American Recovery and Reinvestment Act of 2009
Encyclopedia
The American Recovery and Reinvestment Act of 2009, abbreviated ARRA and commonly referred to as the Stimulus or The Recovery Act, is 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
Barack Obama
Barack Hussein Obama II is the 44th and current President of the United States. He is the first African American to hold the office. Obama previously served as a United States Senator from Illinois, from January 2005 until he resigned following his victory in the 2008 presidential election.Born in...

.

To respond to the late-2000s 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 ‘green’ energy. The approximate cost of the economic stimulus package was estimated to be $787 billion at the time of passage. The Act included direct spending in infrastructure
Infrastructure
Infrastructure is basic physical and organizational structures needed for the operation of a society or enterprise, or the services and facilities necessary for an economy to function...

, education, health, and energy, federal tax incentives, and expansion of unemployment benefits and other social welfare provisions. The Act also included many items not directly related to economic recovery such as long-term spending projects (e.g., a study of the effectiveness of medical treatments) and other items specifically included by Congress (e.g., a limitation on executive compensation in federally aided banks added by Senator Dodd
Christopher Dodd
Christopher John "Chris" Dodd is an American lawyer, lobbyist, and Democratic Party politician who served as a United States Senator from Connecticut for a thirty-year period ending with the 111th United States Congress....

 and Rep. Frank
Barney Frank
Barney Frank is the U.S. Representative for . A member of the Democratic Party, he is the former chairman of the House Financial Services Committee and is considered the most prominent gay politician in the United States.Born and raised in New Jersey, Frank graduated from Harvard College and...

).

The rationale for ARRA was from Keynesian macroeconomic theory
Keynesian economics
Keynesian economics is a school of macroeconomic thought based on the ideas of 20th-century English economist John Maynard Keynes.Keynesian economics argues that private sector decisions sometimes lead to inefficient macroeconomic outcomes and, therefore, advocates active policy responses by the...

 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.

Legislative history

Both the House and the Senate versions of the bills were primarily written by Democratic Congressional committee leaders and their staffs. Because work on the bills started before President Obama officially took office on January 20, 2009, top aides to President-Elect Obama held multiple meetings with committee leaders and staffers. On January 10, 2009, President-Elect Obama’s administration released a report that provided a preliminary analysis of the impact to jobs of some of the prototypical recovery packages that were being considered.

House of Representatives

The House version of the bill, , was introduced on January 26, 2009. It was sponsored by Democrat David Obey, the House Appropriations Committee
United States House Committee on Appropriations
The Committee on Appropriations is a committee of the United States House of Representatives. It is in charge of setting the specific expenditures of money by the government of the United States...

 chairman, and was co-sponsored by nine other Democrats. On January 23, Speaker of the House
Speaker of the United States House of Representatives
The Speaker of the United States House of Representatives, or Speaker of the House, is the presiding officer of the United States House of Representatives...

 Nancy Pelosi
Nancy Pelosi
Nancy Patricia D'Alesandro Pelosi is the Minority Leader of the United States House of Representatives and served as the 60th Speaker of the United States House of Representatives from 2007 to 2011...

 said that the bill was on track to be presented to President Obama for him to sign into law before February 16, 2009. Although 206 amendments were scheduled for floor votes, they were combined into only 11, which enabled quicker passage of the bill.

On January 28, 2009, the House passed the bill by a 244-188 vote. All but 11 Democrats voted for the bill, and 177 Republicans
Republican Party (United States)
The Republican Party is one of the two major contemporary political parties in the United States, along with the Democratic Party. Founded by anti-slavery expansion activists in 1854, it is often called the GOP . The party's platform generally reflects American conservatism in the U.S...

 voted against it (two Republicans did not vote).

Senate

The senate version of the bill, , was introduced on January 6, 2009, and later substituted as an amendment to the House bill, . It was sponsored by Harry Reid
Harry Reid
Harry Mason Reid is the senior United States Senator from Nevada, serving since 1987. A member of the Democratic Party, he has been the Senate Majority Leader since January 2007, having previously served as Minority Leader and Minority and Majority Whip.Previously, Reid was a member of the U.S...

, the Majority Leader, co-sponsored by 16 other Democrats and Joe Lieberman
Joe Lieberman
Joseph Isadore "Joe" Lieberman is the senior United States Senator from Connecticut. A former member of the Democratic Party, he was the party's nominee for Vice President in the 2000 election. Currently an independent, he remains closely affiliated with the party.Born in Stamford, Connecticut,...

