CBO: Obama stimulus harmful over long haul

Discussion in 'Economics' started by JBfinancial, Feb 6, 2009.

  1. CBO: Obama stimulus harmful over long haul
    Stephen Dinan

    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.

    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.

    The House last week passed a bill totaling about $820 billion while the Senate is working on a proposal reaching about $900 billion in spending increases and tax cuts.

    But Republicans and some moderate Democrats have balked at the size of the bill and at some of the spending items included in it, arguing they won't produce immediate jobs, which is the stated goal of the bill.

    The budget office had previously estimated service the debt due to the new spending could add hundreds of millions of dollars to the cost of the bill -- forcing the crowd-out.

    CBOs basic assumption is that, in the long run, each dollar of additional debt crowds out about a third of a dollars worth of private domestic capital, CBO said in its letter.

    CBO said there is no crowding out in the short term, so the plan would succeed in boosting growth in 2009 and 2010.

    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.

    CBO did project the bill would create jobs, though by 2011 the effects would be minuscule.

  2. Duh.. You need to print money to offset ricardian equivalence.

    A lot of money.
  3. Of course. ALL of this stimulus/bailout is harmful in the long run.

    But Federal politicos don't care about that. They only care about the "appearance in the short run so they stand a better chance of getting elected/reelected".... well, that and lining their own pockets at taxpayer expense... :mad:
  4. The CBO is also only pertinent when scrutinizing a republican plan, that is according to the dems.
  5. 'harmful' I would say fatal, thus bringing to close an era where 'greed was good'

    The sooner the package is introduced then the sooner the point of no return is reached and reality will prevail.

    Much the same way in which Bush brought the US closer to the turning point than Gore would have.

  6. Mvic


    This stimulus bill creates jobs at a cost of 900K+ per job at the high end or $300K in the low end (if 3.9M are created vs 1.2M) and he jobs that will be created will be the type that pay on average $33K.

    Does this make any sense to anyone?
  7. Another 598,000 jobs were lost in January. The problem is that it will take 1 year or more to solve the financial mess, aka get help from other countries such as China to setup a better financial system.

    In the meantime, the goal is not to have the country in a depression by then. A lot of the jobs lost for example in January were retail jobs because "people aren't spending". Well they won't spend either with so many job losses and it will create a vicious cycle of economic contraction.

    Does it increase the debt? Hell ya.
    What I have problem with the article is that the argument is 1 sentence long. "crowd out private investment" Wtf does that mean?

    Almost all the argument is usual journalistic filler, that one sentence is the only one that matters to evaluate the claim about the stimulus.
  8. If I recall in another article about the CBO they hired outside consultants to do the analysis. A question that should be answered first is who did they hire, what methodology did they use, and how did they come up with the numbers?

    The idea of crowding out investment is a tricky one. As in most estimates slight deviations in assumptions can create giant differences in projections.
  9. Its plain to see that Obama is a tool under control by the fools on the left.

    He should resign. lol
  10. This is a catastrophe, it is no longer an analytical problem.
    It requires a paradigm shift in thinking.

    #10     Feb 6, 2009