to avoid disappointment if things don’t go well. Detailed assessments by Mark Zandi and others, using Moody’s macroeconomic methodology, place the value of the package in terms of jobs at somewhere between 4.5 and 5 million.


The effect as estimated by Moody’s shows an immediate impact, with incrementally greater benefit continuing on out through 2012. While this is a promising picture, it is insufficient. America needs better, and another stimulus bill around this time next year will be required. By then the evidence of necessity will be clear, as will be the benefit achieved from this round. Public support should be substantial, overwhelming Republican opposition; Americans love a winner.

Finally, the difference between a Democratic administration and a Republican should be considered. John McCain has of course weighed in with his opinion on what should be done. He and Mitch McConnell lead the Republican resistance in the Senate, calling the bill “pure pork” and introducing a substitute measure composed entirely of tax cuts – the weakest possible approach economically but the most advantageous for the rich.

Even after the bill had been passed, McCain continued to attack it as “generational theft.” Had he been President, McCain would have been just as irresponsible and focused on stealing as much money as possible for the 1% Elite as any other Republican, willingly plunging America into a full-on depression in pursuit of enrichment of the few at the expense of the many. The Republican Party is nothing more than the political front for a massive criminal organization, and anyone who would support a Republican in government is as much a criminal as are they – or a fool.

All things considered, this is a job well done by Pelosi, Reid and Obama. It wasn’t a simple thing to get this Act, insufficient and weakened as it was, past the obdurate opposition. Certainly it was not the work of weaklings or idiots, and also not the work of servants of the same Corporatist Reactionaries who have been running things the past 35 years. They would never have allowed anything remotely like the Progressive elements included in this bill, but rather something a great deal more along the lines of what John McCain wanted; more tax breaks for the rich and impoverishment for everyone else. As sad as it may be to acknowledge, we are a great deal better off now than we would have been under a continuation of the previous regime.

Now that Obama has been thoroughly disabused of the wisdom of pursuing bipartisanship, he may be able to put aside his pride and set about governing instead of compromising. He won’t be any less of a Conservative, but a Conservative is not a Reactionary; Obama is much better than 2% Less Evil. If he can get some help whipping the BlueDogs into shape, the Progressive and Moderate Democrats in Congress will move to implement steadily more Progressive legislation.

We should consider carefully how we might be helpful in that regard.

Further reading:

American Recovery and Reinvestment Act of 2009

Mark Zandi, at Moody’s

Lawrence Mishel and John Irons editorial opinion

Analysis by John Irons at the Economic Policy Institute

James Galbraith at Firedog Lake on what to do next

Hugh Sunday at Oxdown Gazette, with a somewhat less optimistic assessment

And for “balance” the entirely pessimistic view from the people whose policies created this mess

No votes yet


Submitted by lambert on

It unquestionably does; and I never bought the pork talking points. Dems like to legislate, and they're good at it.

The question is whether it's enough to do the job that needs to be done -- and the what's starting to look like a clusterfuck over at Geithner's place could take it all down. (I'm not sure about the "jobs" metric, either. Can't say why. Maybe because it feels like a "sell it to the voters," thing, since they all promise "jobs."

As with so much else, so far: Could do better. A good start.

gqmartinez's picture
Submitted by gqmartinez on

I'm with you. There was never any doubt that good measures were in the bill, but the worry of the *economists who got it right* was that it was way too little and that the proportion of ineffective tax cuts made the deficiency even more dramatic. As Krugman mentioned, something is better than nothing, but we run the risk of permanently endangering future stimulii if this stimulus falls short, which is quite likely.

The perma-sell campaign mode regarding Obama (ya know, he's 5-10% less bad than McCain) is getting mighty tiresome. The soft bigotry of low expectations (which shouldn't bear any racial undertones, only competency) is not just predictable and banal, it can be dangerous. Is it surprising that we had yesterday's 10% post with this post following so closely behind? Its almost as if the Biden Police had marching orders.

