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Profile: American Recovery and Reinvestment Act of 2009
American Recovery and Reinvestment Act of 2009 was a participant or observer in the following events:
The American Recovery and Reinvestment Act (ARRA) invests $90 billion in clean energy projects for the next 10 years via loan guarantees, tax incentives, and grants. $38 billion of this is government spending and $20 billion is tax incentives. Symbolically, President Obama signs the bill into law at the Denver Museum of Nature and Science, where he takes a tour of the museum’s solar panel installation. He says he hopes the bill will inspire Americans to get involved in “green” energy the same way that President Kennedy’s goal to put a man on the moon inspired Americans in the 1960s. “I hope this investment will ignite our imagination once more in science, medicine, energy and make our economy stronger, our nation more secure, and our planet safer for our children,” Obama says before signing the bill. The bill includes:
A three-year extension to the tax credit for wind, which would have expired at the end of this year, and an extension until the end of 2013 for geothermal and biomass renewable-energy projects. The credit has been increased to 30 percent of the investment.
$4.5 billion in direct spending to modernize the electricity grid with smart-grid technologies.
$6.3 billion in state energy-efficient and clean-energy grants, and $4.5 billion to make federal buildings more energy efficient.
$6 billion in loan guarantees for renewable energy systems, biofuel projects, and electric-power transmission facilities.
$2 billion in loans to manufacture advanced batteries and components for applications such as plug-in electric cars.
$5 billion to weatherize homes of up to 1 million low-income people.
$3.4 billion appropriated to the Department of Energy for fossil energy research and development, such as storing carbon dioxide underground at coal power plants.
A tax credit of between $2,500 and $5,000 for purchase of plug-in electric vehicles, available for the first 200,000 placed into service.
Most companies in the green-tech field hail the new focus on energy efficiency and renewable energy in the bill, contrasting it with the Bush administration’s support for fossil fuel energy production and its disdain for clean energy programs. Investors and analysts say the new law is a step towards a comprehensive energy policy based on sustained commitment to renewable energy and efficiency. Michael Liebriech of New Energy Finance says: “For years, US policymakers’ support for clean energy has been uneven. No longer… the US will have a great chance to be the growth engine for our industry over the next several years.” The spending should have an almost-immediate impact, especially in areas such as smart grid technology and energy efficiency, says venture capitalist Dennis Costello. However, even this influx of government funding does not solve all the financial problems facing energy technology firms. The recession continues to grip the economy, he notes, damping demand and making financing of new projects difficult. “It’s kind of refreshing to see at least beginnings of a real energy policy, some sort of unified approach to our energy problems,” he says. “But it isn’t going to solve our energy problems. There are a lot of countervailing factors to give pause to being over-exuberant on the future of energy sector and clean tech.” [CNET News, 2/17/2009; Adam Johnston, 7/2013]
The Center for American Progress releases a study that shows how economically viable a transition from the US’s current dependence on carbon-intensive and fossil fuels to a clean energy economy can be. Making this transition is a necessity, the study says, due to “global climate change due to rising carbon emissions” forcing the US to “dramatically cut its consumption of traditional fossil fuels, the primary source of carbon dioxide (CO2) delivered into our atmosphere by human activity.” The transition must achieve three interrelated goals:
Dramatically increasing energy efficiency;
Dramatically lowering the cost of supplying energy from such renewable sources of energy as solar, wind, and biomass; and
Mandating limits and then establishing a price on pollution from the burning of oil, coal, and natural gas.
According to the study, a dramatic decrease in CO2 emissions can be achieved alongside an increase in employment opportunities, individual incomes, and economic growth. The authors of the study say their work is done within the parameters of two government initiatives: the American Recovery and Reinvestment Act (ARRA—see February 2009) and the proposed American Clean Energy and Security Act (ACESA), which remains to be passed by Congress. Taken together, the authors claim, the two measures can generate roughly $150 billion per year in new clean-energy investments in the United States over the next decade. Most of this new spending will be undertaken by the private sector, the authors say, triggered by the ARRA and the yet-to-be-passed ACESA, and will, they predict, create some 1.7 million new jobs that will be sustained if the spending continues year after year. That job gain would drop the unemployment rate about one percent, “even after taking into full account the inevitable job losses in conventional fossil fuel sectors of the US economy as they contract.” The authors say the clean energy program would do a great deal to combat the recession. The program would rely on three elements:
Regulations aimed at promoting clean energy;
A mandated cap on carbon emissions that will be phased in through 2050; and
Measures designed to help businesses, communities, and individuals successfully manage the transition to a clean-energy economy.
