Recovery Act Boosting Economic Performance and Providing Middle Class Tax Relief

The Council of Economic Advisers (CEA) recently released its third quarterly report on the impact of the American Recovery and Reinvestment Act (ARRA).  The report generally confirms what economists across the board have concluded: the Recovery Act has prevented a full economic collapse; generated millions of jobs; boosted national economic performance; and provided sorely needed state fiscal relief.

The CEA estimates ARRA has created or saved between 2.2 and 2.8 million jobs, nearly half of which have been enabled by the tax relief and income support provisions of the law.  The report also finds that as a result of the Recovery Act:

  • government investment in high-growth areas, including infrastructure and clean energy, increased $16 billion in the first quarter of 2010;
  • real GDP began rising in the third quarter of 2009 and payroll employment started to increase in the first quarter of 2010;
  • first quarter GDP in 2010 is between 2.5 an 2.9 percent higher than what it would have been; and
  • approximately $110 billion in tax relief and $90 billion in other income support, like unemployment benefits and food assistance, directly benefited middle and lower income families

The last point is critical.  Not only has ARRA positively impacted the economy, it has offered real relief to working families in a time of extreme economic hardship.  As CEA Chair Christina Romer, relates, “[i]n addition to shoring up the overall economy... the Recovery Act has made a real difference in the lives of families.  The broad set of tax cuts and income supports enacted last year have clearly boosted consumption and employment growth in a way that has been absolutely essential.”  The table below illustrates that ARRA's tax relief provisions are predominantly directed towards the middle and working class and have helped reduce these families' tax burdens to the lowest levels they have been in decades.

Center on Budget and Policy Priorities - Federal Income Taxes on Middle-Income Families at Historically Low Levels
Council of Economic Advisers - The Economic Impact of the American Recovery and Reinvestment Act of 2009: Third Quarterly Report
Progressive States Network - 2.4 Million Jobs Supported by the Recovery Act - and a Depression Averted
Progressive States Network - Take Action: Additional Federal Job Creation and State Fiscal Relief Needed
The White House - New CEA Report Finds Recovery Act Already Responsible for about 2.5 Million Jobs