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What does the CBO REALLY say about the stimulus plan?
Submitted by NextRightNando on Tue, 01/27/2009 - 10:47
in
A week ago the AP reported on a leaked analysis by the Congressional Budget Office saying that it would take YEARS for the money from the stimulus plan to reach the economy. The media pounced on it and in the last week this analysis was cited 81 times in the MSM, usually calling it a "CBO Report".
Problem is, no such report ever existed. You can see the entire non-report here.
It is based on a very early version of the plan, and only a portion of it at that - $300 million of the $825 million (that which is headed for the Appropriations Committee, not that for the Ways and Means or Energy and Commerce Committees). And, it is based on the standard model is spending, it makes no allowance for the ability to accelerate in response to the current crisis.
So much for that famous MSM liberal bias.
The actual CBO Report is now available.
Assuming enactment in mid-February, CBO estimates that the bill would increase outlays by $92 billion during the remaining several months of fiscal year 2009, by $225 billion in fiscal year 2010 (which begins on October 1), by $159 billion in 2011, and by a total of $604 billion over the 2009-2019 period.
In other words, two-thirds in the first 18 months.
And lest you think I made the first part of this post up, I quote the report:
This is the first cost estimate that CBO has prepared for H.R. 1 in its entirety. A previous preliminary estimate that has been widely cited addressed only the budgetary impacts of an earlier version of the provisions contained in Division A, at the request of the House Committee on Appropriations.
(3 votes)
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Comments
So which part of Obama's stimulus package...
...is actually going to stimulate the economy, and when? Which part of Obama's stimulus package will actually create jobs that are not paid for out of the stimulus package, and when?
Borrowing money to pay for tax cuts doesn't stimulate anything. Real GDP growth comes from keeping more money in the pockets of the consumers. This whole stimulus proposal is nothing but a fraud on the people who elected Obama to office. But hey! It's Obama's supporters who are going to have to learn this lessen the hard way, by paying for such foolishness long after Obama is gone.
ex animo
davidfarrar
Whats going to pull us out of the recessionary spiral
Whats going to pull us out of the recessionary spiral absent the stimulus plan?
Let me say this again....
...so that all other young Obama supporters can perhaps understand this very, very important point: Obama's stimulus does not represent "change". It represents the same, old, traditional response to other economic recessions. IT HAS NEVER, EVER WORKED TO SHORTEN AN ECONOMIC RECOVERY! IT HAS NEVER, EVER WORKED TO CREATE REAL JOBS FOR THE POOR AND LOWER MIDDLE CLASSES.
If you truly want to stop this economic recession and hasten the creation of new jobs in the shortest amount of time, reduce taxes on both producers and consumers, while paying for the tax cuts through reducing government spending.
FOR EVERY DOLLAR CUT IN GOVERNMENT SPENDING, FIVE WILL BE CREATED IN THE GDP IN FIVE YEARS.
That is real economic growth. And as I have tried to explain in previous posts: Young, Obama supporters are going to be the principal class who will have to shoulder this enormous economic burden by 2017, when social security surpluses runs out and paying the yearly social security debt will become harder and harder.
ex animo
davidfarrar
and you continue to provide us with lies instead of evidence
I'm sorry but you're putting ideology over common sense, and I ain't afraid to call you out on that.
And you think it's common sense...
...to seriously suggest government can spend it's way out of an economic recession? To seriously believe such nonsense you are the one putting ideology over pragmatism.
But, hey! It's you guys who are going to have to pay for it, big time, so I guess you have the right to be wrong. But I was under the impression, Obama supporters wanted "Change." I was under the impression they actually want a pragmatic approach to governance, not politics as usual.
If you want an example of pragmatic "Change" in the approach to this economic recovery: Stop taxing individual labor as profit and lower corporate taxes by 50%, while paying for this change through the reduction of government spending instead of borrowing from your future.
ex animo
davidfarrar
yes, i do. as did john mccain
the man you most probably voted for.
his Keynesian solution would have been war with Iran.
Show us some numbers
Lets heat this explanation of yours, and please, illustrate it with numbers, not ridiculus clips.