Mandos's picture
Submitted by Mandos on

Actually, BIO and I share a twice daily Vulcan mind meld. Over the internets, of course.

"My your mind via TCP/IP. Your my mind over Ethernet..."

Next week we have our Borg implant surgery scheduled. What fun!

bringiton's picture
Submitted by bringiton on

Where's my share of the Biden bribe money?

And why are you getting paid anyway to meddle in American politics? Is this some kind of NAFTA deal? Damn Canadians.

bringiton's picture
Submitted by bringiton on

always call people names and impugn their motivation. It so raises the level of discourse.

It may come as a shock to some but events transpire in a given order, for reasons that are seldom understood, and are then commented upon. Those who choose to call out a conspiracy because they see commentary following events, rather than engage on the substance of the offered conversation, contribute nothing and expose their own vapidity.

I clearly stated fore-and-aft the need for a subsequent stimulus installment, and provided links to others who argue the same. Raising the same point in comments as though it were a chastisement or rebuttal for some failure of analysis on my part, when the exact opposite is plainly true, suggests that either someone has reading comprehension problems or can't process complex thoughts. Regardless, those deficiencies apparently do not keep the ill-informed from offering their banalities. Freedom of speech is no guarantor of quality.

There are sound reasons as to why this bill was constructed the way it was, and why it was limited in magnitude. They are all related to the size of the Republican/BlueDog cabal, their willingness to obstruct progressive movement and perpetuate the dominance of the Reactionary Corporatists, and the very practical compromises needed to outflank them. An unimportant reality to some minds; apparently Obama Obsessional Fetish overwhelms any ability to discern between the relative levels of Evil abroad in the land.

Fortunately, not everyone is so sadly afflicted.

bringiton's picture
Submitted by bringiton on

what do you like? I chose it because, give-or-take, it is a reasonable end-point that reflects a whole mountain of precursor measures and is one that most people can get their heads around in terms of practical meaning. Maybe that's why it gets used a lot, rather than some nefarious subliminal salesmanship purpose.

Plus the graph was easy to construct, so there's that.

If there is some other measure you like better, that isn't contained in the provided links, please do tell and I'll poke around and see if I can find it for you.

I don't think there is any question that this bill isn't enough; there is no argument about that, anywhere I'm aware of, so how it can be a continuing question is something I don't understand. That assertion seems to have evolved into a simple catch-all, essentially a slogan, for condemnation of something that is in fact pretty good - limited, to be sure, but on balance pretty good.

It is a fair start, all that can be done at this point politically and in fact probably all that can be done from a practical standpoint unless you'd like deeper tax cuts. It looks a lot better after digging into it than the blizzard of media snow had led me to believe. I thought that a small measure of good news, extracted after three days of careful reading and thoughtful analysis backed up by data as well as confirming analyses from multiple sources was uplifting and worth sharing.

bringiton's picture
Submitted by bringiton on

based on vague assumptions, you'll have nothing left for economists to do but stand around and make small talk about the performance of their digestive tracts; I can't think of anything more desperate or pathetic than that.

How do you propose assessing what interventions to make, how much to budget, how to manage tax law, etc etc, without making some assumptions about effects and trying to model the overall impact?

Do we just make stuff up? Should we do what sounds good in the moment and hope for the best? Are you saying that there is no value to economic analysis and projections whatsoever, indeed any form of statistical analysis, because one particular case of hyperpituitaryism has a conventionally unquantifiable set of highly specialized physical skills? One whose skill set is in fact assessed by, ahem, entirely subjective means?

I ask again: If you don't like jobs generated and the level of unemployment, what do you like?

Submitted by lambert on

... that's not a question I'm prepared to answer.

What I can say is that the "jobs" frame makes my antenna twitch. Whether that means anything to you, or not, I can't say. Up to you. I mean, I've only been at this on a daily basis for what, 5 years? For now, I'm just laying down a marker that there's a talking point in the discourse that bears watching.

