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US and Jamaican Stimulus Packages Comparison


By December 2007, the collapse of the U.S. home mortgage market and the resultant asset quality catastrophe at lending institutions had, as feared, exercised a domino effect on many sectors of the economy: gross domestic product had indeed declined two quarters in a row. The recession was officially on. The magnitude of the economic decline was such that, as 2008 rolled by, the weakness spilled over into virtually all of the nation’s trading partners in Europe and Asia.

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In classical monetarist theory, fiscal action is the last resort to keep spending going when activity in the two other demand-side sectors (consumers and industry) contract. Aside from re-inflating money supply and resuscitating the velocity of money, government spending ideally sends signals of confidence to the other players in the economy.

Earlier this year, in January and February, the U.S. Congress passed an economic stimulus bill that had been initiated by the outgoing Bush administration.

Not having to wait for the term of a predecessor to end before taking action, Jamaica Prime Minister Bruce Golding announced on December 15, 2008 a package of tax cuts and loans with more expected in the months ahead (Voice of America, 2008).

Comparison of stimulus package features

Size and Timing of Stimulus Package

The augmented U.S. spending bill, originally proposed for $ 787 billion, climbed to $819 billion after various riders and amendments tacked on by Congress (Blanchfield, 2009). Nonetheless, it was the original $ 787 billion outlay that Mr. Obama signed into law on February 17.

Initially, the Jamaican stimulus package counted an unspecified amount in tax cuts, loans of at least $6.4 million for the tourism sector and a $4.5 million cash injection for other small businesses. By June, outlays for the tourism sector had risen to $7.1 million (Makyn, 2009).

As soon as these government stimulus moves can be shown to have had an effect, Mr. Golding promised subsequent aid directly to those who had been retrenched as a result of the economic difficulties. In a reprise of the American situation, the package includes aid to cash-strapped homeowners presently having difficulty servicing their mortgages (Voice of America, 2008).

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For the rest of 2009, the parts of the Jamaican program for which details and spending levels could be discerned would aggregate about US$52.3 over twelve months (approximately 0.59% of GDP); it seemed that the tax cut component was due to rise to $9.8 million and tourism advertising and marketing would get $3 million. (Makyn, 2009).

The early levels of Jamaican stimulus spending amount to $10.9 million, a puny 0.0013% of the expenditure approved by the U.S. Congress. But with GDP estimated at $10.5 billion, the scale of the Jamaican economy is just one-fourteenth that of the U.S.A. (, 2009) while American gross domestic product was thought to be around $14.3 trillion in 2008 (Bureau of Economic Analysis, 2009).

Targeted Industries and Sectors

The U.S. stimulus package relies on cash injections for infrastructure, school investments, and non-cash tax cuts in the hopes that consumers will spend the unexpected discretionary income and thus get a degree of retail activity going that would otherwise not happen. There are also components of a political economy and policy nature, such as incentives to the energy industry being weighted in favor of renewable energy types, and funds for modernizing health care.

The “American Investment and Recovery Act of 2009”, as it has come to be called”, is an exercise in confidence-building and bolstering consumer spending power since it promises to save or create three to four million jobs, chiefly in the private sector and channel an aggregate $150 billion to “low-income and vulnerable households”. Other broad components:

  • “Fund a substantial chunk of the cost of computerizing patient health records (“electronic medical records” or EMR) and therefore save billions in health care costs;
  • Resuscitate the renewable energy industry and provide the capital over 2010 to 2012 to double production of domestic renewable energy;
  • Modernize 75 percent of federal building space and more than one million homes;
  • Under the Pell Grants, increase the maximum award level per student by $500 so as to make college affordable for seven million more students and increasing the education tax cut for just under four million students;
  • $150 billion for new infrastructure, including the ‘largest increase’ ever in funding for roads, bridges, and mass transit systems since the national highway system came into being in the 1950s;
  • Dispense an $800 ‘Making Work Pay’ tax credit for 129 million working households, and expand the ‘Child Tax Credit’ so as to reduce taxes for families with children.” (, 2009, p. 1).
Categories of Spending under the Recovery Act (source:
Figure 1: Categories of Spending under the Recovery Act (source:

Scrutinizing the details by U.S. government agency (see table overleaf), it is clear that the ambitious amount budgeted under the Recovery Act is meant to disperse the stimulus very broadly. One notes further that direct outlays (rather than loan guarantees and tax cuts) are budgeted at just $174.9 billion but these have been frontloaded. As of June 2009, one-third (34.5%) of amounts allocated till 2012 have already been paid out.

