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About ARRA

ARRA Economic Stimulus Package

The American Recovery and Reinvestment Act of 2009 (ARRA) is an economic stimulus package enacted by the 111th United States Congress and signed into law by President Barack Obama on February 17, 2009. The Act of Congress was based largely on proposals made by President Obama and is intended to provide a stimulus to the US economy in the wake of the economic downturn. The measures are nominally worth $787 billion. ARRA includes federal tax relief, expansion of unemployment benefits and other social welfare provisions and domestic spending in education, health care, and infrastructure, including the energy sector. ARRA also includes numerous non-economic recovery related items that were either part of longer-term plans (e.g. a study of the effectiveness of medical treatments) or desired by Congress (e.g. a limitation on executive compensation in federally aided banks added by Senator Dodd and Rep. Frank). The government action is much larger than the Economic Stimulus Act of 2008 which consisted primarily of tax rebate checks.

The bill was first approved by the House of Representatives and then by the Senate. Congressional negotiators announced on February 11 that they had completed the Conference Report of the bill. The Conference Report with final handwritten provisions was made available to the public on February 13. On that day, the Conference Report was voted on and passed as Roll Call Vote 70 by the House, 246-183. The vote was largely along party lines with all 246 Yea votes given by Democrats and the Nay vote split between 176 Republicans and 7 Democrats. No Republicans in the House voted for the bill. Later that day, the Senate passed the bill, 60-38, with all Democrats and Independents voting for the bill along with three Republicans. The remaining 38 Republican senators voted against the bill. The bill was signed into law on February 17 by President Obama at an economic forum he was hosting in Denver.

Healthcare Allocation:
Congressional Budget Office Report

A February 4, 2009, report by the Congressional Budget Office (CBO) said that while the stimulus would increase economic output and employment in the short run, the GDP would, by 2019, have an estimated net decrease between 0.1% and 0.3% (as compared to the CBO estimated baseline).

The CBO estimated that enacting the bill would increase federal budget deficits by $185 billion over the remaining months of fiscal year 2009, by $399 billion in 2010, by $134 billion in 2011, and by $787 billion over the 2009-2019 period.

In a February 11 letter, CBO Director Douglas Elmendorf noted that there was disagreement among economists about the effectiveness of the stimulus, with some skeptical of any significant effects while others expecting very large effects. Elmendor said the CBO expected short term increases in GDP and employment. In the long term, the CBO expects the legislation to reduce output slightly by increasing the nation’s debt and crowinding out private investment, but noted that other factors, such as improvements to roads and highways and increased spending for basic research and education may offset the decrease in output and that crowding out was a not an issue in the short term because private investment was already decreasing in response to decreased demand.

An updated report of the budget and economic outlook by the CBO in March 2009 showed that taxpapers will pay $356 billion, $167 billion more than the original figure of $189 billion in January.

The CBO estimated that an increase in the GDP of between 1.4 percent and 3.8 percent by the end of 2009, between 1.1 percent and 3.3 percent by the end of 2010, between 0.4 percent and 1.3 percent by the end of 2011, and a decrease of between zero and 0.2 percent beyond 2014. The impact to employment would be an increase of 0.8 million to 2.3 million by the end of 2009, an increase of 1.2 million to 3.6 million by the end of 2010, an increase of 0.6 million to 1.9 million by the end of 2011, and declining increases in subsequent years as the U.S. labor market reaches nearly full employment, but never negative.Decreases in GDP in 2014 and beyond is accounted for by a decrease in worker productivity caused by lower wages rather than lower employment.