Submitted by jawbone on

Arra! There be dragons on the horizon -- that SocSec (sell out?) summit which Obama told the Blue Dogs he would have, coming up February 23. Next Monday, ye landlubbers. Want to be set adrift with that to think about?

And the 24th? Oh, just a little state-of-the-union type speech.

Digby's hair is definitely singed, and Jane Hamsher is calling for the email brigade ASAP.

Seems some Dems' hair is on fire to get this "fiscal responsibility" thingy under way -- have to fix what doesn't need fixing. NOW, NOW NOW! Jim Cooper, Kent Conrad. Oh, and that Judd Gregg.... Some conservative House Repubs. Any Dems from the Democratic wing of the Democratic Party?

Does Obama think he can trade changes to SocSec for Repub votes? OMG! Somebody stop him before he negotiates with himself again!

As Dean Baker put it, talking about messing around with SocSec, the single thing still secure for most retirees, does not increase confidence.

Now, single payer healthcare...that would make millions of Americans feel more secure....

Seems there be ponies aboard the ship of state.

And, again, where's the Josh Marshall Anti-Bamboozlement Call to Action?

bringiton's picture
Submitted by bringiton on

about SS or healthcare.

This one is about the stimulus bill, and changes on the political landscape it appears to reflect. How those changes may affect other topics is beyond the scope of this post, but if you'd like to take that on I may have something On Topic to contribute in comments.

pie's picture
Submitted by pie on

We're saved!

Happy, Happy! Joy! Joy!
Happy, Happy Joy!

I'll keep my optimism in check until I see exactly what this stimulus starts to accomplish. Dog knows Michigan should be seeing some positive results considering the dire financial state it's in. Detroit and Flint were just given the dubious honor of being named to the top ten "Most Miserable Cities in America." In Flint, GM employs one-tenth the number of workers it did during the good times. One-tenth.

Hey, things can get worse, but we are all hoping otherwise.

bringiton's picture
Submitted by bringiton on

Can't remember a time when Detroit was pleasant to visit. Flint I don't know, never been there, but when businesses dry up the towns that were supported by them always decline.

Forty years of mismanagement and incompetence will not be reversed in a month, or a year, or a presidential term. It will take a decade or more of uninterrupted dismantling and reconstruction of the social contract just to get back to where we were in 1966, the last time we had a liberal Congress and a president willing to go along with positive domestic social change.

While we're about it, incremental victories should not be discounted. Unless dispair and doubt are all that you enjoy.

Mandos's picture
Submitted by Mandos on

While we're about it, incremental victories should not be discounted. Unless dispair and doubt are all that you enjoy.

What's more, if there's anything I've learned in the period between 1998 and 2006 when I would never have imagined myself talking this way, if incremental victories are all you're gonna get, you better well celebrate them.

pie's picture
Submitted by pie on

despair and doubt are not enjoyable. But prophecy isn't comforting or reassuring.

I'm all about reality. And in that real world, I hope this stimulus begins to improve our situation, but I worry about the criticisms it's getting from people whose opinions I trust. I want it and him to succeed, because the alternative is very bad for all of us. I'll take incremental victories.

On the bright side, at least Bush is no longer president. The jury's out on Obama and will be for the next two or three years, unless things get much worse or he screws around with Social Security.

Then the fun will really begin.

nihil obstet's picture
Submitted by nihil obstet on

Nice analysis in terms of stating assumptions and proceeding from them. And inspiring of comments from people like me who follow "Who did what" "What's the strategy" "What does it mean for the future".

But most people don't follow like that. If things get better, the Republicans will lose more power. If things get worse, the Democrats will have failed, and all the arguments about how much worse things would have been without the stimulus won't matter. Just look at the recent "FDR's New Deal made the Great Depression worse" arguments. It's absolute nonsense, but it's getting a lot of media play. By next election, people who are suffering economically or who see suffering and are frightened for themselves will be prime target markets for the short "Democrats failed" message, not for the "Well, it would have been worse" analysis.