Here are my numbers that disprove what you just wrote.
First, an overview of unemployment rates 1920 - 1940. Recall that The Crash happened in 1929; FDR took office in March, 1932. Then what happened? The unemployment rate started dropping.
Second, annual GDP figures - note that the recovery was in effect before the WWII ramp up began:
Year Nominal GDP ($B)
$219.
Third, because you are predictable, you are still going to say that the increase in GDP in '34 onward was do to WWII build-up. Just to show that is rubbish: Have a look at the the figures for US defense spending as a % of GDP (also using this link) It is obvious that the WWII ramp up did not start untill, you know, WWII.
NB, there is a very good graphic of this on page 3 of this PDF.
just to rub the salt in a little deeper
(because we all know you needed brining. okay, bad joke)
look at the standard and poors index over the ten years since 1929... Spiders seem to do a lot better than Diamonds, eh?
Wait. Didn't I clean your clock
...on this issue once before in another post?
(click on picture above to be taken to the earlier post)
ex animo
davidfarrar
Then, as now, you simply never responded.
Then, as now, you simply never responded. If you have a response, please be so kind as to post it hear.
Well, I will repeat my response to you.
ex animo
davidfarrar
with responses like that.
the only erudite commentary that springs to mind is about Martin Luther's infamous meeting with the devil, where he scooped up his feces and threw it at the devil himself!
(nb. he wrote this himself, I'm spreading no slander)
Well, actually...
...it really didn't open the way I had hoped.
So here is a copy of my response:
"You are not using facts, sir...
...you are using your interpretation of the facts. And while the stock market is not the real economy, it is a reflection of the real economy, one of the few we have here during this time period unaffected by WWII, its buildup, execution and aftermath.
The GDP, did respond to defense spending and the production of massive amounts of defense related production. Again, you are trying to manipulate the facts to support your view.
Rather than rely on your interpretation of the facts of this period, or even mine for that matter, I suggest we rely on Mr. Morgenthau's interpretation. He is the qualified expert witness here, not you, me or RaisingTide."
ex animo
davidfarrar
The rhetoric of a talkshow host who can cut off callers
That is some fine talk show host rhetoric you've got there - but unfortunately for you, it only works when you can cut the caller off.
To say that unemployment declined from 1932 to 1940 is not an "interpretation of the facts" - to say that 14.6 is lower 23.6 is to state an observable fact.
If the stock market is a reflection of the real economy, then could it possiblly be unaffected by the economic inpact of WWII?
But more importantly, why use the reflection when instead you can look at the real picture - like GDP? Why is your method - which is not used by practicing economists - the superior one? Other than the fact that it conveniently fits your crackpot theory.
How can you defend this "interpretation of the facts"? Are you saying the increase in GDP in '34 onward was do to WWII build-up? That is absurd on its face. But, just to demonstrate that is it is rubbish: Have a look at the the figures for US defense spending as a % of GDP (also using this link) It is obvious that the WWII ramp up did not start untill, you know, WWII.
NB, there is a very good graphic of this on page 3 of this PDF.
Why is he a more qualified expert witness than, say, his boss, FDR? If he was so certain that FDR's policies were a disaster, why did he stay in the cabinet until 1945? Afterall, staying on meant his job was to finance these policies that you say he said were such a disaster.
Lets return to the beginning - you say he said that after 8 years the FDR administration had not made any progress. But the numbers so that unemployment rate had been reduced from 23.6% to 14.6%, and GDP had increased from $58.7B to $101.4B, with roughly the same defense budget.
So, what is more credible - this random "quote", from a man WHO REMAINED IN THE ADMINISTRATION, to the actual facts??
This 'dollar cut, five dollars gained'
Where is this meme coming from? I mean, by that logic, why not just cut all government spending? lol I'm sure it can't be that cut and dry.
Yes, it can be just that easy
This isn't rocket science. When you overspend to the point where you are spending money you don't have, YOU CUT SPENDING.
