Thomas
February 17, 2010 marked the anniversary of the American Recovery and Reinvestment Act (ARRA) implemented by the Obama administration to boost employment and lead us out of the economic recession of 2008 and 2009. RESI, also, held an important event on this day, our Annual Economic Outlook Conference. Ok, maybe, I exaggerate when I compare a national event to our event but it was still important to us. During the conference, three panelists provided us with some excellent opinions on the effects of ARRA on the economy. In particular, two Towson University economists, Dr. Dorn and Dr. Rhoads, were especially knowledgeable and gave us two differing opinions.
Dr. Dorn and Dr. Rhoads
Professor Dorn opinioned that ARRA has not been an efficient policy and American taxpayers will have to pay the bill through higher taxes in the following years. In his view, the government sector is not as efficient as the private sector and increasing public sector spending does not provide as many jobs as the private sector. He also questioned the assertion by some people that the US had many “shovel ready” projects that needed investment from the federal government. Few of the allotted dollars have been spent on public infrastructure projects so far and maybe there were not as many “shovel ready” projects as portrayed. In his opinion, the problem was the supply side of the economy. Instead, the Federal government should have given more tax breaks to businesses and eliminated corporate taxes for example. Also, the ARRA money would have been more efficient if the government would have given it to the private sector to spend and manage public infrastructures.
Professor Rhoads had a different take on the efficiency of ARRA. He reminded us that in extremely difficult times, the government needs to provide short term economic relief and has a legal obligation to create policies leading to full employment. In his opinion, the private sector does not have the ability to lead us out of one of the most difficult economic times facing the US economy. Many economists participated in the craft of ARRA and found this policy necessary. According to Dr. Rhoads, another positive aspect of ARRA was that the government made sure that it did not put all its eggs in the same basket. Seemingly, the government had learned from past policy mistakes. Therefore, spending for ARRA was rightly divided in several different areas; tax breaks to businesses, extended financial support to unemployed people or people in dire economic situations, and investment in public infrastructures. In addition, the use of monetary policy could have not been as successful. The federal interest rate has been kept at almost zero percent since 2000, which meant that it was not as effective as before.
These two distinguished experts made some excellent arguments regarding the efficiency of ARRA. And I left with so many questions of my own.
- Was the policy crafted efficiently?
- Will American taxpayers pay higher rates of tax in the future?
- Should the Obama administration have implemented more tax breaks for the private sector?
- Will more tax breaks on businesses create more jobs?
Etc… All in all the RESI conference displayed TU’s expertise at providing varied solutions to complex problems while also giving the audience food for thought going forward.
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