Following news coverage can be easy. Understanding some of the terms it uses, less so. In our Flashcard
series, The Atlantic explains ideas you may read about but never see
spelled out. In this installment, we explain the American Recovery and Reinvestment Act.
The $862 billion American Recovery and Reinvestment Act (aka The Recovery Act, aka The Stimulus, aka Obamanomics) was supposed to cut short the recession and create millions of jobs when the president signed it in early 2009. A year and a half later, stimulus is a dirty word, and two-thirds of Americans think the bill did nothing to help the economy, or worse.
Some of the anti-stimulus fever is understandable, and some of it is a misunderstanding. We were promised 8 percent unemployment with the stimulus, and we got 10 percent. That's frustrating. But it's also frustrating that plenty of smart people claim that the stimulus was all about government creating new powers, when it was overwhelmingly about helping states and families do old things, like pay teachers and credit card bill.
Journalists often illustrate stimulus articles with construction workers next to Recovery Act logos. But the stimulus wasn't a Big Dig. It was a Big Fill. Its chief role has been to fill the holes in state and family budgets. Here's how:
It's best to think about the stimulus in three separate pieces: the Tax Cuts, the Big Fill, and the Fun Stuff.
First, the Tax Cuts. One-third of the stimulus goes to reducing our tax burden. There are two big ticket items here. First, in order to get money into working people's pockets, Congress passed the Making Work Pay tax credit, which incrementally refunds working Americans for up to $800 a year. Second, in order to keep upper-middle class families from paying higher taxes, the bill "patches" the Alternative Minimum Tax. Here's a breakdown of the rest of the individual tax credits with letter grades from the Tax Policy Center (this list does not include about $15 billion in business tax incentives, or $20 billion in green energy tax goodies).
Second, the Big Fill. About half of the stimulus supported state and federal programs that needed more money. To be clear: the role of this money was not to create new obligations, but to fulfill existing obligations. In 2009, 80 percent of spending went to five programs: Medicaid, unemployment compensation, Social Security, the State Fiscal Stabilization Fund (which mostly pays for education), and student financial aid. To date, two-thirds of federal outlays have gone to help states' pay for Medicaid, education and public employees through two programs known as the Medicaid Federal Medical Assistance Percentage and the Fiscal Stabilization Fund. Here is the clearest breakdown of spending I have found.
Third, the "Fun Stuff," as Vice President Joe Biden calls it. Hundreds of contracts and loans for bridges and buildings are out the door already. But one-sixth of the full stimulus is waiting to be spent as part of a long-term effort to promote green energy, electronic health records, better schools, and new research. This is the "reinvestment" part of the Recovery and Reinvestment Act. As you can see from the table above, the Departments of Transportation, Energy and Education have more than $100 billion to spend on programs after 2010. [Read more about the Fun Stuff in TIME.]