, an independent
Independent (politician)
In politics, an independent or non-party politician is an individual not affiliated to any political party. Independents may hold a centrist viewpoint between those of major political parties, a viewpoint more extreme than any major party, or they may have a viewpoint based on issues that they do...

 who caucuses with the Democrats
Democratic Caucus of the United States Senate
The Senate Democratic Caucus is the formal organization of the current 51 Democratic Senators in the United States Senate. In the 112th Congress, the Democratic Caucus additionally includes two independent senators who formally caucus with the Democrats for the purpose of committee assignments...

.

The Senate then began consideration of the bill starting with the $275 billion tax provisions in the week of February 2, 2009.
A significant difference between the House version and the Senate version was the inclusion of a one-year extension of revisions to the alternative minimum tax
Alternative Minimum Tax
The Alternative Minimum Tax is an income tax imposed by the United States federal government on individuals, corporations, estates, and trusts. AMT is imposed at a nearly flat rate on an adjusted amount of taxable income above a certain threshold . This exemption is substantially higher than the...

 which added $70 billion to the bill's total.

Republicans proposed several amendments to the bill directed at increasing the share of tax cuts and downsizing spending as well as decreasing the overall price.
President Obama and Senate Democrats hinted that they would be willing to compromise on Republican suggestions to increase infrastructure spending and to double the housing tax credit proposed from $7,500 to $15,000 and expand its application to all home buyers, not just first-time buyers.
Other considered amendments included the Freedom Act of 2009, an amendment proposed by Senate Finance Committee members Maria Cantwell
Maria Cantwell
Maria E. Cantwell is the junior United States Senator from the state of Washington and a member of the Democratic Party....

 (D) and Orrin Hatch
Orrin Hatch
Orrin Grant Hatch is the senior United States Senator for Utah and is a member of the Republican Party. Hatch served as the chairman or ranking member of the Senate Judiciary Committee from 1993 to 2005...

 (R) to include tax incentives for plug-in electric vehicles
Battery electric vehicle
A battery electric vehicle, or BEV, is a type of electric vehicle that uses chemical energy stored in rechargeable battery packs. BEVs use electric motors and motor controllers instead of, or in addition to, internal combustion engines for propulsion.A battery-only electric vehicle or...


and an amendment proposed by Jim DeMint
Jim DeMint
James Warren "Jim" DeMint is the junior U.S. Senator from South Carolina, serving since 2005. He is a member of the Republican Party and a leader in the Tea Party movement. He previously served as the U.S. Representative for from 1999 to 2005.-Early life and education:DeMint was born in...

 (R) to remove language from the bill that would prohibit funds which would be "used for sectarian instruction, religious worship, or a school or department of divinity; or in which a substantial portion of the functions of the facilities are subsumed in a religious mission".

The Senate called a special Saturday debate session for February 7 at the urging of President Obama. The Senate voted, 61-36 (with 2 not voting) on February 9 to end debate on the bill and advance it to the Senate floor to vote on the bill itself. On February 10, the Senate voted 61-37 (with one not voting)
All the Democrats voted in favor, but only three Republicans voted in favor (Susan Collins
Susan Collins
Susan Margaret Collins is the junior United States Senator from Maine and a member of the Republican Party. First elected to the Senate in 1996, she is the ranking member of the Senate Committee on Homeland Security and Governmental Affairs...

, Olympia Snowe
Olympia Snowe
Olympia Jean Snowe , née Bouchles, is the senior United States Senator from Maine and a member of the Republican Party. Snowe has become widely known for her ability to influence the outcome of close votes, including whether to end filibusters. She and her fellow Senator from Maine, Susan Collins,...

, and Arlen Specter
Arlen Specter
Arlen Specter is a former United States Senator from Pennsylvania. Specter is a Democrat, but was a Republican from 1965 until switching to the Democratic Party in 2009...

), with Specter later switching to the Democratic party. At one point, the Senate bill stood at $838 billion.

Comparison of the House, Senate and Conference versions

Senate Republicans forced a near unprecedented level of changes (near $150 billion) in the House bill which had more closely followed the Obama plan. The biggest losers were states (severely restricted Stabilization Fund) and the low income workers (reduced tax credit) with major gains for the elderly (largely left out of the Obama and House plans) and high income tax-payers. A comparison of the $827 billion economic recovery plan drafted by Senate Democrats with a $820 billion version passed by the House and the final $787 billion conference version shows huge shifts within these similar totals. Additional debt costs would add about $350 billion or more over 10 years. Many provisions will expire in two years.

