Second, in addition to tax cuts, the American Recovery and Reinvestment Act includes $144 billion in direct aid to state and local governments (Recovery. gov, 2009). This is extremely important, because most states are on the verge of bankruptcy, with essentially every state running a multibillion dollar deficit. States, unlike the federal government, cannot simply borrow money and consistently run unbalanced budgets. Instead, they have to actually pay upfront, which can pose a problem in tough economic times like today.
According to the New York Times, for example, California has been struggling with an enormous $41 billion budget deficit, and was on the verge of fiscal collapse (Steinhauer, 2009). If the worst had happened, the state government would have had to shut down effectively, leaving tens of thousands of workers unemployed and sending the state’s economy in even worse free fall. With the Obama stimulus plan, however, the direct aid from the federal government can help close those budget gaps, ensuring that essential programs will not be on the chopping block.
Without that federal money from the stimulus, many states would fall into disarray, and social services, education, and other necessary programs would disappear under the budget crunch. The stimulus plan, thus, ensures that such devastating actions are not taken with direct aid to those ailing state and local governments. Third, $154 billion of the stimulus package is being spent on infrastructure projects, scientific programs, and energy policy. These three areas are meant to be direct job creators, as the spending will create a high demand for new employment.
In infrastructure, the plan aims to repair old, dilapidated roads and bridges and even build many new ones across the country. The construction endeavors require intensive and large quantities of labor, meaning that the billions of dollars spent on such projects will quickly put many people to work. Once employed, the theory goes, these workers will begin spending more, and that consumer spending can once again restart economic prosperity. Similarly, spending on scientific research and energy policy will serve to create jobs in the immediate future.
As scientific research is expanded, laboratories and other research centers will need to hire new employees, assistants. Additionally, the research projects will ripple through the economy positively in two other ways: first, scientific industries, such as chemical suppliers, will expand their business as research begins, and second, the rewards of the research will likely yield long term technological benefits that end up creating new industries.
After all, research and development on computers may have seemed unimportant at the time, but in the end, computerization ended up spurring the largest economic expansion in American history. Finally, in terms of energy policy, the Obama administration is hoping that by investing heavily in new alternative energy sources, they will be able to create a new “green” sector of the economy. This is wise policy, because it will not only ensures that new jobs will be created, but also that the United States is less dependent on foreign unclean energy sources, thus enhancing our foreign policy while benefitting the environment.
Together, these three job engines—infrastructure, science, and energy—all will help create millions of jobs in the immediate future, an essential step in reversing the course of the recent economic recession. Fourth, and finally, the stimulus package includes measures for substantial social spending. This comes in the form of health care, hunger assistance, job assistance, and education. For health care, perhaps the most interesting component is creating an electronic medical records system.
According to the American Consumer Institute, the government estimates that a comprehensive electronic medical records system would save around $110 billion annually in health care costs (“Electronic Medical Records,” 2008). That gargantuan sum could either be redirected to other life-saving efforts, improving the medical system more broadly, or in consumer savings to lower health insurance premiums. Over a decade, that savings would add up to more than one trillion dollars, a substantial sum. Moreover, the stimulus includes large amounts for society’s most vulnerable, and helps to insulate them from hunger.