CBO Scores the Stimulus Bill
| Mon Jan. 26, 2009 10:45 PM PST
CBO SCORES THE STIMULUS BILL....So what does the Congressional Budget Office really think about the stimulus bill currently wending its way through Congress? Answer:
CBO anticipates that implementation of H.R. 1 would have a noticeable impact on economic growth and employment in the next few years.
Specifically, they estimate that in the spending portion of the bill, $477 billion out of $604 billion would be disbursed either this fiscal year or in the next two fiscal years. That's 79% of the total.
I guess opinions can vary on this, but that strikes me as pretty good. What's more, most of the spending that comes in FY2012 or later is either for projects that simply take more than two years to complete (highways, school repairs) or infrastructure improvements that have long-term paybacks (renewable energy programs). There are a few other items in the out years that are more arguable, but they add up to a pretty small portion of the bill.
Overall, then, it looks like the spending part of the bill is maybe 90% clean as short-term stimulus. And on the supply side, nearly 100% of the tax cuts are allocated during the next 18 months. Given the realities of the appropriations process, I'm not sure the White House could have done much better than this. Looks like pretty good work from the economics team.
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Make sure it's enough. It may take us a decade if we get it wrong. My guess is PK will worry it's too small still.
Compared to how much we've given away to bankers, I can see how a few dozen billion wasted may not strike you as a big deal.
Great. Now let's see the current administration's communications office get off the mat after their pathetic first week. All I'm hearing from the media since the inauguration is Republican concerns. Can't anybody here play this game?
I wonder - does this mean that in order to allay concerns about the package being too small we would have to pump up the tax cut side of the proposal? I mean if the proposed spending will only be 79% spent in the next 2 years then wouldn't adding more spending proposals probably just lower that percentage, not actually add more money into the economy?
Submitted by Nick (not verified) on Tue Jan. 27, 2009 6:11 AM PST.
Boy, the CBO just torpedoed the GOP excuse for voting against the stimulus bill. I think the Republicans are dumb enough to keep obstructing their way to 35 Senators by 2010...talk about tone deaf!
80% of the money in 2 years is "short term stimulus" (probably most of that coming in the second year)? It is clear that there is still little understanding of how steeply this economy is going down.
One year from now, today will be the good, old days.
The quickest way to inject money that is needed NOW?
Make good the deficits of the state and local governments. It's bipartisan, it prevents the impending layoffs of state and local government employees, it funds the safety nets that are becoming far more critical, it preserves businesses of contractors and suppliers. The finance routes are there, no new programs need to be set up and initalized.
After that is done, then you can start working on the longer term programs.
But 477 billion over 2 years? Less than 2% of the GDP. Chump change! A spitball against an asteroid!!
Get real.
The biggest danger right now is to start too little, too slowly, and remain incrementally behind.
Picture brand new fiber optic lines running in fron of empty stores, foreclosed houses, closed schools. Does that make sense?
More has to happen NOW!!
But 477 billion over 2 years? Less than 2% of the GDP. Chump change!
Exactly.
BO's caution and courting of republican favor makes him look weak and indecisive at a time when strength and certainty is needed. When you're confronted by a situation like this that requires big, bold, immediate action, even if the precise action required is somewhat uncertain, you act anyway. It's confidence you are trying to rebuild. You blame the problem on the outgoing clowns, throw the shit up against the wall big-time, ask for patience, and declare victory early on -- this year.
The only reason the stimulus is $850 million (or whatever the figure is now) rather than $2 trillion is political, not economic. The only reason there are 30% (and rising) tax cuts (now as opposed to later) is political. This is not change, this is standard DC political maneuvering -- for no good reason. Giving respect and a voice to clowns like Boehner and McConnell -- who want you to fail -- is simply ludicrous and dangerous.
I have the sinking feeling that BO has tied his success in large part to Congress, in particular the republicans, behaving like adults. And we know how that usually turns out. My fear is that he is on the verge of squandering the support and goodwill he gained in the election. He and his team already appear to not know what they are doing. Larry Summers went on MTP and said as much.
I'm sorry, but this is really stupid politics on a make-or-break-your presidency issue.
Neal is completely wrong about covering state/local deficits is bipartisan - that's the one aspect of the stimulus that Congressional Republicans have gone even more apoplectic over than any other.
Also neither Neal or Econobuzz have answered the question I posed above (and I think it needs to be answered before pushing for more spending): if even with the current plan not 100% can be spent over 2 years, why would upping the allocation increase the actual amount of money pumped into the economy?
I mean if the proposed spending will only be 79% spent in the next 2 years then wouldn't adding more spending proposals probably just lower that percentage, not actually add more money into the economy?
My take is that the package is small because Congress is scared/upset/refuses to make it larger, *not* because they ran out of things to stimulate.
For instance, NASA's annual budget is $17B. In my very very quick reading of the report, last night, there is no mention of additional funding for NASA. I suspect that NASA would happily spend another billion or so this year or next in rescuing hubble and in building/testing Orion and Ares.
