Emphasis 'Reinvestment' in the ARRA

The American Recovery and Reinvestment Act – known as the stimulus – is one of the largest public investments of our time, pumping hundreds of billions of dollars into creating and saving jobs, repairing and building new infrastructure, and modernizing the health care system. But is it working? Tim Fernholz, writing for the American Prospect, joins a chorus of journalists highlighting shortcomings in the bill. Specifically,Fernholz writes that the stimulus was too small for the severity of the recession and not flexible enough to plug state budget gaps and meet other critical needs.

So, where are all of the jobs? At a very broad level there is a fundamental misunderstanding of the Act. The American Recovery and Reinvestment Act is not simply a Recovery Bill or a job creator – although it was intended to be that – it is also a Reinvestment Act, emphasis on investment. Investments take time and the stimulus was intended to be spent over a period of years. Although we live in a culture of instant gratification, investments are longer-term commitments of resources for future benefit.

According to watchdog Propublica.org, approximately only 20% of the stimulus (not counting the tax breaks) has been spent so far. One reason to be patient is that the bulk of the resources, about 40% of all ARRA allocations, are not scheduled to be released until 2010. In addition, most of the job-generating components (i.e., transportation, energy & environment, education & training) are also not scheduled to roll out until next year. This means that while all stages of ARRA should be carefully distributed, the nation must be prepared for the 2010 allocation.

Nonetheless, there remains serious shortcomings in the bill and its implementation. First of all, although ARRA requires extraordinary tracking and transparency measures, including the requirement that all recipients report on the number of jobs created or retained, neither ARRA nor OMB’s reporting requirements require the race-, gender-, and geographic employee level information. Because the current economic crisis disparately impacts marginalized communities, tracking these data ensures accountability with the principles and purposes of the Act, including whether those most impacted by the recession benefit from the recovery. Without race-, gender, and zip code specific data at the employee level, it will be very difficult to determine whether the economic recovery is truly a recovery for all Americans.

Secondly, the emphasis of the recovery should be on expanding and creating pathways to opportunity. Not all of the Recovery efforts are consistent with this goal. For example, the Neighborhood Stabilization Program has continued to concentrate affordable housing in inner cities instead of using foreclosures in the suburbs to create affordable housing in high opportunity areas. Although many suburban, high-opportunity areas experienced high rates of foreclosure (which qualifies them for NSP money), HUD refused to add opportunity indicators to its competitive grant criteria. As a result, funds are going to the inner city and areas traditionally thought of as in great need instead of creating affordable housing in high opportunity areas. Although the grant proposal period is already closed for current NSP programs, future programs should take opportunity into account when awarding grants to create affordable housing.

Along the same lines, the recession has most devastated low-skill, low-education workers. While the total unemployment rate reached 9.5%4 in June of 2009, the unemployment rate for workers with no high school diploma was 15.5%, and workers with a high school diploma but no college education have a 9.8% unemployment rate.

This disparity underlines the need for job training and other programs that connect workers to jobs that provide the opportunity for advancement and a living wage. Job training, reentry programs for the formerly incarcerated, and apprenticeships for inexperienced workers are all essential to creating the opportunity for all Americans to have a good and sustainable job. As an investment in the American people, these measures are essential to a long-term recovery.

For more information on the Recovery, visit FairRecovery.org.