The main funding differences between the Senate bill and the House bill are: More funds for health care in the Senate ( $153.3 vs $140 billion), for green energy programs ($74 vs. $39.4 billion), for home buyers tax credit ($35.5 vs. $2.6 billion), new payments to the elderly and a one year increase in AMT limits. The House has more funds appropriated for education ($143 vs. $119.1 billion), infrastructure ($90.4 vs. $62 billion) and for aid to low income workers and the unemployed ($71.5 vs. $66.5 billion).

Spending (Senate-$552 billion, House-$545 billion)

  • Aid to low income workers and the unemployed
    • Senate - $47 billion to provide extended unemployment benefits through Dec. 31, increased by $25 a week, and provide job training; $16.5 billion to increase food stamp benefits by 12 percent through fiscal 2011 and issue a one-time bonus payment; $3 billion in temporary welfare payments.
    • House — Comparable extension of unemployment insurance; $20 billion to increase food stamp benefits by 14 percent; $2.5 billion in temporary welfare payments; $1 billion for home heating subsidies and $1 billion for community action agencies.

  • Direct cash payments
    • Senate — $17 billion to give one-time $300 payments to recipients of Supplemental Security Income
      Supplemental Security Income
      Supplemental Security Income is a United States government program that provides stipends to low-income people who are either aged , blind, or disabled. Although administered by the Social Security Administration, SSI is funded from the U.S. Treasury general funds, not the Social Security trust fund...

       and Social Security
      Social Security (United States)
      In the United States, Social Security refers to the federal Old-Age, Survivors, and Disability Insurance program.The original Social Security Act and the current version of the Act, as amended encompass several social welfare and social insurance programs...

      , and veterans receiving disability and pensions.
    • House — $4 billion to provide a one-time additional Supplemental Security Income and Social Security Disability Insurance payment to the elderly, of $450 for individuals and $630 for married couples.
    • Conference - $250 one-time payment to each recipient of Supplemental Security Income, Social Security (Regular & Disability) Insurance, Veterans pension, Railroad Retirement, or State retirement system.

  • Infrastructure
    • Senate — $46 billion for transportation projects, including $27 billion for highway and bridge construction and repair and $11.5 billion for mass transit and rail projects; $4.6 billion for the Army Corps of Engineers; $5 billion for public housing improvements; $6.4 billion for clean and drinking water projects.
    • House — $47 billion for transportation projects, including $27 billion for highway and bridge construction and repair and $12 billion for mass transit, including $7.5 billion to buy transit equipment such as buses; and $31 billion to build and repair federal buildings and other public infrastructures.

  • Health care
    • Senate — $21 billion to subsidize the cost of continuing health care insurance for the involuntarily unemployed under the COBRA
      Consolidated Omnibus Budget Reconciliation Act of 1985
      The Consolidated Omnibus Budget Reconciliation Act of 1985 is a law passed by the U.S. Congress on a reconciliation basis and signed by President Reagan that, among other things, mandates an insurance program giving some employees the ability to continue health insurance coverage after leaving...

       program; $87 billion to help states with Medicaid
      Medicaid
      Medicaid is the United States health program for certain people and families with low incomes and resources. It is a means-tested program that is jointly funded by the state and federal governments, and is managed by the states. People served by Medicaid are U.S. citizens or legal permanent...

      ; $22 billion to modernize health information technology systems; and $10 billion for health research and construction of National Institutes of Health
      National Institutes of Health
      The National Institutes of Health are an agency of the United States Department of Health and Human Services and are the primary agency of the United States government responsible for biomedical and health-related research. Its science and engineering counterpart is the National Science Foundation...

       facilities.
    • House — $40 billion to subsidize the cost of continuing health care insurance for the involuntarily unemployed under the COBRA program or provide health care through Medicaid; $87 billion to help states with Medicaid; $20 billion to modernize health information technology systems; $4 billion for preventative care; $1.5 billion for community health centers; $420 million to combat avian flu; $335 million for programs that combat AIDS, sexually transmitted diseases and tuberculosis.
    • Conference - A 65% COBRA subsidy for 9 months will apply to workers laid off between Sept. 1, 2008 and Dec. 31, 2009. Those already laid off have 60 days to apply for COBRA.

