The American Recovery and Reinvestment Act of 2009 was an $836 billion package of tax cuts, safety-net expansions, and direct federal spending signed by President Barack Obama on February 17, 2009, to fight the Great Recession. Public Law 111-5 was the largest fiscal stimulus in U.S. history at the time it passed, aimed at halting mass layoffs, propping up state budgets, and seeding longer-term investment in clean energy, health information technology, broadband, and scientific research.1Congressional Budget Office. Estimated Impact of the American Recovery and Reinvestment Act on Employment and Economic Output in 2014
What It Cost
The Congressional Budget Office scored the bill at roughly $787 billion when Congress passed it. By the time provisions ran their course through 2019, CBO revised the total to about $836 billion. Spending came in $88 billion higher than projected, while the tax cuts cost $39 billion less than expected. The money split into three broad buckets: individual and business tax relief, expanded entitlement and safety-net programs, and direct federal spending through contracts, grants, and loans. The ratio ended closer to 80 percent spending and 20 percent tax cuts, rather than the originally estimated 75/25.
Tax Relief for Individuals and Families
The centerpiece for most workers was the Making Work Pay credit, worth up to $400 for individual filers and up to $800 for married couples filing jointly. It was delivered through reduced federal withholding rather than a single refund check, so paychecks rose modestly across the year.2Internal Revenue Service. Making Work Pay Credit
The refundable Child Tax Credit reached deeper into low-income households. The law lowered the earned-income threshold from $12,550 to $3,000, so families could receive a refundable credit equal to 15 percent of earnings above $3,000, up to the $1,000-per-child maximum. The Earned Income Tax Credit was expanded to create a higher credit tier for families with three or more qualifying children, who had previously received the same amount as families with two.
For college costs, the law replaced the Hope Credit with the American Opportunity Tax Credit. AOTC covered up to $2,500 per student per year for tuition, fees, and course materials, applied for four years of undergraduate study rather than two, and was 40 percent refundable up to $1,000. Phase-outs reached $180,000 for married couples.3U.S. Department of the Treasury. The American Opportunity Tax Credit
The first-time homebuyer credit grew from $7,500 under the 2008 Housing and Economic Recovery Act to $8,000, and the repayment requirement was dropped as long as the buyer kept the home for at least three years. Income caps were $75,000 for individuals and $150,000 for married couples.4Internal Revenue Service. Tax Credits for Home Buyers
Tax Incentives for Businesses
The law extended 50-percent bonus depreciation into 2009, letting companies deduct half the cost of qualifying equipment and property in the first year. It kept the Section 179 small-business expensing limit at $250,000, well above the $133,000 it would otherwise have dropped to.5Internal Revenue Service. Business Provisions of the American Recovery and Reinvestment Act of 2009 The Work Opportunity Tax Credit was expanded to cover two new groups of hires made in 2009 or 2010: unemployed veterans and disconnected youth.
Unemployment, Food Aid, and COBRA
The act extended the Emergency Unemployment Compensation program (EUC08) created in 2008, which layered federally funded weeks on top of regular state benefits. At the time of the extension, EUC08 offered up to 20 weeks in a first tier available in all states, plus up to 13 more weeks in states with high unemployment. Every unemployment recipient’s weekly benefit was raised by $25, a supplement that applied across regular state benefits, extended benefits, and trade adjustment assistance.6U.S. Department of Labor. States Decisions to Adopt Unemployment Compensation Provisions of the American Recovery and Reinvestment Act Final Report
The Supplemental Nutrition Assistance Program received a 13.6 percent increase in maximum monthly benefit levels effective April 2009, as enrollment was already climbing sharply.7Food and Nutrition Service. Benefit Redemption Patterns in SNAP – FY 2009
Workers laid off involuntarily got help keeping employer coverage through a 65 percent COBRA premium subsidy, so displaced workers paid only 35 percent of the cost.8U.S. Department of Labor. Evaluation of the ARRA COBRA Subsidy Final Report The subsidy initially ran up to nine months and was later extended by Congress to 15 months. It was limited to employees involuntarily terminated between September 1, 2008, and February 28, 2010.9U.S. Bureau of Economic Analysis. How is the COBRA Premium Assistance Provision of ARRA Classified in the National Income and Product Accounts
Health Care
The health care provisions ran along two tracks. The Health Information Technology for Economic and Clinical Health Act (HITECH), enacted as part of the stimulus, offered financial incentives for hospitals and physician practices to adopt electronic health records, set new standards for the privacy and security of health data, and raised penalties for organizations that failed to protect patient information.10U.S. Department of Health and Human Services. HITECH Act Enforcement Interim Final Rule
To keep states from cutting Medicaid as their revenues collapsed, the law temporarily raised the Federal Medical Assistance Percentage, the share of state Medicaid costs the federal government pays. The bump added an estimated $87 billion in Medicaid funding for the period from October 2008 through December 2010.11U.S. Department of Health and Human Services Office of Inspector General. Review of the Calculations of Temporary Increases in Federal Medical Assistance Percentages Under the American Recovery and Reinvestment Act
Education
The maximum Pell Grant award rose to $5,350 for the 2009–2010 school year. Title I programs serving high-poverty schools received substantial allocations, and the Individuals with Disabilities Education Act got additional funding to keep special education services running.12U.S. Department of Education. American Recovery and Reinvestment Act of 2009 – Using ARRA Funds Provided Through Part B of the Individuals with Disabilities Education Act
The State Fiscal Stabilization Fund put $39.7 billion behind state K-12 budgets. States taking the money had to maintain overall education spending above their fiscal year 2006 levels, so the federal aid supplemented rather than replaced state dollars.
