Stimulus Package : The New Deal

The Welfare Reform Act of 1996 was an attempt by the government to get people to be more efficient and less reliant on the government. There was a sort of “exchange” between the government and citizens. Citizens work and in return they receive financial assistances. This is referred to as the TANF, Temporary Assistance to Needy Families. It was supposed to motivate people to work, or that was the goal. Recipients were required to work at least 20 hours a week. This was actually successful in decreasing the number of Americans who were dependent on welfare systems. As diversity greatly increased, the need for welfare also increased. Welfare reform efforts were attempted because of the various changes occurring. Welfare in the United States is

On November 4, 2008, candidate Barack Obama was elected for the first term of his presidency. The following February, The American Recovery and Reinvestment Act of 2009—or the ARRA—was signed into effect by congress, and made into law by President Obama on February 17, 2009. This stimulus package was originally proposed to be 816 billion dollars, but was eventually raised to be 840 billion dollars in 2012. The purpose of this bill was to inspire confidence in the American people that the economy would be up and running again. The ARRA was intended to give money back to small businesses as well as the American families who ran and worked at these businesses. This varies from TARP, or the Troubled Asset Recovery Program, which was a bill that was aimed at bailing out banks in October 2008. TARP worked to allow banks in danger to participate in reverse auction, in order to sell their assets.

Leo: Before the end of his term, President Bush passed TARP. TARP was a program that increased government spending to buy all the garbage CDOs. This program involved $800 billion in government spending which was limited to $475 billion due to the Dodd-Frank Act (TARP Programs 1). President Obama continued using expansionary fiscal policy by passing the American Recovery and Reinvestment Act which increased government spending by $787 billion and lowered taxes (Amadeo 1).

Deficit spending is often applied in a political context. However, it can be applied in

In 2009, a great amount of the stimulus funds were designated for education spending. The 91 billion dollars that was supported by this fund did not cover the total federal spending on education of the years 2008 to 2009 which summed up to be 667 billion dollars. An estimation of 570 billion dollars was not supported by the total education bill of federal spending. It costs an estimated 35 billion dollars to cover kindergarten through twelfth grade on a yearly basis. (Voice,2011).

Those who partake in assistance programs do not have the means to pay taxes back to the government. We are pouring billions of dollars into programs to help citizens who cannot help themselves, in the hopes that they will battle their way out of their poor situation and become viable citizens and help pay taxes. On paper this is a great idea however like many ideas it has setbacks. Many of the citizens that we hope climb out of their situation don’t. This is a problem because we now have more people receiving money than we have people paying into the programs. If we reduce our funding to these programs we can help slow the rate at which we are falling into debt.

In the current state of the American economy, needless spending is something the government needs to avoid at all costs. With some trillion dollars owed to various foreign countries, the United States literally cannot afford to pump money into programs that do not benefit the country as a whole. Michael Tanner, who is the Director of Health and Welfare studies at the Cato Institute, reports that this year the Federal government will spend 952,000,000,000 dollars on programs to help the poor (10). While some of this money goes to people who truly need it, there are many people that take advantage of the kindness of others. Robert Rector, who is the Senior

The lower levels of government are becoming reliant on this federal money, and some even refuse to sponsor a program if it must be paid for with their tax dollars. Washington does not add any value to the taxes they receive. Instead, they lessen the value of the money before sending it back to the local governments for their funded programs. This causes local governments to pay higher taxes while gaining little funding in return. Local governments need to begin finding their own ways to fund programs instead of relying on Santa Claus so dish out small amounts of money to

These programs to aid the middle class require money that the government does not have. To create the necessary funds needed to operate the “Stimulus Package,” the government levied high taxation on corporations. However, this had the opposite result. The high taxation placed on large corporations took away jobs from the American middle class(Kent McDill). Middle class jobs are slowly bleeding out of America. The high taxation, along with strict corporate regulations are taking middle class jobs out of America and forcing corporations to take a different route for employees.

The inclusion of Buy American provisions in the ARRA affected how the funds could be spent. Of the $787 billion in stimulus funds, approximately $89.4 billion was assigned for education training, aid and employment services, $32.7 billion for transportation projects, $25 billion for infrastructure projects, $22.4 billion for energy projects and $12.3 billion for housing (Government of Canada, 2012). The Buy American provisions of the ARRA were specified in Section 1605. ARRA requirements reflected provisions of the 1933 Buy American Act and the 1982 Buy America Acts. These stipulations required that for federal, state, and municipal projects funded by the ARRA, a preference was imposed to use U.S. domestic products. Specific ARRA Buy American requirements applied only to projects funded by the Act and no longer would apply once the ARRA funding is exhausted.

When a government’s spending exceeds its revenues causing or deepening a deficit it is called deficit spending. Deficit spending is only one of numerous tools used to help manage the economy. Deficit spending is presumed to stimulate consumer demand by helping the consumer to obtain more money to spend, in turn, the demand of product will rise. There are advantages and disadvantages to deficit spending that we will discuss further below.

Fiscal policy: Given the breadth and depth of this recession, it was clear that the Treasury and the entire Obama administration had to take bold actions. In fact, right at the beginning, they were committed to a fiscal stimulus policy package which would be “substantial” enough to pull the economy out of the recession. The final stimulus package signed into law in 2009, the American Recovery and Reinvestment Act, was totaled $787 billion including about one-third tax cuts and one-third aid for states and the unemployed. Of the rest, labor health and education investment got 8%, and infrastructure investment got about 7%. It also included a large amount of government money to

Observers of failed economic stimulus packages have developed a fear that these large sums of funding will be mismanaged and therefore will not be able to stimulate the economy (“History of Government Spending,” n.d.).

In these current economic times, people have lost jobs. People have lost faith in the economy since the worth of their money keeps falling. Businesses are failing left and right because of the lack of confidence in the system. Banks have folded because of the amount of people who are unable to pay their loans, leaving the banks without funds. The auto industry is failing as people cannot afford the new cars being produced by Detroit. Confidence in the economic system of the United States is very low. How can the country recover from this economic recession? Some economists would say that the government should step in to save the day by pumping funds into the system. President Obama signed a massive stimulus bill in an attempt to turn the

The policy response from the G.W. Bush is that there are three main parts to the fiscal policy stimulus. An individual tax that the Internal Revenue service sent out started in mid-2008. There were two business provisions that encourage investment during 2008 by increasing limits on expensing investment costs and accelerate depreciation of qualifying investments. The specific steps taken in early 2008 were the home owner purchases rebate and tax cuts.