I can think of all sorts of current ways for congress to spend and productively too. In a law that seems to have brought Jim Baker, George W. Bush together with John Edwards, last December a Federal Law mandated all pools be made safer to keep children from being harmed or killed by pool drains. That's estimated to cost between $1K and $15K per pool, and though the deadline has passed many pools still need the modification which seems to create work for 1-30 people for a week or so per pool. (I am watching my apartment complex so their pools as I write.) Right there is a Federal program to make pools safer that creates a great deal of work, is expensive, and would very much benefit from a Federal program to pay for these safety measures.
I think there are lots of untapped areas in which to spend that will create economic stimulus.
The problem is more likely a) people afraid or opposed to spending this much money, b) lack of imagination/time/resources for the various committees to propose ways to productive ways to spend the money.
That's spinning! For ex., a big part of the economy, auto manufacturing, is going down. A stimulus might be something like removing taxes from gasoline so the auto makers can sell more big cars and make a profit, or mandate lower wages for auto workers. Not to deny the necessity for renewable energy, but this is a death spiral strategy for the auto companies, not a stimulus.
Even Obama realizes that the long term problem is the enormous deficit, so if the legislation is for more massive long term spending at the expense of a stimulus to temporarily shore up the economy, then we are merely adding to the long term problems.
"It is unclear how the stimulus will raise minimum and median wages."
Er... is it supposed to? I don't think they're addressing that here. The bulk of the tax cuts are for the middle class, though, so I think that's the short-term answer to the middle class squeeze.
I think Obama may even be most inclined to make the cuts manifest as less taxes per paycheck, rather than a lump sum, so at least in practice, most workers would see their "wages" increase.
Guys,
Everybody needs to catch their breath. Obama is not currying favor with the GOP, he's doing what he has to do politically: 1.) try to pick off a few GOP-ers; and 2.) make it look like he's negotiating in good faith. The stimulus is going through. It will most likely be a good bill. I'm amazed so many people jump all over the guy, when he's always demonstrated a shrewdness, intelligence, and long term outlook. Until he blows it, I'm inclined to give him and his way the benefit of the doubt. B/c none of us posters know exactly what to do here. But Obama has surrounded himself with sharp/bright people. The Dems in Congress will maintain the spirit of the stimulus package. Jeez, let the man do his thing.
People need to be reminded:
That's the kind of thing that wouldn't stimulate the economy immediately - in order to do things like repair the Hubble, you need years of advanced planning, looking for the right time window, finding a ship that will take the astronauts there, etc. I suppose you could go through the motions to put yourself in the position to launch, and thereby stimulate the economy, but if the strategy is just to spend money for money's sake without an eye toward the usefulness of that expense then we might as well hire people to dig holes and hire others to fill them.
I'm a physicist, so I dearly appreciate the pitch for more NASA money, but fixing the Hubble is not going to help increase the productivity of the American economic system. Roads, bridges, schools, etc actually do that - and it looks like even with all the projects in the stimulus plan as it stands we still can't spend the money fast enough to be genuine stimulus.
I guess what I'm (inelegantly) saying is that there's a tension here between the need to spend money fast and the need to spend money wisely and if we're really going to all get huffy about the need to spend money fast then we probably need to abandon wisdom. This is not necessarily a bad idea, but we should be honest about it.
http://www.msnbc.msn.com/id/28530024/
$5B for three shuttle flights by 2012. So that's a relatively short term stimulus.
Both scenarios assume that the additional funding needed to keep the shuttle flying does not come out of the budgets for developing the replacement system, consisting of the Orion crew capsule and its shuttle-derived Ares 1 launcher. Both vehicles are being developed under the Constellation program, which encompasses the hardware NASA needs to transport astronauts to and from the international space station after the shuttle retires, and later to the moon.
Obama is also thinking of militarizing NASA to save on NASA budgets -- this at a time when we're trying to figure out if $200M in condoms and bc pills is a good purchase or not.
www.theregister.co.uk/2009/01/05/obama_nasa_military_chumship_thoughts/
links removed because mojo mods are too stupid to breathe.
This will not work and Obama and the Democrats know it won't work. They have all the votes they need to pass it without the Republicans yet they are brow beating Republicans to join them. They are trying to creating a false sense of bipartisanship and they do not want this mother load of pork to break the backs of only Democrats when it does fail. Democrats need to be able to say Republicans were a part of this failure but we will stand strong and this will not be a bipartisan bill. Kudos to the Republicans in the House.
Only tax cuts have ever worked.
If a spending stimulus package could work one would have worked by now. Didn't work for Bush. Didn't work for Japan.
Sure as hell didn't work for Hoover or FDR.
Welcome to the next 'stimulated' depression.
Here's a study that analyzes the performance of stimulus packages. It's very technical, but the results are quite stark.
http://sfb649.wiwi.hu-berlin.de/papers/pdf/SFB649DP2005-039.pdf
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