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What is the American Recovery and Reinvestment Act?

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  • Written By: Florence J. Tipton
  • Edited By: John Allen
  • Last Modified Date: 10 February 2020
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Also called the Stimulus Plan, the American Recovery and Reinvestment Act (ARRA) is legislation passed by the United States Congress in 2009 to bring stability to the national economy during a severe economic recession. Several different components were developed to target weak areas and improve the U.S. economy both immediately and on a long-term basis. Spending for infrastructure projects, job creation, educational investments, and money for state governments were some of the key provisions in the Recovery Act. Signed by President Barack Obama on February 17, 2009, the total amount of the stimulus bill was $787 billion U.S. Dollars (USD).

The goal of the ARRA was to not only to create new jobs, but also to preserve many existing jobs. The American Recovery and Reinvestment Act of 2009 also provided tax cuts for families and businesses. People who had lost jobs during the economic downturn were given additional extensions to receive unemployment insurance payments while looking for work.

The Stimulus plan sought to pump billions of dollars into the struggling American economy in hopes of reviving economic growth. Considered a stop-gap measure by some politicians and economists, the American Recovery and Reinvestment Act is credited for preventing the Great Recession from becoming a second Great Depression in America. Many observed that the ARRA stemmed the economic free fall in the latter part of 2008 when the United States was losing nearly 800,000 jobs per month.

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Money allocated in the American Recovery and Reinvestment Act was spread out over a number of years. The objective was to have a cumulative effect on improving the economy over the long-term. Infrastructure investments for long-term economic growth included renewable energy projects, computerization of health records, and road and construction projects across the country.

By increasing renewable energy sources, the United States hoped to decrease its dependence on foreign oil as an energy resource. New technology initiatives were aimed at reducing medical errors that may have contributed to the rising costs of health care services. Individual states could apply for federal grants to help pay for so called "shovel-ready" projects — construction projects that have passed the planning and approval process and only need funding to begin.

The education initiatives included in the American Recovery and Reinvestment Act connected America’s ability to compete for 21st century jobs with the current the educational system in the country. The most prominent education program in the Stimulus was Race to the Top, a $4.35 billion (USD) program that allows states and school districts across the United States to compete for federal grants. The money is available for those who demonstrate a plan to reform poorly performing schools and to improve teacher training and the quality of education that is available to students.

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