American Recovery and Reinvestment Act of 2009 - Conference Report

hmoroz — Tue, 17 Feb 2009 19:06:44 -0500

Legislation

The middle class

Supports

Video Summary

Injustice Facts

Unemployment rate in early 2010, if current laws and policies governing federal spending and taxes do not change, according to the Congressional Budget Office: 9.2%

Reduction in unemployment rate in 2010 if the American Recovery and Reinvestment Act is enacted, according to the Congressional Budget Office, Mark Zandi of Moody’s Economy.com, and White House economic advisers, respectively: 1.9%, 2.1%, 1.8%

Increase in GDP from spending $1 on extended unemployment insurance benefits, in dollars: 1.63

Increase in GDP from spending $1 on accelerated depreciation, which provides businesses a tax break for new investment, in dollars: 0.25

Percentage of spending and tax cuts that will take effect by the end of 2010, according to the Congressional Budget Office: 74%

Percentage reduction in aid to states made by the conference report of the American Recovery and Reinvestment Act compared to the House version: 32%

Overview/Summary

Middle Class Position Analysis

Middle Class Supports.Economic conditions are bleak. The Congressional Budget Office estimates that if the economy continues on its current course, both the length and depth of the current downturn will be the worst since the Great Depression. For middle-class Americans, this means job and wage cuts, loss of health insurance, and, simply, a daily struggle to keep up with everyday costs like mortgage payments and college tuition.

The Congressional Budget Office estimates that if current economic conditions persist the unemployment rate could reach as high as 9.2% by 2010. With 46 million Americans already uninsured, the Kaiser Family Foundation reckons that if unemployment averages just 7% in 2009 (the current rate is 7.2%), the number of uninsured will increase by 2.6 million with an additional 2.4 million individuals enrolled in Medicaid and SCHIP. Indeed, state governments are struggling to provide the increased services needed to keep the swelling ranks of unemployed, uninsured individuals from falling out of the middle class. But the current economic climate has left states with decreased revenue from income, sales, and property taxes: 46 states face budget shortfalls with combined budget gaps of $350 billion through 2011. To confront these gaping budget holes, more than 20 states have implemented or are considering cuts to health insurance programs; the same is true of K-12 and early education programs and of funds for public colleges and universities.

Beyond the decidedly dire short-term outlook, economic improvement is probably quite far off. Douglas Elmendorf, director of the Congressional Budget Office, has testified that “economic recovery is likely to be slow and protracted.” Thus, programs that address longer-term concerns – investment in infrastructure and green technology are two primary examples – are as important as an immediate, stimulative jolt to the economy.

The American Recovery and Reinvestment Act ties together measures designed to assist middle-class households struggling to make ends meet, provisions that will provide an immediate economic stimulus, and investment that can help set the stage for an economy built on energy efficiency and durable infrastructure. Economists generally agree that the legislation will save around 3 or 4 million jobs by 2010, while increasing economic output. Indeed, the Congressional Budget Office, Mark Zandi of Moody’s Economy.com, and White House economic advisers all project that the legislation will reduce the unemployment rate by around 2%. Extended unemployment insurance will allow 6.7 million people to collect benefits. Importantly, aid to state governments for Medicaid and education programs would shore up budget gaps and help prevent cuts to vital services.

While assisting those most at need during the economic downturn, extended unemployment insurance and state fiscal assistance also generate the most “bang for their buck” in terms of stimulus because they funnel money into the hands of the people most likely to spend it. Extended unemployment insurance generates an estimated $1.63 in economic activity for each dollar spent; aid to state governments generates $1.38. In contrast, though they act more quickly than spending measures, tax cuts generate less stimulus. The Making Work Pay, Child, and Earned Income tax credits will help keep more than 2.3 million Americans out of poverty and the American Opportunity credit will make 3.8 million more students eligible for a higher education tax break. These are important measures that will assist aspiring middle-class and middle-class Americans struggling to make ends meet. But the expansions are temporary and tax cuts, even when refundable and directed at the low-income individuals most likely to spend them, are less effective stimulus measures. Worst of all, though, are tax cuts for businesses like accelerated depreciation and carryback loss provisions that have little economic benefit.

Despite concern that the spending included in the American Recovery and Reinvestment Act will be delayed, perhaps a valid concern due to the legislation’s size and complexity, the Congressional Budget Office estimates that 74% of spending would occur between 2009 and 2010. Indeed, funds for investment in infrastructure and energy efficiency, though perhaps more complicated to spend, are a critical step in longer term economic recovery. Beyond its stimulative value – infrastructure spending’s “bang for the buck” is $1.59 – the United States desperately needs new infrastructure to compete in the global economy. The American Society of Civil Engineers estimates that $2.2 trillion in infrastructure spending is now necessary. The funding for infrastructure projects included in the legislation is a first step in addressing this deficiency and funds devoted to high-speed rail are particularly welcome. Similarly, spending on a modernized electricity grid, retrofitted low-income housing, and weatherized homes creates the framework for a future economy less reliant on fossil fuels and, indeed, based on green technology.

Limitations on executive compensation and bonuses are a first step in establishing the accountability that has been missing from the financial bailout. Still, the bill does not set forth a comprehensive plan to address the foreclosure crisis that includes a moratorium on foreclosures, a mechanism to require modification of mortgages, and a change to the bankruptcy code to permit modification of mortgages on primary residences. Funds for the Neighborhood Stabilization Program are a necessary, but insufficient, step in mitigating the widespread negative effects that foreclosures can have on entire neighborhoods and communities.

Quotes from Experts

Beyond this Bill

Additional Resources

Recovery.gov, the official website of the American Recovery and Reinvestment Act

“Recession and Recovery,” from the Center on Budget and Policy Priorities

“Impact of Economic Turmoil on Health Coverage and State Medicaid Programs,” from the Kaiser Commission on Medicaid and the Uninsured

Amendment to Provide Additional Funding for Child Care of 2003

atraub — Tue, 25 Sep 2007 16:29:16 -0400

Legislation

The middle class

Supports

Video Summary

Injustice Facts

Number of single working American mothers that spent half of their cash income on childcare in 2002: 4 in 10
Number of Americans born in the bottom quintile of the income distribution between 1942 and 1972 that stayed poor: 4 in 10
Number of Americans born in the top quintile of the income distribution between 1942 and 1972 that stayed rich: 4 in 10

Overview/Summary

Middle Class Position Analysis

The Middle Class Supports: For struggling Americans, TANF provides a vital support system allowing those on a fixed income to balance the responsibilities of work, education, and caring for small children. In 2003, low-income single working mothers spent as much as half of their cash income on childcare. By increasing the amount of federal aid to states to provide working mothers with additional child care resources, this amendment addresses one of the most formidable and expensive obstacles faced by low-income parents in climbing their way into the middle class.

Child care

American Recovery and Reinvestment Act of 2009 - Conference Report

Legislation

The middle class

Video Summary

Injustice Facts

Overview/Summary

Middle Class Position Analysis

Related Blog: Header

Quotes from Experts

Related Blog: Text

Beyond this Bill

Related Blog: Link

Additional Resources

Amendment to Provide Additional Funding for Child Care of 2003

Legislation

The middle class

Video Summary

Injustice Facts

Overview/Summary

Middle Class Position Analysis

Related Blog: Header

Quotes from Experts

Related Blog: Text

Beyond this Bill

Related Blog: Link

Additional Resources