  • Education
    • Senate — $55 billion in state fiscal relief to prevent cuts in education aid and provide block grants; $25 billion to school districts to fund special education and the No Child Left Behind K-12 law; $14 billion to boost the maximum Pell Grant
      Pell Grant
      A Pell Grant is money the federal government provides for students who need it to pay for college. Federal Pell Grants are limited to students with financial need, who have not earned their first bachelor's degree or who are not enrolled in certain post-baccalaureate programs, through participating...

       by $400 to $5,250; $2 billion for Head Start.
    • House — Similar aid to states and school districts; $21 billion for school modernization; $16 billion to boost the maximum Pell Grant by $500 to $5,350; $2 billion for Head Start.
    • Conference - The Conference Report merged most education aid with the State Fiscal Stabilization fund (administered by the Department of Education)and gave power over the funds to each governor under voluminous restrictions. The Governor is "Required" to spend $45 billion of the money on education to restore funding to 2008 levels but the mechanisms to enforce state maintenance of effort at 2005-06 levels are complex and potentially impossible to implement. Hard hit states such as Nevada cannot possibly find enough funds to get to the 2005-06 state funding levels for education. Some states with no current budget cuts for education, such as Arkansas and North Carolina, may get nothing. This will result in a monumental 50 state legal and political fight over how to re-budget to best take advantage of the federal legislation. Many states will further reduce state funds for education to the 2005-06 minimum so these state resources can be used for other state priorities and the net gain for education will be far less than the total federal appropriation.

  • Energy
    • Senate — $40 billion for energy efficiency and renewable energy programs, including $2.9 billion to weatherize modest-income homes; $4.6 billion for fossil fuel research and development; $6.4 billion to clean up nuclear weapons production sites; $11 billion toward a so-called smart electricity grid to reduce waste; $8.5 billion to subsidize loans for renewable energy projects; and $2 billion for advanced battery systems.
    • House — $28.4 billion for energy efficiency and renewable energy programs, including $6.2 billion to weatherize homes; $11 billion to fund a smart electricity grid.

  • Homeland security
    • Senate — $4.7 billion for homeland security programs, including $1 billion for airport screening equipment and $800 million for port security.
    • House — $1.1 billion, including $500 million for airport screening equipment.

  • Law enforcement
    • Senate — $3.5 billion in grants to state and local law enforcement to hire officers and purchase equipment.
    • House — Comparable provision.

Taxes ($275 billion)

  • New tax credit
    • House— About $145 billion for $500 per-worker, $1,000 per-couple tax credits in 2009 and 2010. For the last half of 2009, workers could expect to see about $20 a week less withheld from their paychecks starting around June. Millions of Americans who don’t make enough money to pay federal income taxes could file returns next year and receive checks. Individuals making more than $75,000 and couples making more than $150,000 would receive reduced amounts.
    • Senate — The credit would phase out at incomes of $70,000 for individuals and couples making more than $140,000 and phase out more quickly, reducing the cost to $140 billion.
    • Conference- Tax Credit reduced to $400 per worker and $800 per couple in 2009 and 2010 and phaseout begins at $75,000 for individuals and $150,000 for joint filers. Note retirees with no wages get nothing.

  • Alternative minimum tax
    Alternative Minimum Tax
    The Alternative Minimum Tax is an income tax imposed by the United States federal government on individuals, corporations, estates, and trusts. AMT is imposed at a nearly flat rate on an adjusted amount of taxable income above a certain threshold . This exemption is substantially higher than the...

    • House — No provision.
    • Senate — About $70 billion to prevent 24 million taxpayers from paying the alternative minimum tax in 2009. The tax was designed to make sure wealthy taxpayers can’t use credits and deductions to avoid paying any taxes or paying at a far lower rate than would otherwise be possible. But it was never indexed to inflation, so critics now contend it taxes people it was not intended to. Congress addresses it each year, usually in the fall.
    • Conference - Includes a one year increase in AMT floor to $70,950 for joint filers for 2009.

  • Expanded child credit
    • House — $18.3 billion to give greater access to the $1,000 per-child tax credit for low income workers in 2009 and 2010. Under current law, workers must make at least $12,550 to receive any portion of the credit. The change eliminates the floor, meaning more workers who pay no federal income taxes could receive checks.
    • Senate — Sets a new income threshold of $8,100 to receive any portion of the credit, reducing the cost to $7.5 billion.
    • Conference - The income floor for refunds was set at $3,000 for 2009 & 2010.

  • Expanded earned income tax credit
    • House — $4.7 billion to increase the earned income tax credit
      Earned income tax credit
      The United States federal earned income tax credit or earned income credit is a refundable tax credit primarily for individuals and families who have low to moderate earned income. Greater tax credit is given to those who also have qualifying children...

       — which provides money to low income workers — for families with at least three children.
    • Senate — Same.

