The Truth Behind the Trillion-Dollar Stimulus, the Biggest Economic Recovery Plan in History (2012)
The American Recovery and Reinvestment Act of 2009 (ARRA) (Pub.L. 111--5), commonly referred to as the Stimulus or The Recovery Act, was an economic stimulus package enacted by the 111th United States Congress in February 2009 and signed into law on February 17, 2009, by President Barack Obama.
To respond to the Great Recession, the primary objective for ARRA was to save and create jobs almost immediately. Secondary objectives were to provide temporary relief programs for those most impacted by the recession and invest in infrastructure, education, health, and renewable energy. The approximate cost of the economic stimulus package was estimated to be $787 billion at the time of passage, later revised to $831 billion between 2009 and 2019. The Act included direct spending in infrastructure, education, health, and energy, federal tax incentives, and expansion of unemployment benefits and other social welfare provisions. The rationale for ARRA was from Keynesian macroeconomic theory, which argues that, during recessions, the government should offset the decrease in private spending with an increase in public spending in order to save jobs and stop further economic deterioration. Shortly after the law was passed, however, Keynesian economist and Nobel laureate Paul Krugman while supportive of the law, criticized the law for being too weak because it did not "even cover one third of the (spending) gap".
Economists such as Martin Feldstein, Daron Acemoğlu, National Economic Council director Larry Summers, and Nobel Memorial Prize in Economic Sciences winners Joseph Stiglitz and Paul Krugman favored large economic stimulus to counter the economic downturn. While in favor of a stimulus package, Feldstein expressed concern over the act as written, saying it needed revision to address consumer spending and unemployment more directly. Just after the bill was enacted, Krugman wrote that the stimulus was too small to deal with the problem, adding, "And it's widely believed that political considerations led to a plan that was weaker and contains more tax cuts than it should have — that Mr. Obama compromised in advance in the hope of gaining broad bipartisan support." Conservative economist John Lott was more critical of the government spending.
On January 28, 2009, a full-page advertisement with the names of approximately 200 economists who were against Obama's plan appeared in The New York Times and The Wall Street Journal. The economists denied the quoted statement by President Obama that there was "no disagreement that we need action by our government, a recovery plan that will help to jumpstart the economy". Instead, the signers believed that "to improve the economy, policymakers should focus on reforms that remove impediments to work, saving, investment and production. Lower tax rates and a reduction in the burden of government are the best ways of using fiscal policy to boost growth." The funding for this advertisement came from the Cato Institute.
On February 8, 2009, a letter to Congress signed by about 200 economists in favor of the stimulus, written by the Center for American Progress Action Fund, said that Obama's plan "proposes important investments that can start to overcome the nation's damaging loss of jobs", and would "put the United States back onto a sustainable long-term-growth path". This letter was signed by Nobel Memorial laureates Kenneth Arrow, Lawrence R. Klein, Eric Maskin, Daniel McFadden, Paul Samuelson and Robert Solow. The New York Times published projections from IHS Global Insight, Moody's.com, Economy.com and Macroeconomic Advisers that indicated that the economy may have been worse without the ARRA.