Term paper: American Recovery and Reinvestment Act of 2009

One of the major responses of the new U.S. administration to the challenge of the economic crisis was a massive financial injection into the economy. February 17, 2009, the U.S. President Barack Obama signed the so-called the American Recovery and Reinvestment Act. This economic program was the biggest in the nation’s history, the record high amount was allocated for the reconstruction and economic development of the United States. This bill was to stimulate economic activity in the country and create a total of three and a half million jobs. The total cost of Obama’s plan was $ 787 billion.

The main argument of critics against the Obama administration’s economic program is that this economic plan did not go far away from the Keynesian ideas, the adequacy of which was placed under a big question after the stagflation experience of the 1970’s. Historical experience suggests that the government is simply unable to be a more successful investor by virtue of the fact that it does not have sufficient information about the state of the economy at the micro level (Johnson, 2009). Government actions tend to be tardy in their nature. The market itself knows best how to invest money, and each investor is responsible for the investments putting his capital at risk. The government usually takes the risk only once in every four years, when time comes to think about the re-election (Durant, 2011).

In reality, the U.S. government will borrow the major part of the money of the money abroad. It will issue new debt obligations, which, as it assumes, such countries as, for example, China or Japan, will want to buy, that is, the countries with substantial foreign exchange reserves. External debt will consequently increase, which will significantly limit the financial maneuvers of the government in the future. Sooner or later it will find itself in a situation where, due to population aging, it will have to serve the increasing social obligations and a huge foreign debt (Miller, Vandome, & McBrewster, 2010).

In general, in the short run, Obama’s anti-crisis plan is fulfilling its goals. Government measures have helped restore investor trust, credit market has improved significantly. The private sector has become more independent, and is now less relying on federal programs, which was one of the main goals of public investment (Miller, Vandome, & McBrewster, 2010). In the long run, it is important whether the program will be able to solve the problems that caused the financial crisis, and if it “works” the U.S. will once again become the driving force for the entire global economy.

References

CCH Tax Law Editors. (2009). American Recovery and Reinvestment Act of 2009: Law, Explanation and Analysis. CCH, Inc.
Durant, R.F. (2011). Global Crises, American Public Administration, and the “New Interventionism” Revisited. Administration & Society, 43 (3), pp. 267-300.
Howsen, R. & Lile, S. (2011). The role of politics and economics in the allocation of federal stimulus spending. Applied Economics Letters, 18 (3), pp. 263-266.
Johnson, N. (2009). Does the American Recovery and Reinvestment Act Meet Local Needs? State and Local Government Review, 41 (2), pp. 123-127.
Miller, F.P., Vandome, A.F., & McBrewster, J. (2010). American Recovery and Reinvestment Act of 2009. Alphascript Publishing.
Muldowney, P.M. (2010). COBRA and the Stimulus Act: A Sign of Things to Come? Compensation & Benefits Review, 42 (1), pp. 24-29.
United States Congress (2010). An ACT American Recovery and Reinvestment Act of 2009, The BiblioGov Project.
United States Congress (2011). The American Recovery and Reinvestment Act of 2009: An Update: Hearing Before the Committee on the Budget, House of Representatives, Washington: U.S. G.P.O.
Wyatt, D.F.G. (2009). The Perceived Challenges of Implementing the American Recovery and Reinvestment Act. State and Local Government Review, 41 (2), pp. 128-132.
Yago, G. & Li, T. (2011). Deleveraging Corporate America: Job and Business Recovery Through Debt Restructuring. Journal of Applied Corporate Finance, 23 (1), pp. 77-83.

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