  • Expanded college credit
    • House — $13.7 billion to provide a $2,500 expanded tax credit for college tuition and related expenses for 2009 and 2010. The credit is phased out for couples making more than $160,000.
    • Senate — Reduces the amount that can be refunded to low-income families that pay no income taxes, lowering the cost to $13 billion.

  • Homebuyer credit
    • House — $2.6 billion to repeal a requirement that a $7,500 first-time homebuyer tax credit be paid back over time for homes purchased from Jan. 1 to July 1, unless the home is sold within three years. The credit is phased out for couples making more than $150,000.
    • Senate — Doubles the credit to $15,000 for homes purchased for a year after the bill takes effect, increasing the cost to $35.5 billion.
    • Conference - $8,000 credit for all homes bought between 1/1/2009 and 12/1/2009 and repayment provision repealed for homes purchased in 2009 and held more than three years.

  • Home energy credit
    • House — $4.3 billion to provide an expanded credit to homeowners who make their homes more energy-efficient in 2009 and 2010. Homeowners could recoup 30 percent of the cost up to $1,500 of numerous projects, such as installing energy-efficient windows, doors, furnaces and air conditioners.
    • Senate — Same.
    • Conference - Same;

  • Unemployment
    • House — No similar provision.
    • Senate — $4.7 billion to exclude from taxation the first $2,400 a person receives in unemployment compensation benefits in 2009.
    • Conference—Same as Senate

  • Bonus depreciation
    • House — $5 billion to extend a provision allowing businesses buying equipment such as computers to speed up its depreciation through 2009.
    • Senate — Similar.

  • Money losing companies
    • House — $15 billion to allow companies to use current losses to offset profits made in the previous five years, instead of two, making them eligible for tax refund
      Tax refund
      A tax refund or tax rebate is a refund on taxes when the tax liability is less than the taxes paid. Taxpayers can often get a tax refund on their income tax if the tax they owe is less than the sum of the total amount of the withholding taxes and estimated taxes that they paid, plus the...

      s.
    • Senate — Allows companies to use more of their losses to offset previous profits, increasing the cost to $19.5 billion.
    • Conference - Limits the carry-back to small companies, revenue under $5 million

  • Government contractors
    • House — Repeal a law that takes effect in 2011, requiring government agencies to withhold three percent of payments to contractors to help ensure they pay their tax bills. Repealing the law would cost $11 billion over 10 years, in part because the government could not earn interest by holding the money throughout the year.
    • Senate — Delays the law from taking effect until 2012, reducing the cost to $291 million.

  • Energy production
    • House — $13 billion to extend tax credits for renewable energy production.
    • Senate — Same.
    • Conference - Extension is to 2014.

  • Repeal bank credit
    • House — Repeal a Treasury provision that allowed firms that buy money-losing banks to use more of the losses as tax credits to offset the profits of the merged banks for tax purposes. The change would increase taxes on the merged banks by $7 billion over 10 years.
    • Senate — Same.

  • Bonds
    • House — $36 billion to subsidize locally issued bonds for school construction, teacher training, economic development and infrastructure improvements.
    • Senate — $22.8 billion to subsidize locally issued bonds for school construction, industrial development and infrastructure improvements.

  • Auto sales
    • House — No similar provision.
    • Senate — $11 billion to make interest payments on most auto loans and sales tax
      Sales tax
      A sales tax is a tax, usually paid by the consumer at the point of purchase, itemized separately from the base price, for certain goods and services. The tax amount is usually calculated by applying a percentage rate to the taxable price of a sale....

       on cars deductible.
    • Conference - $2 billion for deduction of sales tax, not interest payments phased out for incomes above $250,000.

Conference report

Congressional negotiators that they had completed the Conference Report on February 11. On February 12, House Majority Leader Steny Hoyer
Steny Hoyer
Steny Hamilton Hoyer is the U.S. Representative for , serving since 1981. The district includes a large swath of rural and suburban territory southeast of Washington, D.C.. He is a member of the Democratic Party....

scheduled the vote on the bill for the next day, before wording on the bill's content had been completed and despite House Democrats having previously promised to allow a 48-hour public review period before any vote. The Report with final handwritten provisions was posted on a House website that evening. On February 13, the Report passed the House, 246-183, largely along party lines with all 246 Yes votes given by Democrats and the Nay vote split between 176 Republicans and 7 Democrats.

The Senate passed the bill, 60-38, with all Democrats and Independents voting for the bill along with three Republicans. On February 17, 2009, President Barack Obama signed the Recovery Act into law.

Provisions of the Act

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