Report on Stimulus Impact
The debate on the success of last year’s American Recovery and Reinvestment Act is ongoing. A non profit group in Richmond is out with a report on its impact in Virginia.
The Commonwealth Institute for Fiscal Analysis says the stimulus money did what it was intended to do in Virginia. Michael Cassidy is Executive Director of the Institute, which focuses its attention on medium- and low-income Virginians.
Cassidy: And the analysis shows that approximately 5.3 million Virginians were helped with nearly 2 billion dollars in aide through the forms of tax credits, additional unemployment benefits, and social security that went directly into their hands during this past year.
One key, he said, is the breadth and depth of the money crunch.
Cassidy: The recession has been so strong, so deep, and so long-lasting that the provisions of direct aide to folks who were struggling has certainly been very helpful to those individuals and families. The country’s economic output was plummeting when the Recovery Act became law last winter. In the spring the economy began to stabilize and by the summer it was starting to grow again, which is the first step toward a full recovery.
Cassidy pointed to a number of national studies.
Cassidy: The non-partisan Congressional Budget Office has estimated that the country would have lost as many as 2.4 million more jobs in 2009 without the Recovery Act. And several well-known private economic forecasters such as IHS Global Insight and Moody’s Economy and macro advisers have all concluded that the Recovery Act played a crucial role in turning the economy toward recovery. The big challenge for the State is that typically State revenues, and this happens nationwide, lag in any kind of economic recovery. So whatever fragile recovery we may be developing at this point, it’s gonna be quite some time before we see the results of that in State coffers.
Virginia, he noted, will be getting more federal stimulus money.
Cassidy: There is additional funding that was provided through the Recovery Act through a few other needs that are still in the pipeline, if you will. One of the important findings about these direct aide to individuals is that this particular portion of the Recovery Act affected economic stimulus because it reached taxpayers soon after the Recovery Act became law, it rapidly pumped additional income into the hands of Virginians, which increases consumer demand at a time when the economy desperately needed it.
And, he added, it targeted the unemployed, low-income, and people in need.
Cassidy: Who are most likely to spend that income. As an example, the Making Work Pay credit provided over a billion dollars in direct work-related support to 90 percent of the workers in the State labor force.
The provision was efficient, Cassidy explained, because even low income Virginia workers received its full value, at least 6.2 percent of their earned income.
Cassidy: And the Internal Revenue Service released new withholding tables right after the Act was enacted and employers began implementing those new tax withholdings soon thereafter.
There is evidence, he said, that taxpayers are more likely to spend tax cuts provided in small portions than in large chunks.
Cassidy: And so having their tax withholdings reduced throughout the work year has helped nine in ten workers in the entire State make ends meet and have a little bit more cash in their hands to spend.
The full report, “The Recovery Act One Year Later,” can be found online at thecommonwealthinstitute.org.
John Ogle, WCVE News