Author: Ben Dalgetty
On Tuesday, Feb. 17 President Barack Obama signed the American Recovery and Reinvestment Act of 2009, commonly referred to as the stimulus bill, at the Denver Museum of Nature and Science. The bill, which was the first passed by the 111th Congress and signed by Obama, was a compromise between competing House and Senate resolutions which passed on Feb. 13 with 246 yeas 183 nays in the House, and 60 yeas 38 nays in the Senate.
The bill totals $787 billion and has faced harsh criticism from many Republicans, with no votes from their caucus in the House and only three in the Senate from Senators Arlen Specter (PA), Olympia Snow (ME) and Susan Collins (ME). Most GOP objections focused on deficit spending.
When commenting on the addition of provisions and initiatives that were goals of the Obama administration but unnecessary to economic recovery, Senate Minority Leader Mitch McConnell (KY) said, “[Obama took a] Christmas tree approach,” according to a CBS News piece. The final piece of legislation is divided primarily into 34 percent, or $286 billion, in tax cuts and 64 percent, or $504 billion in social spending and programs. The three biggest areas of government spending are infrastructure spending, $120 billion, education, $92 billion and energy at $40.75 billion.
The bill is based in large part on Keynsian economics, the belief that government spending is necessary in a depression to compensate for lost private sector demand, which President Roosevelt used during the Great Depression and has had a mixed reception from professional economists.
In a Jan. 28 ad run in the NY Times and Washington Post 200 economists said, “We the undersigned do not believe that more government spending is a way to improve economic performance.” The ad was funded by the libertarian Cato institute and the liberal leaning Center for American Progress Action fund countered with 200 economists endorsing government action, both ads were signed by numerous Nobel Laureates.
In a Feb. 11 statement Congressional Budget Office Director Douglas Elmendorf noted the uncertainty over the effectiveness of stimulus spending. “In the short run the stimulus legislation would raise GDP and increase employment,” he said. And, in the long run he said, “funding for improvements to roads and highways, might add to the economy’s potential output in much the same way that private capital investment does.” He also noted the benefits of education investment, but cautioned that government spending can crowd out private investment and reduce output in the long run.
Of the money earmarked for education, $26 billion will go to local school districts, $53.6 billion goes to the states for schools as well as public colleges and universities and the Pell grant, need-based funds for post-secondary education, will be increased by $500 at a total cost of $15.6 billion.
Many students at Occidental receive either federal Pell Grants, or Cal-Grants from the cash-strapped state of California which will benefit from the state assistance. “We enroll more Pell Grant recipients than most other nationally ranked liberal arts colleges,” said Vice President for Admission and Financial Aid, Bill Tingley in a previous statement.
Determining the success of a stimulus package designed to build consumer confidence, unfreeze lending capital and make strategic long-term investments that prevent future depressions will not happen immediately, something that has been acknowledged by Obama.
At a Feb. 9 press conference, the first of his administration, Obama laid out his three three central measures of success, creating or saving 4 million jobs, an effectively operating credit market and a stabilized housing market.
He said, “the most [ . . . ] the biggest measure of success is whether we stop contracting and shedding jobs and we start growing again,” stressing the element that much of the controversial social spending is geared towards.
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