When government cuts spending, less taxes are required, leaving more money in the pockets of the consumers. What is so hard to understand tabout his principle?
ex animo
davidfarrar
Been there, done that
Herbert Hoover, who presided over a 25% decline in GDP between the Crash in October 1929 and then he finally left office in March, 1928
Have you been here?
ex animo
davidfarrar
Hmm, which is more compelling?
Actual history? Or 7 minutes of alternative reality from the Cato Institute??
So you think...
...all the government has to do is send more money it hasn't got and somehow, the recession will be shortened.
Now I will grant you, tax cuts will stimulate the economy, but not when the money used to pay for them is borrowed. Real economic stimulus from tax cuts come from lowering government spending, keeping more money in the pockets of the consumers. Cutting government spending by 30% should be done before even thinking about borrowing money for tax cuts, let alone infrastructure.
At this point, I am not at all convinced even if every single member of Congress and President Obama wanted to reduce government spending by 30% they would be able to do it over the objection of the taxing oligarchy, who actually controls the real power in this country.
ex animo
davidfarrar
How many times do you have to hear the words "Herbert Hoover"
How many times do you have to hear the words "Herbert Hoover" before it begins to sink in that that no one - absolutely no one - with any credibility or position of responsibility is proposing this harebrained idea because it was tried in 1930 and it bad things much, much worse?
But Hoover didn't cut government spending...
..he increased it.
ex animo
davidfarrar
repeating the mistakes of Herbert Hoover
Hoover and the Congress vastly increased government spending while imposing high tariffs at the same time the Fed contracted the money supply. We are on course to repeating only two of the three mistakes. Count your blessings I suppose.
GDP-spending confusion
Decline in GDP is not the same as decline in government spending. From 1929 to 1932, GDP fell by 25% but the federal budget increased by almost 50%. (source) Hmm. Maybe we are repeating a mistake here.
True but
Surely there is some sort of 'sweet spot' where there is not too much nor too little government taxation? I'm no economist, so go easy on me.
Did you read the CBO report you link to?
CBO estimates the early stimulus comes not from the Obama spending binge but from increased unemployement benifits and TAX CUTS.
to some extent they're right
there is always a bidding process, etc etc. and not everything gets spent at once. but if you tell a contractor that he's getting 10 milliion over two years, he can spend like that is a given. ergo you get more return on investment than you might expect, as he can get more long term needs met.
Yes. That's why they are in there.
Yes, That's why they are included in the bill. Paraphrasing Nate Silver: spending gives more bang for the buck than tax cuts, however there are a limited number of shovel-ready project out there. So the bill if a mix of spending and tax cuts - what the tax cuts lack in terms of ROI they make up for in terms of speed.
In other words, it is the work of grown-ups, living in the real world.
grown-ups and tax cuts
But hey, if the purported purpose of the economic stimulus package is to SAVE THE COUNTRY FROM DISASTER RIGHT NOW, why not craft the plan to be entirely tax cuts? CBO agrees they are more effective at immediate stimulus, Nate Silver agrees (as if he were an economist, but hey he's a lefty so you'll cite him), and even your idol Warren Buffett is agnostic on the issue.
So please tell us all how it is "grown-up" to insist on a mix of tax cuts and spending when the latter is known a priori to be far less effective at economic stimulus than the former.
The bottom line: The spending is not about stimulus. It is about fulfilling Democrat policy priorities and the recession is just an excuse to justify enacting it. As Rahm Emmanuel said, don't let a good crisis go to waste.
well, it may just be me
but I think if you take the unemployment and welfare checks away, you lose cities. Cali's already threatening to not send tax rebates back, unemployment and welfare, plus student loan remittances.
Do you enjoy the smell of charred human flesh?
Fuzzy math
Hmm. Let's just look at the part that Nando quoted.
So, $92B for the rest of FY 2009, $225B for FY 2010, and $604B overall. So the amount that would be expended from Feb 09 to Sept 10 (the end of FY 2010) is $92B + $225B = $317B. So the proportion that would be spent in the first 18 months is $317B/$604B = 52.5%. That's pretty far from "two-thirds". In other words, fully 47.5% or $287B will be spent after Sept 2010. This is beyond even where the pessimists think the recession will end.
