House Democrats have proposed $825 billion in stimulus spending
(the American Recovery and Reinvestment Act of 2009) to be used to
create jobs, protect workers, expand infrastructure, and provide
aid to states. This money is being borrowed, meaning it will have
to be repaid by either taxing it from future generations or
borrowing even more funds.
Many people have trouble picturing such an enormous amount of
money. To put it into perspective, $825 billion is worth
approximately $10,520 for each family in the United States, or
$22,445 for each family with children under the age of 18. These
figures account for a large portion of what families spend money on
each year, including food, clothing, shelter, and health care.
In 2007, there were 78,425,000 family households in the United
States; 36,757,000 of these households contained children under 18
years of age. If the $825 billion in stimulus spending
were borrowed from either of these groups, every family in the
United States would be lending the federal government $10,520, or
each family with children under the age of 18 would lend $22,445.
Of course, family groups are not going to be asked to loan this
money to the government, or even to be responsible for paying it
all back in the future. However, as a mental exercise, if they
were, how would this fit into annual family spending?
These amounts account for a large portion of the goods and
services that families spend their money on annually. According to
the 2007 Consumer Expenditure Survey (CES), families with
children under 18 spend, on average:
- $2,470 on apparel and services,
- $2,668 on health care,
- $4,402 on food at home, and
- $12,739 on shelter.
Taken together, families with children under 18 spend, on
average, $22,279 annually--almost 37 percent of total average
annual family spending--on these goods and services. If this group
were required to fund the stimulus bill, it would be similar to
saddling them with debt equivalent to their budgets for clothing,
health care, food, and housing for one year.
Average spending for all family groups in the United States is
similar to that of families with children. On average, families are
- $2,330 on apparel and services,
- $3,595 on health care,
- $4,322 on food at home, and
- $11,657 annually on shelter.
If all families were asked to equally shoulder the burden of the
$825 billion stimulus package, it would be like asking them to take
on an amount of debt equivalent to what they spend on food,
clothing, and health care or most of what they spend on shelter for
an entire year.
According to a recent report issued by the College Board, the
average cost of tuition and fees to attend an undergraduate program
for the 2008-2009 school year was $6,585 for a public in-state
institution, $17,452 for public out-of-state and $25,143 to attend
a private four-year institution. Families subsidize most of
the cost of attending college with some type of aid program,
including school loans and federal grants. With their share of the
stimulus, families with children under 18 could pay tuition for one
year at a private four-year institution--such as Harvard, Stanford,
or Yale--or could cover almost four years of the cost of public
The Way Out
The proposed stimulus package by the House Democrats intends to
jump-start the economy by increasing government spending, which has
not increased economic production in the past and is unlikely to do
so in the near future. The national deficit is already large and
growing, and the American Recovery and Reinvestment Act of 2009
will only further exacerbate this problem. This increased debt will
need to be made up by increasing taxes on years of future taxpayers
or by borrowing more money from the economy.
While increased government spending is not the appropriate
policy response for boosting the economy, other policy
prescriptions can certainly aid the process. Instead of creating
higher taxes for families by increasing government spending,
policymakers should instead consider extending or making permanent
the 2001 and 2003 tax reductions and should reduce individual,
small business, and corporate taxes through 2013. A recent study by
Heritage Foundation analysts found that extending these tax cuts
and further reducing taxes would stimulate job production and
increase gross domestic product, thereby improving our economy and
shortening the length of the recession.
Shanea J. Watkins, Ph.D.,
is Policy Analyst in Empirical Studies and Patrick Tyrrell is a
Research Coordinator in the Center for Data Analysis at The