Analysis of The American Recovery and Reinvestment Act

Today, President Obama signed into law the American Recovery and Reinvestment Act of 2009. The "stimulus bill" represents the latest and largest effort by the federal government to boost the deteriorating economy. (For details of all efforts to date, see www.usbudgetwatch.org/stimulus).

The bill will cost an estimated $787 billion over ten and a half years, including $501 billion in increased spending, and $286 billion in tax cuts. The larger provisions include a $400 per person "Making Work Pay" tax credit, a one-year patch for the Alternative Minimum Tax (AMT), an expansion of food stamps and unemployment benefits, funding for infrastructure projects, increased spending on health care and education, and additional aid to states and individuals.

"The Committee for a Responsible Federal Budget is hopeful that the passage of the stimulus bill, along with other efforts, will help put the economy on a path toward recovery. Most economists believe that the bill will provide at least some short-term boost to the macroeconomy, improving both GDP and employment over the next few years," the analysis concludes.

"Over the long-run, however, the new debt created from the stimulus - especially if accompanied by deficit-financed renewal of some provisions - will become a burden, creating a significant drag on the economy. To ensure sustained economic growth, policymakers must begin to deal with this debt and address the long-term fiscal gap more broadly once the economy recovers."

See a complete analysis of the stimulus bill below.