The Republicans have nothing to lose and much to gain by voting against the bill. Nobody thinks this is a perfect bill, so the Republicans can present themselves as the principled holdouts for a bill without all the Democratic pork/waste/giveaways/irresponsibility, which will be illustrated with one or two appropriate anecdotes developed to inflame the grievances of those who are losing financially.

There may be good reasons to pass this bill rather than one more aimed at recovery and relief, but I don't see political advantage over the Republicans as one of them.

bringiton's picture
Submitted by bringiton on

You offer that as though it were an option.

As you point out, the Republican strategy was/is/will be to obstruct and vote no, then claim they were on the right side regardless of outcome. It is a plan that has worked for them in the past and the Nixonian coalition of bigotry, greed and foolishness is only slightly diminished so maybe it will again. We'll see how the political battle shapes up; it isn't easy defeating the lying liars and their media allies. Meanwhile, it can't hurt to get some of the fundamentals right - or as right as can be had.

This weak, watered-down bill barely squeaked through the Senate, with just three Republicans out of 41 giving support. That bare minimum was met only after Democrats had given up a host of concessions and further weakened the bill from the House version. What leads you to believe that a stronger bill would have gotten even those three Republican votes? What makes you think such a bill would have even made it out of the House?

Or are you arguing that the Democrats should have crafted a bill heavier on expenditure stimulus and then fought an endless procedural battle in the Congress while the economy slowly slides into depression? Would it have been better somehow to get nothing done rather than pass a half-measure?

Are you arguing that the political theater is all that matters? Is the perpetual campaign, the sound bites, the lies, the posturing and preening and belicosity all that those in government should worry about, and the actual details of governance be damned?

Do you really believe that the media would suddenly change to support for the Democrats if they had just been more progressive? That the VRWC domination of the MSM would have crumbled in the face of righteousness? Would those who believe the lies of the Right suddenly have the scales fall from their eyes and accept progressive principles from the likes of a raging Lefty radical like Obama and the demonic Liberal Pelosi?

None of what we want to happen will come in one fell swoop, handed down from some savior written on stone and larded with manna from heaven. It will be one increment at a time, with much frustration and uncertainty and many false steps, through great travail and against all but overwhelming resistance. Of course this bill does not reverse three-plus decades of Radical Reactionary pillaging and destruction; no one bill could. But it is a decent start, and that deserves to be said and recognized.

Best to stop hoping for a miracle, for one magical stroke that will make it all better along with the perfect sound bite for explanation to the simple-minded. Better to gird your loins and prepare for a long war with many battles, a war that can never be won but only stalemated at some better position than what we now have - and then only by making one small advance at a time.

Progressive interests have scored a significant victory with this bill. I intend to savor it, while I sharpen my sword and prepare for the next assault.

nihil obstet's picture
Submitted by nihil obstet on


As Dick Cheney said in December about assistance to the auto manufacturers, "If we don't do this, we will be known as the party of Herbert Hoover forever."

Virtually any bill the Democrats brought in would have passed with 60 votes for cloture. The Republicans would have gone through exactly the same shenanigans before designating the few who would bring it in to 60.

Although maybe you have it right -- hoping for liberals to put up a strong fight for good policies is hoping for a miracle, and I should probably stop.

bringiton's picture
Submitted by bringiton on

Best give it up, or at least any public expression; speaking openly of hope only brings condemnation.

Can't reconcile your claim with reality. The slightly more progressive, somewhat more expenditure-heavy House bill had to be watered down to get three Senate Republican votes. How then does it logically follow that an even more progressive and more heavily expenditure-biased bill would have still drawn three Republicans in the Senate? On what reality can you base that claim?

