CBO: Obama Stimulus Plan Worse than Ineffective
The Congressional Budget Office had bad news for Democratic leaders at a day when they tried to convince at least some Republicans to support the economic stimulus plan: the plan will give the economy a very minor boost in the short term, the CBO says in a recently published report, but will hurt the economy in the middle to long term.
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.
CBO estimates that by 2019 the Senate legislation would reduce GDP by 0.1 percent to 0.3 percent on net. [The House bill] would have similar long-run effects, CBO said in a letter to Sen. Judd Gregg, New Hampshire Republican, who was tapped by Mr. Obama on Tuesday to be Commerce Secretary.
Senator Harry Reid said earlier today he believes he has the votes to pass the bill. Two Republicans are reportedly thinking about siding with Democrats on this one. The CBO report, however, could have a major impact; Blue Dog Democrats and moderate Republicans have all the reasons they need not to vote for this worthless bill.
Later Reid acknowledged that he did not have the votes yet; the statement came shortly after conservative bloggers called on readers to let Republican senators know what they think about the plan.
This bill is so incredibly bad that it’s simply unbelievable that Reid, Nancy Pelosi and President Barack Obama are actually trying to sell it to the American people. They’ve lost the battle for public opinion; polls show support for the bill decreasing. The minority that supported the bill two days ago is becoming smaller and smaller; the only ones who support it are either radical progressives or others who are simply uninformed about the bill’s content.
Obama took office with quite some firepower and public support. If he continues to pursue this plan, however, and if Republicans succeed in shooting it down – both in the Senate and in the public debate – he’ll suffer a tremendous blow.
And that very early in his presidency.
Lets hope Republican senators will resist pressure from leading Democrats and vote against this horrendous, ineffective, worthless bill created by the Democratic Party’s far-left leaders.
Wrong, wrong, wrong. Wrong!
actually leading to a lower Gross Domestic Product over the next 10 years than if the government had done nothing.
No, it does not.
http://cboblog.cbo.gov/?p=205
It predicts a small net negative effect in years 3-10 and a much larger positive impact in years 1-2. You can’t calculate the “overall” or “over the next 10 years” effect and exclude the first two years from that, unless, like the Washington Times, you lack basic math skills.
Just add the positive and negative numbers together. You get a positive number.
The CBO in a muddled attempt at clarity discusses “long run” as if the “short run” effects were being held constant. But they’re NOT held constant in real life. With a 7% increase in years 1 and 2, not having that is a net 7% *decrease* in those years, which obliterates the -0.3 impact in the next eight years, in the *combined* impact.
I’m sure you’ll update.
glasnost probably believes Nancy P. that 500 million Americans are losing their jobs each month as well!
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…..
glasnost, you are the one who is misinterpreting.
You are correct to note that the positive changes in GDP predicted in the first two years might offset the later losses. But there’s no doubt that the CBO is expressing concern about the COST of the early gains- which is a crowding out effect on private investment. With the government financing all of this debt through sale of T bonds, and investors being fearmongered into buying these ’safe’ government securities, the normal private sector investment will continue to staganate. So, even though you’re right to say that the early year gains in GDP might offset the later recession, that recession itself will be self induced by the effects of the long term parts of this package. So yes, it is correct to say that the report is warning that the package in the long term is likely to do more harm than doing nothing would.
Actually, now that I reread this section:
I seem to have conceded too much to glasnost. The report isn’t just warning that those particular years down the line will turn toward negative growth and comparing that to potential positive growth that might otherwise occur without the bill- they’ve actually stated that there’s likely to be a NET decrease in GDP. It appears they’re saying that even taking into account your point, that the early growth has to then be taken into account before GDP heads downward, there’s still likely to be a decrease in absolute terms (not just in missed opportunity.)
glasnost, do you know what the word ‘net’ means?
(Hint: It has nothing to do with catching fish)
I agree, not effective. Perhaps we have these sorts of commercials in our future to look forward to if our fears are realized… Funny, but, not, all at the same time..
http://www.youtube.com/watch?v=rAqPMJFaEdY
Hmmm, I just looked again at Glasnost’s math. So +7 = -7?
The CBO letter is being misrepresented. In fact, it says the stimulus plan will have a large positive effect over the next 3 years — millions of jobs and hundreds of billions of dollars in actual GDP — and a SLIGHT negative effect on potential GDP 10 years from now. Not “over the next 10 years” but in the 10th year and thereafter. How slight? 1/1000th to 3/1000th of GDP. Yes, thousandths. And no negative long-run effect on employment. Life’s choices always involve tradeoffs. This is a pretty good one — million of jobs saved now, no jobs lost long term. Very significant boost in ouput now, slight detriment to output relative to what it would otherwise have attained later. The magnitudes? Benefit in 2010 ten times greater than predicted detriment in 2019. Read the CBO directly: http://www.cbo.gov/ftpdocs/96xx/doc9619/Gregg.pdf