A Guide To The Perplexed: Reading The America Recovery And Reinvestment Bill

January 22, 2009 by Douglas A. McIntyre

Old_car_2“Madness is to think of too many things in succession too fast, or of one thing too exclusively”–Voltaire

The American Recovery and Reinvestment Bill of 2009 should be required reading for every citizen from billionaires to the average person. It was issued by The Committee On Appropriations and is the road map for the $825 billion that the Congress and Administration intend to put into the US economy to jumpstart the economy out of the recession.

The most important part of the document may be the description of how the country was dragged into the worst economic period in its history.

At the beginning of the bill, the authors write: "Since 2001, as worker productivity went up, 96% of the income growth in this country went to the wealthiest 10% of society. While they were benefiting from record high worker productivity, the remaining 90% of Americans were struggling to sustain their standard of living. They sustained it by borrowing… and borrowing… and borrowing, and when they couldn’t borrow anymore, the bottom fell out."

If that analysis is true, then two other things must be accurate. The first is that the cause of the recession was Americans becoming overextended in their use of credit. The other one, which is a consequence of the first, is that if the government can facilitate future consumer borrowing, the economy will be righted again in short order. That would mean that more complex methods of solving the problems of the recession, such as spending money on infrastructure, would be unnecessary. It would be simpler to take $825 billion and make it available for home equity loans, enlarge credit card lines, and auto loans.

But, the authors of the bill are not willing to follow their own logic, so they have crafted another plan. The first assumption of what the program will do, and among the most important of its goals, is only mentioned in passing. "This package is the first crucial step in a concerted effort to create and save 3 to 4 million jobs." This is a little twist on what is being said in public.

The general assumption about job creation under the program is that it will add 3 to 4 million jobs. But in the introduction to the bill the assumptions about job loss are laid out quite clearly: "Credit is frozen, consumer purchasing power is in decline, in the last four months the country has lost 2 million jobs and we are expected to lose another 3 to 5 million in the next year."

The mathematics of the two sets of employment analysis taken together would show then that no new jobs would be created. The three million or so jobs which will be lost in 2009 will simply be replaced by three million new ones. The jobs lost late in 2008 will not be replaced in this program, leaving a two million job deficit  Joblessness will stay at about 7.2%

Other than those details, the money will be well spent.

The states need help, and the federal government means to provide it: A sum of $79 billion in state fiscal relief will be provided to prevent cutbacks to key services

After the plans to help the states, cut taxes, and provide new infrastructure for the nation, the programs get a little off track.

The bill means to spend $44 million to repair the US Department of Agriculture’s headquarters. About $400 million will go to repairing national monuments in Washington, which are somehow considered essential to national infrastructure.

Additionally, Congress plans to pay out $200 million to provide financial incentives for teachers and principals to do their jobs better. Another $100 million will be used to establish a set of grants to provide $100 to local governments and nonprofit organizations to remove lead-based paint hazards in low-income housing.

Perhaps the best investment in the bill is for $80 million to ensure that worker protection laws are enforced as recovery infrastructure investments are carried out. In other words, there will be a police system set up to make sure that no one with a new job working on national infrastructure with money provided by the government will have his or her rights violated.

The bill calls for over one hundred programs which Congress plans to enact. These include addressing problems as diverse as community block grants, upgrading the forestry service, bridge removal, and NASA research funding. The remarkable thing about the legislation is that almost every program is ill-defined and subject to broad interpretation and a wide variation as to how it might be enacted.

In a sentence, The American Recovery and Reinvestment Bill of 2009 will have to build a bureaucracy larger than any ever created by the US government in order to manage its many parts.

The first sentence of the bill reads "The economy is in a crisis not seen since the Great Depression." If it requires all of these plans to get America back on the road to recovery, the process will take a decade.

Douglas A. McIntyre