The Recovery Act, line by line
The Recovery Act was sold as one number. The statute is a long list of smaller ones, and the big number itself did not stay put.
On 17 February 2009 the American Recovery and Reinvestment Act became Public Law 111-5. Four days earlier the Congressional Budget Office had put the cost of the conference agreement at $787 billion over the years 2009 to 2019, and $787 billion is the name the Act has gone by ever since. The figure was an estimate of something that had not happened yet, and the Act was never one thing. Read title by title it was a tax bill, a rescue of state budgets, a temporary enlargement of the safety net and a public-works programme, bound together under one heading.
The tax title
How large the tax cuts were depends on who is counting. CBO scored about $212 billion of the cost as lost revenue. The Joint Committee on Taxation, scoring the same title, reached about $326 billion, because refundable credits paid to people who owe no tax are spending in one set of books and tax relief in the other. The Bureau of Economic Analysis, which tracked the Act in the national accounts until 2013, settled the question its own way and classed the entire value of refundable credits as social benefits paid to persons.
The largest single line was Making Work Pay, a credit for 2009 and 2010 equal to 6.2 per cent of earned income, capped at $400, or $800 on a joint return. The Joint Committee put its cost at $116 billion. Next came a measure with little to do with recovery: a one-year patch to the alternative minimum tax, which was not indexed to inflation and which Congress had been patching year after year to keep it away from middle-income households. Raising the exemption to $70,950 for a married couple cost $69.8 billion. The Council of Economic Advisers, in its later reviews of the Act, took to quoting a second total with the patch left out.
The rest were smaller and aimed lower down the income scale. The earned income tax credit rose to 45 per cent for families with three or more children. The child tax credit became refundable from the first $3,000 of earnings. The new American Opportunity Tax Credit covered all of the first $2,000 of college costs and a quarter of the next $2,000, so up to $2,500 a year.
The states
The second large block kept state budgets from emptying. Washington raised its share of every state’s Medicaid bill by 6.2 percentage points, the title CBO costed at $90 billion, and a State Fiscal Stabilization Fund of $53.6 billion went to governors, who had to spend 81.8 per cent of their allocation on schools and colleges. Money of this kind leaves no monument. What it was meant to buy was layoffs that did not happen, and no ribbon-cutting records those.
The safety net
Every weekly unemployment payment grew by $25, and the emergency benefit weeks Congress had created in 2008 were kept open to new claims until the end of 2009; CBO costed the unemployment provisions at $39.2 billion. Food stamps rose to 113.6 per cent of the June 2008 thrifty food plan, at $20 billion. A one-off payment of $250 went to each person drawing Social Security, Supplemental Security Income, railroad retirement or veterans’ benefits, about $13 billion in all.
Roads, rails and records
The part the public pictured was the smallest of the large parts: $27.5 billion for highways, about $8.4 billion for transit, $8 billion for high-speed rail, $5 billion for the weatherization of homes. A further $2 billion went to the office coordinating electronic health records, and incentive payments to doctors and hospitals adopting them cost about $20.8 billion net. In CBO’s final accounting transportation came to $46 billion out of $663 billion in outlays.
How $787 billion became $836 billion
Within a year CBO’s estimate stood at $862 billion, about $75 billion above the original and most of it on the spending side. Unemployment compensation was running $21 billion above the first projection. The enlarged food-stamp benefit was to stay in force until inflation caught up with it, and with inflation lower than projected that meant longer, adding $34 billion. Later laws then rescinded some of the money and cut the higher food benefit short, and by August 2010 the total was back to $814 billion. It drifted afterwards in small revisions, $821 billion in February 2011 and about $830 billion through much of 2012 and 2013, until CBO’s last report on the Act, in February 2015, put the bill at $836 billion.
The revisions follow from how the Act was built. A stimulus made largely of benefits that pay out automatically costs more the worse the economy it is meant to repair turns out to be, and CBO traced the 2010 increases to the unemployment rate and food prices running differently from the assumptions of February 2009. The $787 billion was never the cost of the Recovery Act. It was the first estimate of a cost that depended on how long the recession lasted.