Table 1: Recovery Act Investments by Agency (Source:

Agency Available Paid Out
$ (Thousands)
Department of Education (ED) $49,993,341 $10,122,953
Department of Health and Human Services (HHS) $40,461,745 $22,868,674
Department of Labor (DOL)‡ $21,555,980 $8,704,892
Department of Transportation (DOT) $20,742,349 $523,341
Social Security Administration (SSA) $13,033,584 $13,018,135
Department of Energy (DOE) $7,151,235 $243,064
Department of Housing and Urban Development (HUD) $5,489,334 $931,948
Environmental Protection Agency (EPA) $4,460,889 $21,429
Department of Agriculture (USDA) $3,377,864 $2,424,032
Department of Justice (DOJ) $1,840,529 $518,395
Department of Defense (DOD) $1,300,158 $20,031
Department of Treasury (TREAS) $877,178 $13,411
Department of Commerce (DOC) $871,820 $268,043
National Science Foundation (NSF) $671,924 $10,930
General Services Administration (GSA) $605,856 $6,247
US Army Corps of Engineers (USACE) $574,270 $62,826
Department of Veterans Affairs (VA) $561,519 $469,184
Department of Homeland Security (DHS) $536,717 $19,133
Department of the Interior (DOI) $255,361 $6,825
Railroad Retirement Board (RRB) $130,366 $130,288
Small Business Administration (SBA)* $130,178 $35,707
Corporation for National and Community Service (CNCS) $128,249 $1,603
Federal Communications Commission (FCC) $66,210 $5,927
Department of State (DOS) $37,596 $6,479
National Endowment for the Arts (NEA) $19,844 $396
Smithsonian Institution (SI) $18,059 $522
National Aeronautics and Space Administration (NASA) $9,708 $0
Agency for International Development (USAID) $5,312 $109
Total† $174,907,173 $60,434,523
Effective May 21, a Department of Labor accounting adjustment was made to reflect an $8.9 billion dollar reduction from the previously reported outlays (i.e.: paid out).
*Total excludes approved loan amounts for Guaranteed Loan Financing.
Totals may not add up because of rounding.
Source: Federal Agency Financial and Activity Reports.

Owing to the nature of the Jamaican economy, the Golding economic stimulus package initially meant to help manufacturing, small business and the already-troubled tourism industry (Voice of America News, 2009). At the same time, tax cuts were meant to be beneficial to small business since such a fiscal move theoretically increases consumer discretionary income.

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By July, the administration was able to declare some limited success. At least, Tourism Minister Edmund Bartlett announced, no hotels had had to close (, 2009).

Trade Barriers

There are protectionist provisions in the American package. Specifically, the law mandated that funded projects should utilize only American iron and steel in projects (Blanchfield, 2009). This has naturally aroused protests from Canada, with which there is significant trade in those industrial goods, as well as energy and consumer products. Being dependent chiefly on income from tourism and some bauxite mining, the Jamaican economy has no such protectionist sentiment.

Recap and conclusion

Given the size and diversity of the American economy, the “Recovery Act” necessarily addresses many more sectors and over a longer time span (up to 2012) than does the limited aims of the Jamaican stimulus program. However, economics is an inexact science and a recovery cannot be engineered any time.

The leaders of the two nations themselves admit that stimulus programs are unlikely to send the recession retreating any time soon. First, the malaise is wide and deep, exacerbated by an accumulation of consumer debt, fiscal and trade deficits in an America no longer used to living within its means. While confidently proclaiming that the stimulus package and other policy initiatives since February had staved off a disastrous “economic collapse,” Mr. Obama accordingly warned the nation that economic recovery was a long way down the road (Babbington, 2009).

Five months after the Recovery Act was passed into law, the White House was once again testing the waters of public opinion about legislating a second, large injection of deficit spending. Earlier in July, House Democratic leader Steny Hoyer floated the idea in an unsolicited press conference. The White House and Senate – in the persons of White House spokeswoman Jen Psaki, Senate Majority Leader Harry Reid (Democrat-NV), and the President himself – ostensibly refused to consider another stimulus. But an administration ally has clearly been made the stalking horse to test the idea of spending more, presumably in reaction to the bad news of June employment figures: the worst ever in the current recession.

The return to normalization can also be derailed because the time must come when all those urgently-needed funds must be repaid. In all the happy publicity that attended the desire of government wanting to be seen doing something, no matter how rational or not, about the economic catastrophe, few wanted to publicly question where all those hundreds of billions were going to come from. If, as one has reason to believe, these were sourced from Treasury bills and other government IOU’s, then the future has simply been made hostage to the present emergency.

Mr. Obama admitted earlier in the month that “Short term, we’ve got problems and no matter how powerful our stimulus, there’s still going to be issues working out of all that excessive debt” (Rowley and Faler, 2009).

For his part, Mr. Golding affirmed that stimulus spending alone will not be enough to restore the economy on an even keel. Even when the recession dissipates, he foresaw that widespread re-structuring must take place if the island-nation is to attract more investments and create more jobs.

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  1. Babbington, C. (2009). Obama: Full world economic recovery ‘a ways off’‘. Associated Press wire feed.
  2. Blanchfield, M. (2009). Congress, not Obama, must fix protectionist clause: experts. CanWest News. Don Mills, Ont.: wire feed.
  3. Bureau of Economic Analysis (2009). National economic accounts.
  4. (2009). Stimulus package helping Jamaica tourism.
  5. Makyn, R. (2009). The cost of Jamaica’s stimulus package. The Gleaner. Caribbean Policy Research Institute.
  6. (2009). Jamaica > Economy. Web.
  7. (2009). The act.
  8. Rowley, J. & Faler, B. (2009). Hoyer leaves open possibility of second U.S. economic stimulus. Bloomberg news feed. Web.
  9. Voice of America News. (2008). Jamaica’s PM announces economic stimulus package. FIND news feed.

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