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What Is ARRA Funding?

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  • Written By: Mike Howells
  • Edited By: Allegra J. Lingo
  • Last Modified Date: 16 September 2016
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American Recovery and Reinvestment Act (ARRA) funding is money allocated by the United States federal government to a variety of agencies and institutions to promote spending and economic growth. It was passed in early 2009 by Congress and signed into law by President Barack Obama. Its purpose was to stimulate the flagging American economy by promoting things like construction projects, weatherization efforts, and other capital expenditures.

ARRA funding was provided as a direct result of the worldwide recession that saw house values plummet and unemployment rise to nearly 10% between late 2008 and 2009. The related financial crisis caused credit to become very difficult to obtain for both businesses and local government, making it hard to embark on capital projects or purchase big-ticket items. To stimulate spending, the US government opted to provide funding for a variety of projects to help stimulate the economy and job growth.

The total ARRA funding was $787 billion US Dollars (USD). Extended unemployment benefits, new tax credits, competitive grant programs, direct relief to state budgets, and numerous other programs and initiatives were all included in the program. Each element was intended to preserve and create jobs, promote economic growth and efficiency, protect the most vulnerable populations in the country, and minimize cuts to essential services.

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Economists were split on their opinion of ARRA funding as a way to deal with recession. While many saw it as the ideal way to counter the downturn, others felt more government spending was not the answer. Still others believed the funding levels were in fact not large enough to offset the depth of the recession.

One of the primary conceits of ARRA funding was that it funded "shovel ready" projects that would result in immediate spending and hiring. Ideally, crafters of the bill foresaw uses such as local governments using the funding to start bridge repairs and similar large scale projects that they had previously not had the money for. This did occur in many cases, but critics of the stimulus bill contended it did not occur on the scale or with the rapidity that was envisioned.

Despite fairly strict requirements on the ways ARRA funding could be spent, many states were able to use it to offset their own budget deficits. While this generally prevented the need to raise taxes or institute austere service cuts, the temporary nature of the funding meant the states were delaying rather than addressing systemic budget shortfalls. By early 2011, common wisdom accepted that ARRA funding blunted the worst of the recession, but it remained unclear how states and the federal government would deal with paying for its ongoing costs.

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