The CEA has just released the newest quarterly report on the impact of the ARRA. In addition to tabulating the impacts on output and employment, there’s a special section by Chris Carroll (one of the leading authorities on modeling consumption behavior — I used to teach his papers in my PhD macro course), which concludes in the absence of the ARRA “…consumer spending would likely have continued to fall” (which is consistent with my post from a couple days ago).
From the CEA blog:
To date, there has been more than $200 billion of tax relief and income support provided to households by the ARRA. These funds have had a disproportionately large impact on the incomes of middle- and lower-income families.
CEA estimates that without these provisions, household real disposable income would have fallen substantially in 2009. Figure 6 from the report (reproduced below) shows actual after-tax family income alongside income without the tax relief and income support provisions of the Recovery Act. Without the tax cuts and income support provisions of the ARRA, consumer spending would not have rebounded as it did and, indeed, would likely have continued to fall.
As of 2010:Q1, the tax relief and income support provisions of the Recovery Act have saved or created between 1.1 and 1.4 million jobs, or roughly one-half of the total number of jobs saved or created by the Act.
Figure 5 decomposes the augmentation to disposable income arising from ARRA; Figure 6 presents the impact on disposable income.
Figure 5 from CEA, THE ECONOMIC IMPACT OF THE
AMERICAN RECOVERY AND REINVESTMENT ACT OF 2009 THIRD QUARTERLY REPORT
APRIL 14, 2010.
After some discussion of various recent analyses of consumer behavior, the report concludes:
Together with the spending dynamics from the extra income in 2009, the $73 billion in tax relief and income support in 2010:Q1 directly raised household spending by $47 billion (not at an annual rate)…