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Children’s Expenditures under the American Recovery and Reinvestment Act of 2009

The American Recovery and Reinvestment Act of 2009 increased spending and reduced taxes, overall and in the children’s budget. When first enacted in February 2009, the bill was estimated to increase the federal deficit by $787 billion. In January of this year CBO revised the estimate to $862 billion over 2009–19, including $626 billion in increased outlays and $236 billion in reduced revenues. We

financial and housing markets, as well as increased spend- ing on unemployment benefits, health insurance subsidies for the unemployed, and other responses to the recession. A second reason is the timing of the ARRA expansions. While most programs received a one-time additional ap- propriation in 2009, outlays are projected to trickle down over several years. As shown in table 2, only $24 billion or 16 percent of the $156 billion increase in children’s expen- ditures fell into 2009; the remaining $132 billion is expected to increase outlays or reduce taxes in 2010–19.

Several factors explain the time lag that typically occurs between when funds are ap- propriated and when they are disbursed from the Treasury and recorded as an outlay. Con- sider, for example, education, where the 2009 appropriations were increased by $62 bil- lion under ARRA but only $10 billion, or 16 percent of this amount, was spent in 2009. In some cases, federal grants were not yet awarded (e.g., the first round of grants under the Race to the Top competition were not awarded to states until March 2010). In other cases, the funds may be awarded from the federal government to the states but not yet allocated among school districts within every state. Finally, some funds may be committed locally but not yet spent (e.g., teachers retained for school year 2009–10 receive the bulk of their actual salary after the Oc- tober 1 start of the new federal fiscal year). The kids’ share of Recovery Act outlays was more than twice as high as the kids’ share in the overall budget. estimate that 23 percent of the ARRA outlays and 4 percent of the ARRA tax reductions are targeted toward children, for an overall kids’ share of 18 percent, or $156 billion in ARRA expenditures, as shown in the first column of table 2.8 The kids’ share of Recovery Act outlays was more than twice as high as the kids’ share in the overall budget (23 percent compared with less than 10 percent). With such high spending on children under the Recov- ery Act, why did the kids’ share of overall outlays fall from 9.8 percent to 9.5 percent between 2008 and 2009? One reason is the vast increases in government spending outside ARRA, including increased spending under the Troubled Asset Relief Program (TARP) and other initiatives to bolster As shown in table 3 and discussed further in the projec- tions section, the bulk of the ARRA increases will be spread over three years (2009, 2010, and 2011), with the highest

TABLE 2

Estimated Spending and Tax Reductions under the American Recovery and Reinvestment Act (billions of dollars)

Outlays

All outlays Children’s outlays

626 146

Kids’ share Tax reductions

23%

All tax reductions Children’s tax reductions Kids’ share Sum of outlays and tax reductions

236 9.7 4%

Total expenditures Children’s expenditures Kids’ share

862 156 18%

Total, 2009-19

Source: CBO’s Budget and Economic Outlook, table A-1, January 2010, and estimates shown in table 3.

112 25

224 61

289 60

22%

27%

21%

2009

2010

2011-19

88

180

-31

-0.2

0.4

9.5

0%

0%

-31%

200

404

258

24

62

70

12%

15%

27%

18

|

KIDS’ SHARE

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