Frequently Asked Questions on the Recovery and Reinvestment Act
Answers compiled by Rev. Larry Janezic, OFM, FAN Issue Advocate

Does the Bill create and save jobs?

It is very clear that infrastructure improvement projects will put people back to work.  Plans for new green jobs and high tech training opportunities certainly raise hopes.  In a recent interview with the Wall Street Journal, John Silvia of Wachovia states that, historically, stimulus packages generally work.  In economic terms:  once people begin spending, the private sector starts to trust in the movement of goods and service and then creates more jobs.  Silvia predicts that this positive private sector job growth could happen as early as next year.   He appears to be confident because the U.S. Government is making an effort to work with the banks to promote credit and loaning.  In this way, our crisis differs from Japan’s famous lost decade (http://online.wsj.com/video/assessing-the-prospects-for-a-us-recovery/0F670853-9965-4140-BE74-882474BFF4A2.html).  The Center on Budget Policy Priorities also indicates the effectiveness of stimulus spending as it relates to job creation (http://www.cbpp.org/).

Is it too costly?

Much of the popular literature on the subject indicates that, indeed, the size of the package is important.  Many economists assert that it might be better to err on the side of a bigger package.   Critics will cite the historical argument that the New Deal did not significantly lower the unemployment rate and WWII rescued the New Deal.  Yet others suggest that FDR, during the course of the New Deal in his efforts to balance the budget, in essence, cut the stimulative effect mid-stream.

Will our grandchildren be stuck with a huge federal debt?

Theoretically, the desired outcome of the stimulus modifies the tax burden on future generations (i.e., More people working, more people paying taxes).  In an article in the Wall Street Journal, Gary Becker and Kevin Murphy indicate that while there generally is some tax consequence down the road, the tax burden is offset by the benefit of short-term spending and the long-term effect of the stimulus on the economy (http://online.wsj.com/article/SB123423402552366409.html).

Are the humanitarian measures (e.g., nutrition, unemployment compensation) stimulative?

Absolutely.   Mark Zandi of Moody Economy.com asserts that a temporary increase in Food Stamps will produce a measurable simulative effect.  $1.73 is realized for every dollar that is spent in food stamps.  In an article from the Center on Budget Policy Priorities, Chad Stone indicates that spending in a pervasive way, through assistance programs, addresses the over supply of goods and helps loosen the flow of goods and services (See PDF - http://www.cbpp.org/2-5-09bud.pdf).

Will the federal government be perpetually saddled with the entitlement spending prescribed in the bill?

There is that risk.  Some economists support years of government spending because desired outcomes take time.  Nevertheless, the Federal Government is using high tech methods to assess and communicate accountability (http://www.recovery.gov).

These efforts would enable the general public to evaluate the merits of the programs.

Aren’t tax cuts more effective in stimulating spending?

Tax cuts and tax incentives are good, provided that the money is put back into spending on goods and services.  People who are struggling are more apt to spend almost immediately.  Money that is saved for wealth development is less likely to stimulate the current economy.

When will we begin to see positive effects of the Bill?

According to John Silvia of Wachovia, if the plan works, we should see a more favorable unemployment rate by this time next year.