The authors conclude: “To be sure, any economic modeling effort that estimates changes in employment growth, economic growth, and income growth will result in forecasts that are problematic by nature. We make this clear in our paper wherever we rely on our own economic models and those employed by others. But we also take pains to examine the relative strengths and weaknesses of all the modeling approaches—including our own. This enables us to cross check our own conclusions with those of other researchers to reach the most reliable possible understanding of the overall impact of advancing a clean-energy agenda within the US economy.” [Center for American Progress, 6/18/2009; Robert Pollin, James Heintz, and Heidi Garrett-Peltier, 6/18/2009 ]
With unemployment rates for American Indians at 27 percent, African-Americans logging jobless rates of 15 percent, and Hispanics at 13 percent, experts say that for these ethnic groups, the economic recession is more of a “Great Depression.” The foreclosure crisis is equally ominous, having worsened with increasing joblessness, unduly impacting minority groups at a staggering rate. Dr. James Carr, chief operating officer of the National Community Reinvestment Coalition, explains: “The crisis is now fueled by unemployment and loss of income. In 2009, nearly 60 percent of foreclosures are triggered by unemployment.… The Obama administration’s endeavors to curtail foreclosures aren’t working.” He emphasizes that the loan modification program has “plenty of carrots” for the banks, “but no meaningful sticks to compel more responsible actions.” On average, lenders lose 10 times as much on foreclosures than loan modifications, or about $144,000 as opposed to a loan modification tax write-off of $14,000. Because they can, banks are choosing to deduct the greater loss on their current tax bill by foreclosing rather than modifying the loan. Consequently, only 12 percent of homeowners eligible for modification have received such through voluntary Making Home Affordable program set up by the Obama administration. According to Raymond Skinner, Maryland’s secretary of housing and community development: “Foreclosures are taking on a different face. As of the second quarter of 2009, the majority of the nation’s foreclosures are now on prime loans.”
Bankruptcy Law Reform, Homeowners Loan Corporation - What is needed, says Carr, is bankruptcy reform to allow judges to modify mortgages using the same methods they use to modify yacht and investment property payments; at least 30 percent of loans on the way to foreclosure could be helped by reformation of bankruptcy laws. Still, experts agree that even loan modifications won’t help many unemployed persons. Carr is calling for “a new version of the Great Depression-era Homeowners Loan Corporation” (HOLC) to allow the use of eminent domain to purchase loans between current market value and face value cost. The discount could then be used to modify the loans so that the unemployed homeowner could enter into rental agreements to stay in their homes, or even obtain emergency grants or loans to continue paying their mortgages. HOLC, however, is not under consideration by either Congress or the Obama administration.
Insufficient American Recovery and Reinvestment Act Resources - Some argue that the 2009 American Recovery and Reinvestment Act did not provide the resources needed by those hardest hit by the recession, which was supposedly the goal of the bill. As a result, there is now an immediate need for a targeted stimulus for job creation and unemployment benefits extension. “Channeling dollars to the individuals and communities that need them most will immediately stimulate the economy and save and create jobs for both the neediest households and the US population generally,” Carr says. “Families that live on the edge of survival will pour these recovery dollars immediately back into the economy through spending on groceries, medicine, clothing, childcare, energy, transportation, and other basic necessities. That spending would support multiple sectors of the economy and have positive impacts far outside of the communities where dollars are immediately spent.” Additionally, racial barriers and continuing discrimination need to be addressed to guarantee access to affordable housing alternative, transportation, education, and economic opportunity. [Nation, 9/25/2009; NPR, 9/28/2009]
President Obama tells how his ideas of bipartisan compromise with Republican lawmakers were dashed. Obama reflects on the American Recovery and Reinvestment Act of 2009, signed into law in February 2009. Interviewer Jann Wenner of Rolling Stone asks: “When you came into office, you felt you would be able to work with the other side. When did you realize that the Republicans had abandoned any real effort to work with you and create bipartisan policy?” Obama responds: “Well, I’ll tell you that given the state of the economy during my transition, between my election and being sworn in, our working assumption was that everybody was going to want to pull together, because there was a sizable chance that we could have a financial meltdown and the entire country could plunge into a depression. So we had to work very rapidly to try to create a combination of measures that would stop the free-fall and cauterize the job loss. The recovery package we shaped was put together on the theory that we shouldn’t exclude any ideas on the basis of ideological predispositions, and so a third of the Recovery Act were tax cuts. Now, they happened to be the most progressive tax cuts in history, very much geared toward middle-class families. There was not only a fairness rationale to that, but also an economic rationale—those were the folks who were most likely to spend the money and, hence, prop up demand at a time when the economy was really freezing up. I still remember going over to the Republican caucus to meet with them and present our ideas, and to solicit ideas from them before we presented the final package. And on the way over, the caucus essentially released a statement that said, ‘We’re going to all vote “No” as a caucus.’ And this was before we’d even had the conversation. At that point, we realized that we weren’t going to get the kind of cooperation we’d anticipated. The strategy the Republicans were going to pursue was one of sitting on the sidelines, trying to gum up the works, based on the assumption that given the scope and size of the recovery, the economy probably wouldn’t be very good, even in 2010, and that they were better off being able to assign the blame to us than work with us to try to solve the problem.” No House Republican voted for the package; only three Republican Senators voted for it. [BBC, 2/14/2009; Rolling Stone, 9/28/2010]
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