Infrastructure and Transportation
The single largest infrastructure line was $27.5 billion for highway and bridge construction and repair, distributed through the Department of Transportation to state and local agencies. The law also directed $8 billion toward developing high-speed rail corridors, the first federal investment of its kind aimed at modernizing U.S. passenger rail.
Clean Energy, Broadband, and Research
The act made the largest federal clean-energy commitment up to that point. A White House retrospective totaled it at roughly $90 billion, with about $60.7 billion in investment provisions and $29.5 billion in energy-related tax credits. Programs extended the production tax credit for renewable energy by three years, broadened eligibility for the 30-percent investment tax credit, and created the 1603 cash grant program, which ultimately supported nearly 10,000 renewable energy projects totaling over 33 gigawatts of installed capacity.13The White House. A Retrospective Assessment of Clean Energy Investments
The Department of Energy received $4.5 billion for smart grid modernization, funding digital monitoring, automated controls, and advanced metering.14U.S. Department of Energy. Recovery Act Smart Grid Investment Grant (SGIG) Program The Weatherization Assistance Program’s annual budget rose from about $230 million to $5 billion over three years for energy-efficiency upgrades in low-income homes.15Oak Ridge National Laboratory. Summary of Findings From the ARRA Period Evaluation of the U.S. Weatherization Assistance Program
Broadband got $7.2 billion, split between $4.7 billion for the National Telecommunications and Information Administration’s Broadband Technology Opportunity Program and $2.5 billion for the Agriculture Department’s Rural Utility Service targeting underserved rural areas. The work fed into the later National Broadband Plan.
Scientific research received a historic infusion. The National Institutes of Health got $10.4 billion through fiscal year 2010: $8.2 billion for research across its 27 institutes and centers, $1.8 billion for construction and equipment, and $400 million for comparative-effectiveness research. The National Science Foundation received about $3 billion. The law also delivered $400 million to launch the Advanced Research Projects Agency-Energy (ARPA-E), a new agency modeled on the Pentagon’s DARPA that had been authorized in 2007 but never funded.
Buy American Rule
Section 1605 required that all iron, steel, and manufactured goods used in the construction, repair, or maintenance of public buildings and public works funded by the law be produced or manufactured in the United States. For materials consisting predominantly of iron or steel, all manufacturing processes had to happen domestically, though refinement of steel additives was excluded. Exceptions applied where domestic materials were unavailable, would raise costs unreasonably, or would conflict with U.S. trade agreements.16Acquisition.GOV. Section 1605 of the Recovery Act
Oversight
Congress built accountability into the law. The Recovery Accountability and Transparency Board coordinated oversight across federal agencies, drawing its membership from inspectors general across multiple departments, and reported quarterly and annually to the President and Congress.17Federal Register. Recovery Accountability and Transparency Board The Board ran Recovery.gov, which let the public trace money from federal agencies to specific recipients and follow project-level progress reports.18The White House. Frequently Asked Questions Recipients had to file detailed reports on how funds were used, and misuse carried criminal penalties under existing federal law.
What It Did to the Economy
CBO tracked the effects for years after enactment. At peak impact in the second quarter of 2010, CBO estimated the law raised employment by between 700,000 and 3.4 million jobs on an annualized basis and boosted real GDP by between 0.7 and 4.1 percent compared with what would have happened without it.19Congressional Budget Office. Estimated Impact of the American Recovery and Reinvestment Act on Employment and Economic Output The ranges are wide because economists disagree about how far government spending and tax cuts ripple through the broader economy.
Effects faded as designed. By 2012, the estimated GDP boost had fallen to between 0.1 and 0.8 percent, and by 2014 the employment effects were between negligible and modest. The total impact on the federal deficit over 2009–2019 came to roughly $836 billion, with small residual effects continuing after that window.1Congressional Budget Office. Estimated Impact of the American Recovery and Reinvestment Act on Employment and Economic Output in 2014