The act is based on the proposals of President Obama in effort to jump-start the economy after the economic crisis of 2007-2009. In his first weekly address since sworn in as president of the United States, President Obama claimed that the act “will invest in our most important priorities like energy and education; health care and a new infrastructure that are necessary to keep us strong and competitive in the 21st century (Weekly Address, 2009).” Vice President Joe Biden is in charge of overseeing the implementation of the act, which includes working closely with cabinet members, governors, and mayors (About the Recovery Act, 2009). The problems of economic crisis are severe and have resulted in recession, closing of businesses, job loss, and families losing their homes.
The Recovery Act is said to be a major milestone in helping to resolve the economic crisis, but President Obama admits that there is still a large amount of work that needs to be done. The act has three immediate goals it hopes to achieve in response to the economic crisis. The first goal is to create new jobs and save existing ones; the estimated number of jobs saved or created is 3.5 million in the next two years (About the Recovery Act, 2009). Next, the act hopes to spur economic activity and invest in long-term economic growth. The last immediate goal of the act is to foster accountability and transparency in government spending.
Along with these three immediate goals the act hopes to achieve several long-term goals. Some of these goals include igniting spending by both businesses and consumers. The act also hopes to create a new foundation for economic growth and prosperity (Track the Money, 2009). Health care has been a serious problem in this country, but this act aims to modernize the entire healthcare system, saving millions of dollars and countless lives. Increasing access to health care is also something the act hopes to accomplish. Upgrading classrooms, libraries, and labs for children’s schools as well as connecting rural homes, businesses, and schools to the Internet is another goal of the act (About the Recovery Act, 2009). There is also a major emphasis on modernizing infrastructure, including repairing bad roads, dams, bridges, and levees. Unemployment benefits and protecting people’s healthcare are other main focal points of the act. In addition, the act will work to stabilize, reform, and repair the banking system; this would get credit flowing to families and businesses (Track the Money, 2009). Last, the act hopes to stop the foreclosures on homes, and intends to help homeowners stay in their homes. Clearly the Recovery Act hopes to accomplish many things, but these are all things that this country needs in response to the economic crisis.
The internal stakeholders of this policy include the Department’s Governance Board for Recovery Act Compliance, program managers, and individuals responsible for daily operations related to the act. The external stakeholders are the recipients of the Recovery Act’s funds, the Congress, the Executive Office of the President, the Recovery Act Accountability and Transparency Board, and the American public. One of President Obama’s main concerns in developing the Recovery act was to ensure accountability and effectiveness. To accomplish this goal the United States Department of Justice has developed mechanisms to ensure both accountability and transparency of stakeholders as well as monitor the distribution of funds. The Department of Justice’s accountability framework is based on top-down governance, management accountability and effectiveness, top-down communications strategy, performance monitoring, corrective action implementation, and evaluation of the internal control activities (United States Department of Justice, 2009).
The act is based on the proposals of President Obama, and was formulated by the House of Representatives and the Senate. The main debate exists between Democrats and Republicans in Congress. No Republicans in the House and only three Republican in the Senate voted for the bill. Republicans fear that the tax cuts are insufficient, and that in the long-run the country will drown even further into debt. They instead insist on larger tax cuts and less spending on government programs. Republican Senate minority leader Mitch McConnell argues, “This isn’t Monopoly money. It’s real. It adds up, and it has to be paid back, by our children and by their children (U.S. Congress passes, 2009).” Obama and the Democrats hold to the notion that the bold actions of the policy are necessary to transform the United States economy and carry us into the twenty-first century. The final plan split into 36% for tax cuts and 64% in spending, and money for government programs and is funded on borrowed money.
The main theory of the debate is the political systems theory, which stresses the way the political system responds to demands that arise from its environment (Kraft and Furlong, 2009). The Republicans favor limited government and low taxes, and these beliefs are dominant in their argument against the Recovery Act. In contrast, the Democrats believe that the government must take intrepid actions to fix the economic crisis and ensure the well-being of the average citizen. Each of these beliefs is developed from the larger economic context: the economy is failing, and the government must meet the demands of the public and the political parties that support their interests.
There is a classic liberal-conservative battle over the American Recovery and Reinvestment Act. The left is of course pushing for more government spending and a bigger government, where the right claims that a bigger government creates more of a problem. Although the Recovery Act was passed by congress republicans still feel that it is not helping and are offering several different alternatives. Senators John McCain, David Vitter and John Thune all offer several different suggestions and amendments to the American Recovery Act.
John McCain’s alternative stimulus plan was the closest to getting passed by the Senate of the three senator’s plan. However, the amendments were defeated in a 40 to 57 vote along party lines. McCain stimulus package includes changes to the home loan modification program and tax breaks for home purchasers (Human Events, 2009). He also suggests dues for rehabilitating military facilities and equipment. Similar to the recovery act, he wants to restore American infrastructure, mainly roads and bridges. McCain also believes that cutting the two lowest tax brackets by 5 percent and lowering the corporate tax rate by 10 percent for small businesses would drastically help with the economy (Human Events, 2009). The last element to his proposed plan was to accelerate depreciation for capital investments by small businesses. Although the amendments were not passed by the Senate, McCain’s plan did receive the most support and a similar plan will have potential to be passed in the future.
