On February 17, President Barack Obama signed the American Recovery and Reinvestment Act of 2009, more commonly known as the economic stimulus bill. The president's action came after Congress approved the legislation last Friday. The bill is the largest domestic infrastructure and jobs spending package since the New Deal. President Obama made enactment of a stimulus package one of his initial priorities.

The Act will cost an estimated $787 billion. The legislative language and accompanying Conference Committee explanatory statement comprise well over 1,000 pages of text.

The bill's passage was facilitated by the willingness of three Republican senators (Olympia Snowe and Susan Collins of Maine and Arlen Specter of Pennsylvania) to provide the critical votes to surpass the 60-vote requirement under the Senate's procedural rules. Not a single House Republican voted for the bill on final passage.

After the Senate bill eclipsed $900 billion due to individual Senate amendments for homebuyers, car purchasers and biomedical research, among others, a bipartisan coalition of centrists devised an amendment to reduce the scope of the bill by $108 billion. The three Republican senators (Snowe, Collins and Specter) joined forces with Senate Democrats and supported final passage after acceptance of this “moderates’ amendment.” In the House-Senate conference negotiations, Members resolved the tension between the senators and House Democrats who wanted to restore many of the spending provisions from their bill that the Senate eliminated (including funding to stabilize state governments, education construction grants, and funding to combat pandemic flu). Democratic negotiators from the House and Senate were mindful of the fact that if they permitted the overall spending amount to rise again substantially, they risked losing the three Republican Senators, whose votes were essential in order to attain the 60-vote supermajority required under Senate procedural rules.

Utilizing the Stimulus Package

After the expected enactment of this legislation, there will be ongoing implementation by federal agencies, including new grant programs, regulatory standards, tax regulations and related agency actions. Some of the measures will be implemented very quickly, so advance planning will be critical. Arent Fox attorneys and government relations directors will be assisting our clients in providing input to federal agencies and in pursuing funding made available by the Act at the federal, state and local levels of government.

To speed the rollout of the stimulus funding, implementation of distribution programs will occur very quickly with minimal initial oversight. There may be limited advance notice of the availability of new grant programs and some may in essence become first-come, first-served. Due to transparency initiatives, all parties interested in obtaining stimulus funding should be prepared for the details of their projects to be made available to the public on the Internet.  Regulatory lawyers and grant writers will be critical personnel for those seeking stimulus funds in the coming months.

Funding Specifics

Prioritization is given to spending in broad categories believed to hold the greatest economic recovery potential such as:

• Real Estate, Construction and Government Contracting

• Health Care

• Energy and the Environment

• Education

• Tax Provisions

'Winners and Losers'

The compromise reached late Thursday night over the competing versions of the House and Senate stimulus bills resolved billions of dollars in spending disagreements.  In general, most differences were resolved in favor of the Senate language, which had lower spending ceilings and eliminated some spending categories entirely. Several corporate tax relief provisions, however, were resolved in favor of the less generous House language.
Here is Arent Fox’s executive analysis of the compromise stimulus package, emphasizing areas of interest to our clients and noting the winners and losers under the bill. 

Winners in the Construction and Infrastructure Sectors:  State governments will receive a $53.6 billion “state stabilization fund” to cover budgetary shortfalls experienced by local school districts and to expedite construction projects. States are also getting more than $30 billion for highway, bridge and transit projects. Other funded construction projects may include well over $10 billion for modernization of many existing federal buildings and military facilities. Spending for high-speed rail projects was quadrupled to $8 billion dollars.

Winners in Health Care:  Again, states are winners with an $87 billion package to help pay their share of rising Medicaid costs. Hospitals and physicians will benefit from $20 billion to cover costs of converting to electronic medical records. The National Institutes of Health are receiving $10 billion, most of which will go to biomedical research and making winners out of numerous universities and medical centers as well as those organizations leading the fight for such research. There is still $1 billion for prevention and wellness programs (but much less than supporters hoped for).

Winners in Education:  Under the compromise bill, there is $5 billion in bonus grants for schools meeting education performance standards, and increased spending for existing and popular education programs, plus new school construction.

Winners in Energy:  As predicted, the big winners are renewable energy sources, with billions in new and expanded tax credits and a very robust research and development program expansion. Much of the money in the energy sector is designated for a variety of low carbon energy programs, alternative energy demonstration projects and improvements to America’s energy distribution system. 

Other Notables: General Motors will receive a multi-billion dollar tax break for refunds of taxes paid in earlier profitable years. States will now receive long-sought-after more favorable tax treatment of their bonds. Corporations will now receive favorable tax treatment when repurchasing their debt, but not when purchasing debt-laden companies.

Losers:  Large corporations with annual revenues greater than $15 million who were counting on new clawback provisions to offset current losses against prior profits will not be eligible. Home builders and realtors will not receive a $35 billion tax credit to support home sales and the generous car purchase tax break was limited during negotiations (but some consumers and first-time home buyers will receive tax credits for purchasing homes and an exemption from sales taxes on new car purchases). Money specifically slated for school construction has been changed. And proposed new, favorable tax provisions for individuals have been scaled back to reduce the cost of the bill. 

The Senate and three moderate Senate Republicans in particular were winners during the negotiations. Reports indicated that compromises important to them were resolved in their favor. Lastly, it is a victory for the Obama Administration: many campaign spending promises have been fulfilled in the first month of his Administration. 

The complete Arent Fox 19-page analysis of the American Recovery and Reinvestment Act of 2009, broken down by industry sectors, can be read by clicking here.

If you have any questions, please do not hesitate to contact the following members of Arent Fox's Government Relations Department.

Jon S. Bouker, Partner
bouker.jon@arentfox.com
202.857.6183

Craig Engle, Partner
engle.craig@arentfox.com
202.775.5791

Dan H. Renberg, Partner
renberg.dan@arentfox.com
202.857.6386