The American Recovery and Reinvestment Act

By Siddhartha Rao

Faculty mentor: Professor Steve Greenlaw

The COVID-19 Pandemic has caused the worst economic decline since the Great Depression. Both President Trump and Biden have passed stimulus packages to get the economy to recovery as quickly as possible. Since these packages have just been implemented there is no way to know the possible long term impacts they will have on the economy. The ARRA stimulus package that was implemented in 2009 was the last stimulus package to be passed by the US Government before the COVID-19 pandemic. This makes it the best comparison point for the most recent stimulus packages. This paper aims to find out the effectiveness of the ARRA stimulus using two approaches. One uses simulations of increasing government spending to see the impact of increasing all of the stimulus while the other looks at the estimated economic impact of each program funded by the ARRA. The first approach found that if the stimulus was five times greater then the economy would have recovered by 2012. The second approach found putting more funding into programs with a higher chance of increasing economic activity could have closed the worst part of the recession only if all of the funding was used at once. These approaches help to give insight to what can make a stimulus more effective at setting the economy on a course for recovery.

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