ARRA: Stimulus for the 21st century

By Wayne Rogers, Sonnenschein Nath & Rosenthal

The American economy is in crisis. More than 3.5 million jobs were lost over the last year. Americans have not seen this level of employment decline since the end of World War II. The stock market has dropped significantly, banks have curtailed lending and consumer confidence is low. The economic press is comparing the current situation to that which prevailed in the Great Depression. US President Barack Obama and the US congress have responded to the need for swift and bold action to counter this economic emergency.

Wayne Rogers Advisor Sonnenschein Nath & Rosenthal
Wayne Rogers
Senior advisor
Sonnenschein Nath & Rosenthal

On 17 February, the president signed into law the most ambitious economic stimulus plan in US history: the American Recovery and Reinvestment Act (ARRA) of 2009. The act provides a US$780 billion package, a third of which takes the form of tax cuts for 2009 while the rest is to be spent on a wide range of programmes in 2009 and 2010.

With ARRA, the president and congress have focused not only on tax cuts and spending to stimulate the economy, but also on job creation. Specific goals and provisions of the package include the following items.

Create or save 3.5 million jobs over the next two years: The Council of Economic Advisors has focused on job creation, including certain targets: over 90% of the jobs created are to be in the private sector, and jobs are to be created in a range of cutting-edge industries, such as clean energy and health care.

Provide nearly 40% of the package in direct relief to working and middle class families: Public anger at perceived excess on Wall Street and imbalance in the sharing of wealth within corporations (as seen in the furore over executive bonuses) has been somewhat blunted by ARRA’s focus on tax credits for workers, direct relief for families suffering unemployment, and payments to social security beneficiaries (such as retirees) and military veterans. A large proportion of the funds to be sent in aid to the various states will also be earmarked to help working families.

Double existing renewable energy-generating capacity over three years: The amount of renewable energy capacity that has been built over the last 30 years is to be doubled in the next three years. Planned measures to achieve this goal include a clean energy finance authority, renewable energy tax credits, loan guarantees and other forms of financial support.

Invest US$150 billion in infrastructure: Nearly 20% of the package will be spent on roads, public transit, high-speed rail, modernization of the electricity grid and expansion of broadband coverage throughout the US.

Protect health insurance coverage: Many people have lost their health insurance coverage along with their jobs. It only compounds the problem that many states have been cutting funding for medical assistance and children’s health programmes due to budgetary pressure. The bill will temporarily increase federal funding for health care programmes. It will protect over 20 million people whose health insurance eligibility might otherwise have been at risk. Health care records will be computerized, reducing the number of medical errors and saving billions of dollars in health care costs.

Expand tax cuts for low and moderate income households: The act outlines a scheme that aims to lift more than two million people out of poverty. The scheme includes initiatives such as an expanded, US$1,200 tax credit to pay for childcare so parents can undertake employment, and a US$800 “making work pay” tax credit for 129 million households.

Increase energy efficiency: 75% of government buildings will be made more energy efficient, and over one million homes will receive weatherproofing assistance.

Increase education assistance: Funding of college grant programs will be increased for seven million students, and higher education tax cuts will benefit an additional four million students.

The act is sweeping and cuts across all areas of the economy. Companies in nearly every industry, including foreign firms, are now studying how they can avail themselves of the assistance being offered under stimulus plan programmes.

Given the large size of the stimulus package, there is significant concern to ensure proper transparency and accountability for funds. The president has issued detailed advance guidance on how each agency in the government will manage funds and report expenditures. Spending and performance data will be posted on a dedicated website,, enabling the public to see where the money is going, how it is spent and the performance of each project.

President Obama has inherited a full plate indeed: along with the massive burden of two wars, there are enormous challenges in domestic and global economic policy. The time available to implement remedial programmes is short, and the new administration is not even fully staffed yet. However, the signing and implementation of ARRA addresses these daunting economic problems in an aggressive yet transparent manner. The world has high hopes for its success.

Wayne Rogers is a senior adviser in the international law firm of Sonnenschein Nath & Rosenthal, where he specializes in international trade and cross-border transactions. He may be reached at +1-202-408-6478 or [email protected]


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