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THE OBAMA ECONOMIC RECOVERY PLAN: NATIONAL AND REGIONAL
MACROECONOMIC EFFECT OF ENERGY AND ENVIRONMENTAL POLICIES
Frederick R. Treyz, Ph.D., REMI, 413-549-1169, [email protected]
Billy Leung, REMI, 413-549-1169, [email protected]
Mario S. DePillis, Jr, Ph.D. MAR & R Economics, [email protected]
Rod Motamedi, REMI, 413-549-1169, [email protected]
Overview
The Obama Economic Recovery Plan directs investments in environmental and energy infrastructure to motivate
both short-term and long-term economic growth. These include new electricity transmission lines, energy-efficiency
investments in public buildings, weatherization of millions of homes, and creation of renewable technologies. By
understanding how these policies affect jobs, income and other measures of economic activity, we can predict how
these policies will improve and create stability for the economy.
This paper analyzes three dimensions of the the Economic Recovery Plan: the timing of the impact, the geographic
differentiation, and how the impacts differ by program.sdf This paper analyzes three dimensions of the Economic
Recovery Plan: the timing of the impact, the geographic location of the impact, and the differences in impacts by
program. Most of the employment and GDP impact is short-term, due to the concentration of spending in 2009 and
2010 in the stimulus package. There is a smaller, but important long-term increase in employment, income and GDP
as a result of continued government expenditures and the economic return on the initial investments in energy
efficiency. The geographic impact depends on the location of the direct government spending and the location of
supplying industries. The programs differ due to the timing of the spending, and the expected return on the
investment.
Methods
This study reviews the likely macroeconomic effects of energy programs in Obama’s American Recovery and
Reinvestment Plan. We evaluate the total economic effects of the policy changes using the REMI PI+
macroeconomic model, consisting of major regions of the United States.
Results
The results of the study show a large impact in terms of job creation and expansion of production during the first two
years of the stimulus plan, followed by a smaller but important longer-term increase in economic activity due to
continued expenditures and long-term energy efficiency gains that result from the initial energy-related investments.
The state energy program has the highest level of job creation because there are continuous grants to the states over
ten years. The geographic impacts are driven by locations of industries most likely to benefit. In percentage terms,
the Great Lakes region benefits the most, due to the concentration of materials industries in this region; while in
absolute terms the Southeast gains the most jobs since its it the largest regional economy.
Conclusions
This paper demonstrates that the energy programs of the Obama Economy Recovery Act creates an increase in shortterm and long-term economic activity. The short-term gains are large, as the stimulus expenditures are heavily
concentrated in the first two years. Our study measures longer-term economic growth generated by increased energy
efficiency and lower energy costs resulting from the economic return on the initial energy investments. On a regional
level, the economic impact depends on the local energy resources, direct spending for the program, and the economic
spilovers into the surrounding regions and the nation.
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