Senator David Vitter, a republican from Louisiana, proposed amendments to the Recovery Act that would save the government an estimated 48 billion dollars (Human Events, 2009). He proposes a different way to spend government money and suggests prevailing-wage provisions that impact infrastructure projects, making them far more expensive. He also recommends spending 1 billion dollars to fund a census, 600 million dollars to invest in fuel-efficient vehicles by the government, and 400 million dollars for the construction of an FBI facility (Human Events,2009). Vitter also suggests spending 34 million dollars for management of bureaucrats at the department of commerce and a 75 million dollar training facility for the State Department. Last he advocates for spending 55 million dollars for the National Park Service and 125 million for repair and restructure of the D.C. sewer system. Clearly this Stimulus package is very different from President Obama’s; however, it is far less expensive. Nevertheless, the amendments were defeated in the Senate by a vote of 32 to 65 (Human Events, 2009).
Senator McCain and Vitter were not the only republicans to offer amendments to the American Recovery Act. Republican Senator John Thune of South Dakota also suggested several alternatives to the act. In contrast to the previous senators, Thune’s alternatives mainly focus on creating a smaller government to deal with the economic crisis. Thune recommends a reduction in corporate tax rates as well as individual tax rates (Human Events, 2009). He also suggests the removal of the alternative minimum tax, but he does want to incorporate an estate relief tax. Lastly, he calls for an increase in child tax credit and some restrictions on deductions, which would then cause a broader tax base. Although Thune’s suggestions differ greatly from his republican colleagues, he still suffers the same fate; his amendments were voted down 37-60 in the Senate.
Congressmen are not the only actors offering alternatives to the Recovery Act. Katzy and Puentes(2009) of The Brookings Institute offer their own criticism, asserting that “the federal response has been mostly to keep throwing money at the problem, without any meaningful attempt to update our policies to the realities of today.” They find that a more meaningful policy would place more emphasis on infrastructure investments. Experts of the Metropolitan Policy program, Katz and Puentes (2009) find that infrastructure investments addressed toward global warming could lead the way for a lower carbon future. They point out that transportation alone accounts for 28 per cent of U.S. emissions. The experts also stress that in order for the U.S. to compete in the globalized economy, they must work toward developing high-functioning global ports and transportation hubs by holding government responsible for maintenance and improvements. Countries in Europe and China have already done so. Finally, the U.S. should stop subsidizing the excessive decentralization of people and jobs, for household spending on transportation has risen to the second largest expense for most American households. They suggest we place the responsibility of transforming infrastructure investment in federal leadership. Leaders should include plans for freight movement, the electric grid, and water infrastructure across state borders and between metropolitan areas. The current policy on infrastructure centers on job creation which will create short term job success; however, the act should focus on creating productive and sustainable infrastructure that will create long-term growth.
One thing that most economists agree on is that the money had to be spent. We agree with the bold actions taken by the president and congress to bring the economy out of recession and we favor and support the Recovery Plan. We do find that an alternative solution would spend the money more wisely, with more emphasis on infrastructure and better planning for the full scope of national needs. First, we agree with the experts of the Brookings Institution that in order to maintain development, we must take the focus off of job creation in infrastructure and focus on updating policies that dramatically improve infrastructure and establish economic competitiveness. Secondly, we find that program spending is too directed toward programs in local districts. While this is important for bringing the country out of recession and improving the condition individual, we believe that congress should work together to develop more national efforts that better serve the country as a whole, thus sustaining long-term development. We also anticipate a coming crisis in the second wave of commercial real estate; we fear that there will be another real-estate bubble across the world. We find that more actions should be taken in the act to prevent such a crisis. In conclusion, large spending on public programs was necessary for bringing the country out of recession, but further action should look toward maintaining the long-term economic condition.
But has the American Recovery and Reinvestment Act, really fulfilled all of its promises to the citizens of the United States? The key to Obama’s first year in office was the Recovery Act. But the Recovery Act, which should have set the pace for a year of strong reforms. Instead, for reasons partly having to do with the construction of the bill, its effects were nearly invisible-ninety-four per cent of Americans don’t think it created jobs in their area-and Republicans quickly called it a failure. The American people were thinking radical change-not the status quo. Just the way Obama blamed Bush after 9/11, saying, “You told America to go shopping,” people are going to point the finger at him and say, “You had an opportunity and you wasted it.” We should have gone in and done the kind of stimulus that would actually turn the economy around. We ended up with something that was strong enough to prevent a depression. But it just wasn’t strong enough to stimulate the recovery. Obama was trying to be favorably viewed by seventy per cent, and Reagan was willing to settle for fifty-seven per cent. He understood an intense fifty-seven was better than a sort of feel-good seventy. So in conclusion to that, I think that the Act could have been a much bigger success if they wouldn’t have settled with what everyone wanted. But instead passed what was necessary to boost us out of the depression and get our economy back on the rise.