So, please, Nando, explain to all of us, that if this stimulus bill is REALLY REALLY NEEDED RIGHT NOW, RIGHT THIS VERY INSTANT, TO SAVE THE COUNTRY FROM COLLAPSE AND FINANCIAL RUIN, why do you think Democrats are planning on waiting for more than 18 months before spending nearly half of the proposed spending? Could it be, perhaps, that the spending really doesn't have anything to do with economic stimulus? (Gasp! No! It couldn't be! That's just right-wing talking points!)
Also, from part of the report that Nando didn't quote and that WoodbridgeVa pointed out, CBO thinks that a lot of the money will be sitting around in the federal bureaucracy because it's going to be allocated to agencies and departments that will be receiving enormous budget increases, and hence they don't know what to do with that kind of cash. So these agencies are going to have to come up with plans of their own for how to spend the cash. Remember this is CBO talking, not right-wing ideologues like Limbaugh and Hannity. So, Nando, perhaps you might be willing to concede that maybe, possibly, conservatives have a point when they frequently claim that increasing the size of government is just a recipe for bloating the bureaucracy and putting the money to very inefficient uses. MAYBE, just MAYBE, it would be a more efficient use of $100B to return it to the taxpayers, who know EXACTLY what to do with the money, rather than to give $100B to the Department of Widgets who will then sit around for 3 months devising a plan on how to spend the money.
another fucking bailout to the banks?
no fucking way. no way in hell.
Give me some wind. Harness some sunshine.
But no more money for the fucking banks, they've already stolen trillions from the reserve!!!
And no more bailouts for china.
If you give teh government a dollar, they spend let's say 70% of it building something worthwhile, employing people in America.
If you give people a dollar, they either bailout the banks with it, or they send it to china.
Signed Sealed Delivered,
your simulus bullet is magnetized.
liberal mindset on government and money
Well, there you have the liberal mindset on display. Money should remain with government because they are enlightened stewards, while money in the hands of the rabble will only be squandered and spent on unseemly pursuits.
Let's just ignore the fact that the money that government would be spending is actually borrowed money, and who's our biggest creditor? That's right, China.
Let's also ignore the fact that the "something worthwhile" built by government will, most likely, be some pork-barrel project whose real purpose is to get some politician re-elected, thereby casting doubt on the true "worthwhile" nature of the project.
And let's just completely ignore the other 30% that somehow just vanishes. Should we even be concerned? No, because government knows what it's doing. Government can't create utopia without first breaking some eggs!
I expect you to speak up about that 30%
and do your damnedest to get it down to 10%. And that'll be me pushing beside you, because I can't abide unnecessary waste!
How exactly does a national smart grid get Dorgan reelected?
How exactly does Universal Health Care help Merkely?
Sorry, but we're thinking a bit bigger than you are. Maybe you think that more healthcare on indian reservations is porkbarrel, but the public health numbers tell a different story.
I am not sure what you are thinking.
But I am thinking about this:
ex animo
davidfarrar
do you really begrudge buy-american
provisions for textile products? I'll admit that the guy who's suggesting it works for a district with textile mills. But it isn't saying that his textile mills will be chosen, or anything. Just making sure our money spends one cycle here, in american pockets, before it hits chinese pockets.
Been there, done that
Remember the checks that George Bush sent out just last year? Link (pdf):
temporary vs. permanent
You mean, the checks that George Bush and Nancy Pelosi sent out last year? Yeah I remember them. The problem with sending out one-time rebate checks are that they are temporary. People cannot depend on one-time checks in order to make long-term plans. I suggest permanent tax cuts, permanent regulatory reform, and permanent spending cuts, targeted towards small businesses and investors. And not small ones, but big ones. These are the people whose behavior we want to change, after all.
Oh and if you would please explain why we should support the Democrats' "stimulus" plan when nearly half of the spending won't occur for over 18 months.
krugman. go look at the links i psted on the recent blog posts
area. enjoy!
I made longterm plans based on my stimulus check. I'm patriotic that way, and I know my own selfinterest lies in well-connected communities. I guess that's something a misanthrope like yourself might not understand. ;-)