Free Markets, Free People


CBO Not Impressed (Updated)

I‘ve just been watching Pres. Obama speaking to the Democrats at their luxury retreat.  He had a lot of red meat for them.  He also spoke passionately about the immediate need for the stimulus package, telling them–and the nation–that passing the bill is absotively necessary.  If we don’t pass it, he asserted, millions will be thrown out of work, the economy will collapse, blood and flaming frogs will rain down from the sky, etc., etc., etc.

Sounds scary.

But what’s even more scary is that the Congressional Budget Office, Congress’ non-partisan budget analysts, has announced that this stimulus bill will do pretty much the reverse of what it’s designed to do.

President Obama’s economic recovery package will actually hurt the economy more in the long run than if he were to do nothing, the nonpartisan Congressional Budget Office said Wednesday.

CBO, the official scorekeepers for legislation, said the House and Senate bills will help in the short term but result in so much government debt that within a few years they would crowd out private investment, actually leading to a lower Gross Domestic Product over the next 10 years than if the government had done nothing.

Apparently the president isn’t buying it, and the Democratic majority in Congress has decided that their own budget analysts are full of sh–shamefully inadequate analysis.  So,we’re being told by the politicians that their bill is necessary to prevent economic collapse, while the professionals they employ tell us that the bill is worse than inaction.

Who do you beleive?


UPDATE: The CBO’s web site is back up again.  The text of the letter states:

Including the effects of both crowding out of private investment (which would reduce output in the long run) and possibly productive government investment (which could increase output), CBO estimates that by 2019 the Senate legislation would reduce GDP by 0.1 percent to 0.3 percent on net. H.R. 1, as passed by the House, would have similar long-run effects.

In other words, 2019 is the year that the bill comes due, and the crowding out effect begins to become a drag on the economy, presumably until that bolus of debt is paid off.  In other words, it becomes a long-term–and increasing–drag on GDP growth, as the crowding out effect overrides the increasingly smaller return, if any, from the stimulus.

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14 Responses to CBO Not Impressed (Updated)

  • If this boondoggle passes with 1 GOP sen. voting for it – say Snowe, I wonder about the value as a political message of removing her from the caucus. 

  • He had a lot of red meat for them.

    I think the term is “blue meat” when referring to Democrats.  Or, at least, it should be.

  • According to the Washington Times’ own article, they estimate the following effects from the stimulus bill:

    Years 0-2 : 3-6% GDP up
    Years 3-10 : 0.1 – 0.3 GDP down (from maximum)

    So.. what’s the total impact, years 1-10 combined? You folks can handle basic addition, yes?

    Years 1-10 total effect: 2.7 – 5.9 % GDP up.

    The Washington Times is has made fundamental errors of math and interpretation, or else they’re just lying hacks.

    For once in my life, I can’t imagine anyone trying to dispute this. Just read the article. It’s right there in the Times’ own article. They didn’t even pick up on their basic math fail.

    Dale, I’ve never known you to be intellectually dishonest with basic facts, so I expect you’ll actually update this post, now that it’s been demonstrated to be bullsh*t.

  • The agency projected the Senate bill would produce between 1.4 percent and 4.1 percent higher growth in 2009 than if there was no action. For 2010, the plan would boost growth by 1.2 percent to 3.6 percent.

    They got that part right.

    CBO estimates that by 2019 the Senate legislation would reduce GDP by 0.1 percent to 0.3 percent on net.

    Right, as long as you include the effects of years 3-10 on “net” but mysteriously fail to include 2009 and 2010 in the period “now through 2019″.

    • I think you misread the article – they didn’t say the growth would be 0.1% to 0.3% less each year from 2011 to 2019 – they said by that date, the net growth would be 0.1% to 0.3% less than it would be otherwise. They’re referencing the end result, not the year-by-year change. Adding up 0.1% to 0.3% over ten years is not the same thing.

    • According to the Washington Times’ own article, they estimate the following effects from the stimulus bill:

      Years 0-2 : 3-6% GDP up
      Years 3-10 : 0.1 – 0.3 GDP down (from maximum)

      So.. what’s the total impact, years 1-10 combined? You folks can handle basic addition, yes?
      Years 1-10 total effect: 2.7 – 5.9 % GDP up.

      The Washington Times is has made fundamental errors of math and interpretation, or else they’re just lying hacks.

      Or, sadly, you lack basic comprehension skills.

