American Recovery and Reinvestment Act of 2009

American Recovery and Reinvestment Act of 2009 is stimulus package enacted by the 111th United States Congress. It passed the House of Representatives on January 28, 2009, making supplemental provision of job preservation and creation, infrastructure investment, education, healthcare, assistance to the unemployed, and state and local fiscal stabilization. It is a bill which is supposed to strengthen America's middle class through measures that modernize the nation's infrastructure, and calls for the enactment of legislation to restore economic growth through various measures which help the:

1. Modernization of America's infrastructure,
2. Expansion of educational opportunities for American children,
3. Provision of tax benefits and
4. Upliftment of American economy.

The Senate voted on February 9, to advance the bill and President Barack Obama signed it on February 17, 2009. The bill is a $780 billion package, with almost 35% of it devoted to tax cuts (mostly for 2009).

Important Provisions of the Act
Some of the important aspects of the American Recovery and Reinvestment Act of 2009, are as follows:

• Home Buyer Tax Credit and Tax Exemptions: The bill provides a $8,000 tax credit for the first-time home buyers, who purchase a principal residence on or after January 1, 2009, and before December 1, 2009. It will be claimed on a tax return to reduce the buyer's income tax liability and in case any credit amount remains unused, the unused amount will be refunded as a check. To qualify as a first-time home buyer, the buyer (or his spouse) should not have owned a residence during the three years prior to the purchase. A sum of $237 billion is allocated for the tax relief of individuals. Out of this, a major chunk of $116 billion, provides new payroll tax credit of $400 per worker and $800 per couple. It also gives $70 billion in form of Alternative minimum tax, which is a one year increase in AMT floor to $70,950 for joint filers for 2009, and $15 billion for the expansion of child tax credit. There are provisions to expand college credit and provide a $2,500 tax credit for college tuition and related expenses, for 2009 and 2010. However, the credit is phased out for couples earning more than $160,000.
• FHA, Fannie Mae and Freddie Mac Loan Limits: The bill revises last year's loan limits for FHA, Freddie Mac and Fannie Mae loans, and also includes language providing the HUD Secretary with the discretion, if warranted, to increase the loan limit for any area smaller than a county. However, the Secretary's discretion is limited by $729,750 cap. The new loan limits are beneficial for homeowners, buyers and realtors.
• Tax Exemptions for Energy Efficient Housing: For the promotion of energy efficient housing, the bill provides $6 billion to the state and local governments as conservation grants for energy audits, retrofits and financial incentives. The homeowners will be able to claim a 30% tax credit for purchases of new furnaces, windows and insulation through 2010, and $5 billion is allocated to modernize the nation’s electricity grid, to save consumers money.
• Health-care: According to the provisions in the bill, more than 11%, which is about $86.6 billion, is allocated to help states with Medicaid. The bill also provides $24.7 billion for a 65% subsidy of health-care insurance premiums, for the unemployed under the COBRA program, $10 billion construction of National Institutes of Health facilities, and conducting health researches, $19 billion for the advancement in the field of health information technology, and $2 billion for community health services. Besides these projected expenditures, the bill also allocates money for various other health care issues like Veterans Health Administration, and training of health-care personnel.
• Provisions for low income workers, unemployed and retirees: As an important aspect of the bill, $40 billion was allocated to provide extended unemployment benefits, and $14.2 billion to give $250 to all the Social Security recipients. Besides these, $3.95 billion is allocated for job trainings, $3 billion for welfare payments on temporary basis, $500 million for conducting vocational training programs for the disabled, $120 million for community service jobs for older Americans, and $400 million for employment services.

The bill has provisions to fight against the economic downturn, however, maybe because of some latent loopholes, many economists and think tanks have been against President Obama's plan. A full page advertisement with the names of approximately 200 economists appeared in The New York Times and The Wall Street Journal on January 28, 2009, was funded by the Cato Institute stated:

... we the undersigned do not believe that more government spending is a way to improve economic performance. More government spending by Hoover and Roosevelt did not pull the United States economy out of the Great Depression in the 1930s... To improve the economy, policymakers should focus on reforms that remove impediments to work, savings, investment, and production. Lower tax rates and a reduction in the burden of government are the best ways of using fiscal policy to boost growth.