Crisis Diary as it unfolds ….

Obama Stimulus: American Recovery and Reinvestment Act

Finally, US senate passed much awaited stimulus plan aka American Recovery and Reinvestment Act last week and singed into a law. This is one three important policy measures of Obama team. The other two important policy measures are financial stability plan and plan housing mortgages.

The plan is to spend 787b$ over a period of four years. It comprises of apprx 300b$ in tax breaks and 487b$ in spending. Along with infrastructure spending, there is substantial portion allocated to energy and education. The key facts of the stimulus are well-captured by Associated Press

Many liberal economists were not happy about the size of the stimulus and also the share of spending in it.

Atlanta Fed macroblog has a great post presenting American Recovery and Reinvestment Act in pictures.

A year-by-year look at where the money goes:

Note: The dollar amounts listed below are denominated in millions of dollars.

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Which adds up to:

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Finally, the relative size of each year’s spending:

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There you have it.

By David Altig, senior vice president and research director, and Courtney Nosal, economic research analyst, at the Atlanta Fed

The pie for 2010 is much bigger than 2009. I’m not sure how this gels with Obama’s ‘We need to act now‘ rhetoric.

Econobrowser’s recap of CBO’s stimulus analysis can be found here.

Once again, I want to stress the adjectives “massive stimulus” conjoined to the noun “bill” is a matter of context. Dividing by baseline GDP shows that in a proportional (rather than dollar) sense the bill is rather modest. The fiscal impulse to GDP ratio never exceeds 2.5 ppts in any given fiscal year.

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Figure 2: Estimated spending and tax revenue reductions, per fiscal year, divided by GDP. Shaded areas pertain to spending occurring outside of the 19.5 month time frame. Source: CBO, H.R. 1, American Recovery and Reinvestment Act of 2009 (February 13, 2009) and CBO, The Budget and Economic Outlook: Fiscal Years 2009 to 2019, January 8, 2009.


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February 19, 2009 Posted by | Crisis Snapshot | , , , , , | Leave a comment