04/20/2010 05:12 am ET | Updated May 25, 2011

Judging the Stimulus Law: Three Overlooked Areas

As the spin cycle assesses the successes and shortcomings of the American Recovery and Reinvestment Act (ARRA), it is worth pointing to three areas in the law that are too often overlooked:

1. ARRA sets out five purposes:

(1) To preserve and create jobs and promote economic recovery.
(2) To assist those most impacted by the recession.
(3) To provide investments needed to increase economic efficiency by spurring technological advances in science and health.
(4) To invest in transportation, environmental protection, and other infrastructure that will provide long-term economic benefits.
(5) To stabilize State and local government budgets, in order to minimize and avoid reductions in essential services and counterproductive state and local tax increases.

We must judge the act based upon its success in advancing all 5 purposes.

2. ARRA sets out a prudent management standard for expending its funds:

General Principles Concerning Use of Funds--The President and the heads of Federal departments and agencies shall manage and expend the funds made available in this Act so as to achieve the purposes specified in subsection (a), including commencing expenditures and activities as quickly as possible consistent with prudent management.

This means viewing the entire portfolio of stimulus act projects and expenditures as a whole with an eye toward its impact upon the intended beneficiaries.

3. ARRA has two parts, appropriations and tax provisions. The tax provisions include a range of bond vehicles and inducements including the Build America Bond program, the Qualified School Construction Bonds, Non-AMT Private Activity Bonds, Clean Energy Bonds, High Speed Rail bonds, an expanded Industrial Development Bond, etc.

While the shovel ready projects in the appropriations part of the bill have dominated the debates, we must also pay attention to the bond vehicles too.

The shovel ready projects stimulate a short term business cycle and helped retain large numbers of jobs. The bond vehicles also clearly did this. For instance, the Build America Bonds unfroze the municipal bond market ensuring the retention of public and private sector jobs.

At the same time, a main purpose of the bond vehicles is to provide long-term economic benefits through strategic investment in infrastructure and energy projects. Just as the Liberty Bonds during the Second World War were essential to financing victory in Normandy, so too are these reinvestment bonds key to delivering a sound foundation for an equitable America. For this reason, a full assessment of the bonds is premature.

Importantly, because the bond programs can finance long term public works projects -- the average Build America Bond issuance is between 20-30 years -- they allow governments and private firms to make longer term economic plans and commitments than do the shovel ready projects which will wind up and down quickly. As a result of the longer term business cycle that the bonds finance, we are likely to see firms start hiring for more ambitious projects that will last a number of years.

All this means taking a more holistic view of ARRA, and a longer term one. We are only a year into ARRA and many Build America Bond projects themselves will last for a number of years. So, let's pass the Jobs Bill to reinforce both ARRA's successes to-date and its projects underway. We must, for instance, extend the Build America Bond program to further stimulate job creation and investment in what's needed to increase our competitiveness and expand opportunity -- to lay a foundation for growth.

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