Please show an example of Republicans being willing to embrace something more repugnant to them than what they have already rejected.

Submitted by lambert on

... that the Obama campaign polluted the discourse by hijacking a perfectly good word, one syllable word for its own purposes.

Now, anybody who uses the word "hope" -- or hears anyone else use it -- has to think twice about whether they bought into Obama's hopey-changey campaign or not -- especially considering how they'll get hammered when they express doubt. Some don't think twice, of course.

I think, in fact, that everybody trying to shove Obama left is acting in an extremely hopeful manner, since they believe they are not powerless. In that regard, I'm totally hopeful.

Submitted by lambert on

... that the Obama campaign polluted the discourse by hijacking a perfectly good word, one syllable word for its own purposes.

Now, anybody who uses the word "hope" -- or hears anyone else use it -- has to think twice about whether they bought into Obama's campaign or not -- especially considering how they'll get hammered when they express doubt. Some don't think twice, of course.

I think, in fact, that everybody trying to shove Obama left is acting in an extremely hopeful manner, since they believe they are not powerless. In that regard, I'm totally hopeful.

Aeryl's picture
Submitted by Aeryl on

To pass anything. There are majorities in both, though as you point out, there are those troublesome Blue Dogs. So yea, I think a better bill could have passed, and the Senate should have forced the Repubs to filibuster it. Though the Senate's ineptitude is not Obama's fault. But Obama screwing up the playing field is, so I will continue to hold that against him. He has made these battles harder than they needed to be.

bringiton's picture
Submitted by bringiton on

The Democrats have majorities only for the purpose of caucusing to divide the power and cash that comes from committee chairmanships. Once that bit of business was done, the BlueDogs set themselves apart and function as a third party; all the power of a ruling coalition member in a parliamentary system without the consequence of losing their power by voting against the government, pretty sweet.

Both Reid and Pelosi barely cling to power, and if Pelosi loses the caucus' confidence then it will be Steny Hoyer taking over and you are really gonna hate that. He's maneuvering again to undermine her, trying to drive a wedge between her and Reid over how the stimulus bill was handled. She's too smart for that, but she is on slippery ground and if the BlueDogs are not appeased they will make it impossible to do anything constructive.

Our enemies are the Republicans and the BlueDogs, not Pelosi or Reid or Obama. Blame the voters; they are the ones who keep electing these idiots.

nihil obstet's picture
Submitted by nihil obstet on

Please show an example of something the Republicans rejected, and then the Democrats brought back something more repugnant.

What would have happened if the Democrats had come in with a stronger bill and stuck with it? You say the Republicans would have embraced their inner Herbert Hoover and planned to be swept out of office at their next election. I say they would have designated three senators to vote for it, all the while screeching more about it being the worst piece of legislation ever brought to Congress.

I don't know how you convince someone else of a "what if" or counterfactual, but I don't believe Republicans in full-throated baying. It's like how much they hate earmarks, and how important the sacrament of marriage is. They hate earmarks like they'll really block a bill that would contribute to their election difficulties next election.

bringiton's picture
Submitted by bringiton on

Please show an example of something the Republicans rejected, and then the Democrats brought back something more repugnant.
Well, the bill that this post is about, for starters.

Where's your example, to support your claim? No? Can't find one? I thought not, because it never happens.

And no, unlike Conservatives and Reactionaries the Liberal members of the Democratic party do not act like dictators. Who could have anticipated?

nihil obstet's picture
Submitted by nihil obstet on

You wrote This weak, watered-down bill barely squeaked through the Senate, with just three Republicans out of 41 giving support. That bare minimum was met only after Democrats had given up a host of concessions and further weakened the bill from the House version

So you see this as an example of a case where the Republicans rejected a bill, and then the Democrats made it more repugnant to the Republicans -- by giving up a host of concessions and further weakening the bill. Yes, now that I think about it, it is just for starters, because there are lots of examples of that.