      The CBO says that over the first two years GDP will be increased.  After that point, by 2019, the crowding out effect on private investment  will reduce GDP to the point that by 2019, the net will result in0.1-0.3 lower GDP that would obtain in the absence of the stimulus bill.

      Perhaps in the magical fairyland you live in, the crowding out effect will magically vanish in 2020.  In the real world, where the rest of us live, we know that it will not.  The explosion of government credit will be a continuing drag on output and GDP growth.

      This has nothing to do with what economic growth is in years 1-10, as you imply.  The CBO is saying that the macroeconomic drag effect will, in 2019, begin putting a brake on the economy.  In other words, the price for the short-term stimulus is an extended period, beginning in 2019, of lower GDP growth.  That drag will continue until the excess borrowing is paid off, and the crowding out effect reduced.

  • I did not read it the way you did, glas. For example, this sentence:

    “CBO estimates that by 2019 the Senate legislation would reduce GDP by 0.1 percent to 0.3 percent on net.”

    That’s taken from this sentence in the original letter from the CBO to Gregg:

    “…CBO estimates that by 2019 the Senate legislation would reduce GDP by 0.1 percent to 0.3 percent on net.”

    It doesn’t say “per year”, it says “on net”, which means to me they included the earlier positives, but they were cancelled out by later negatives.

    For what it’s worth, US News says exactly the same thing.

    Now maybe they and we have all got it wrong. But you’ll have to find something that says “per year” to support your interpretation. Otherwise, I’m sure Dale will graciously accept your apology.

    • Actually, the “on net” refers to the net difference between, as the CBO puts it,

      …the effects of both crowding out of private investment (which would reduce output in the long run) and possibly productive government investment (which could increase output)…

      It does not refer to net GDP taken over the whole 10-year period. It can be read that way, from the news articles, but in context, it’s clear that the letter refers to 2019 as the crossover year where crowding out overcomes the decreasingly effective productive effects, if any.

      • OK. Then glas was not nearly as wrong as I thought. He only chopped off the time period. 

        I wasn’t even going to go into the eventual drag from long-term lower growth. I figured we’d get some variation of the usual “in the long term we’re all dead” reply.

  • This stimulus is bad in so many ways, and the current economic distress isn’t nearly as bad as the double-digit inflation & interest rates that Jimmy Carter left us with in 1980….just the press is screaming Chicken Little to cover for Obama’s Great Leap Forward, which will be as successful as Chairman Mao’s was in the long run not too long ago! What a crock that Obama & his twin nitwits in the Senate & House are ramming down the throats of gullible MSM fellow-travelers…..

  • The CBO figures are very worrisome; however, as far as Obama and the liberals are concerned, they are meaningless.  I think the collectivists don’t give a hoot whether this pork-ridden “stimulus” package does any good at all.  It is about power and increased government control of the economy.  They are using this crisis, as Rahm E. advises, as an opportunity to live out their liberal utopia fantasies.  They do not care what the numbers say.

  • We’ve been told for years that budget deficits and national debt are B-A-D (I happen to agree).  Now, faced with The Worst Economy Since The Great Depression (v2.0; the last time we had The Worst Economy Since The Great Depression was in ’03, when the dems were trying another power grab), we’re told that MASSIVE deficits and MASSIVE increase in debt are not only good, but VITAL.

    Um… Right.

    CBO says that, in the short term, the spending WILL stimulate the economy, but the huge increase in debt will hurt us in the long term.  In effect, Congress is doing what it does best: kicking the can down the road.  Yes, they’ll “stimulate” the economy now, but at the cost of massive debt that will only add to our woes when Social Security starts to collapse as more and more boomers retired over the next decade.  Porkapalooza is nothing less than a ticking time bomb that promises serious pain to all of us when the bill comes due in a few years.

    To me, this is not hard to understand or believe.  It’s like maxing out your credit: in the short term, you live high on the hog and all the people who sell to you, from the guy who brews your morning latte to the guy who builds your new house, do well.  However, when the credit card payments start coming due and the interest payments alone are more than your salary, you and all those people suffer because you no can no longer pay what you owe.  O’ course, the government can just keep borrowing more and more money from China, so why worry?

    Say… Isn’t this called “borrow and spend”?  And isn’t it EXACTLY what the filthy dems criticized Bush for doing the past eight years?

  • And the irony of the Obamanation citing previous administration out of line of sight deficit spending as a need to now deficit spend into orbit is hilarious…strike that, it would be, if we were talking about Zimbabwe maybe.