Vice President Biden and the Congressional Budget Office (CBO) yesterday both released reports showing how much the America Recovery and Reinvestment Act (ARRA, also known as the “stimulus bill”) helped the U.S. economy. The reports are a stunning rebuke to all of those who say the stimulus bill has been ineffective. CAP’s Richard W. Caperton has the story.
The Vice President’s report, “The Recovery Act: Transforming the American Economy Through Innovation,” details how ARRA has ramped up the levels of investment in numerous growing industries. In particular, ARRA’s policies have led to dramatic increases in investment in clean energy technologies, especially wind and solar. The report painstakingly documents success after success, demonstrating conclusively that the stimulus bill has helped move our country toward a clean energy future.
Most of ARRA’s support for wind and solar comes from three programs:
- Treasury cash grants in lieu of tax credits (“Section 1603”). The cash grants have supported more than 500 projects by leveraging $6 billion in private investment. This investment has created 12,000 new jobs.
- Manufacturing tax credits (“Section 48C”). This tax credit supported 183 projects by leveraging more than $4 billion in private investment, creating a total of 58,000 new jobs.
- Loan guarantees (“Section 1705”). Through this program, the government will guarantee more than $2 billion in debt, which will lower borrowing costs and make it possible for private companies to invest in new projects.
Unfortunately, each of these programs is under attack. Section 1603 cash grants and 48C tax credits are responsible for tremendous growth in the wind and solar industries, but are in danger of ending on December 31. Congress needs to extend these programs through a tax extender bill. The Center for American Progress has also written about challenges facing the loan guarantee program, calling for Congress to restore money to the program that has been raided to pay for other policies.
In addition to the direct investment, ARRA has also driven technological improvement. Most notably, by investing in research and development, the government is helping solar power become cost-competitive with fossil fuels. The report states:
“The cost of solar is forecast to reach grid parity over the next five years in many parts of the country. This means homeowners (who pay an average retail cost of about 10 cents/kWh for electricity from the grid) and utility companies (which have average wholesale power costs closer to 5 cents/kWh) can use solar power without paying a premium over fossil-based electricity.”
ARRA has also guided investment to energy sectors beyond just renewable generation. Electric vehicles, oil-reducing mass transit, smart grid, and electricity transmission have all grown substantially because of the stimulus bill.
The stimulus bill’s investment has been in all segments of the economy, not just energy. CBO’s report describes the effect of ARRA on the overall economy. According to a summary posted on the CBO Director’s blog, “ARRA’s policies:
- “Raised the level of real (inflation-adjusted) gross domestic product (GDP) by between 1.7 percent and 4.5 percent,
- “Lowered the unemployment rate by between 0.7 percentage points and 1.8 percentage points,
- “Increased the number of people employed by between 1.4 million and 3.3 million, and
- “Increased the number of full-time-equivalent (FTE) jobs by 2.0 million to 4.8 million compared with what those amounts would have been otherwise. (Increases in FTE jobs include shifts from part-time to full-time work or overtime and are thus generally larger than increases in the number of employed workers.)
Government action may not be popular with everyone in the U.S., but there’s no way that anyone can claim it’s ineffective. ARRA is helping the economy, now we just need to make sure that the policies that are working stay in effect.
— Richard W. Caperton is a Policy Analyst with the Center for American Progress Energy Team.