Economic Impact of the American Recovery and Reinvestment Act of 2009, Second Quarterly Report

COUNCIL OF ECONOMIC ADVISERS
JANUARY 13, 2010

This is the second quarterly report on the economic impact of the American Recovery and Reinvestment Act of 2009 prepared by the Council of Economic Advisers (CEA).  Because identifying the impact of macroeconomic policy is inherently difficult, we report the results from two CEA approaches and those of a number of respected analysts, including the non-partisan Congressional Budget Office. The CEA Report is available HERE. The key findings are:

1.  As of the end of the fourth quarter of 2009, $263 billion of the total $787 billion included in the Act, or about one-third of the total, has been outlayed or received as tax cuts.  If one includes spending that has been obligated but not yet outlayed, the fraction is over one-half.

2. The CEA estimates that the ARRA added between 3 and 4 percentage points to real GDP growth in 2009:Q3 and between 1½ and 3 percentage points in 2009:Q4.  It has raised the level of GDP as of 2009:Q4 by roughly 2 percent, relative to what it otherwise would have been.  As Table 7 shows, our estimates of the effect of the Act on GDP growth are broadly in line with independent and private estimates.

3. The CEA estimates that the ARRA has raised employment relative to what it otherwise would have been by between 1½ and 2 million jobs as of 2009:Q4.  Table 8 shows our estimates alongside those of other analysts.

4. We examine the direct recipient reporting data available for 2009:Q3.  These data indicate that about 640,000 jobs were saved or created by reporting recipients of ARRA funds as of the third quarter of 2009.  Because the recipient reporting data cover only a fraction of the funds expended to date and do not include any multiplier effects, this estimate suggests, if anything, a larger overall jobs impact than our comprehensive estimates show.

5. The report includes a detailed analysis of the clean energy programs supported by the ARRA.

• We estimate that roughly $90 billion of the total $787 billion of tax cuts and spending in the Act are related to clean energy.  As of 2009:Q4, roughly $5 billion has been outlayed or received as tax cuts, and another $26 billion has been obligated but not yet outlayed.  These investments have the potential to jumpstart the transition of the American economy to greater efficiency and cleaner energy.
• As shown in Table 13, CEA’s analysis suggests that the outlays and tax credits for clean energy to date have saved or created 52,000 clean energy jobs as of 2009:Q4 and another 11,000 induced jobs throughout the economy.
• This employment impact is expected to increase substantially over time.  A job-year is one job for one year, and provides a sensible way of cumulating the employment impact of a program over an extended period.  We estimate that clean energy investments in the ARRA will create more than 700,000 job-years of employment by the end of 2012.