Tag Archives: cbo

CBO Calls Stimulus Resounding Success… I Mean Failure (I Don’t Understand Things)

Posted on by
Reply

As a mushy moderate, I’m in the unfortunate position of actually trying to seek out facts when it comes to economic policy — so contrived sound bites from people who are paid to BS me for a living don’t really do it for me (my apologies to Fox News and MSNBC). So, if you will, please take this brief journey with me as I try to sift through analysis on the impact of the federal stimulus package — all based on from what I can glean is the exact same report from the Congressional Budget Office, mind you.

Jay Bookman of The Atlanta Journal-Constitution contends… the CBO says it was a "major success":

The Congressional Budget Office has released its latest assessment of the 2009 stimulus package and the economic impact of its various components.

According to the CBO analysis of stimulus provisions:

They raised real (inflation-adjusted) gross domestic product (GDP) by between 0.3 percent and 1.9 percent,

  • They lowered the unemployment rate by between 0.2 percentage points and 1.3 percentage points,
  • They increased the number of people employed by between 0.4 million and 2.4 million, and
  • They increased the number of full-time-equivalent jobs by 0.5 million to 3.3 million. (Increases in FTE jobs include shifts from part-time to full-time work or overtime and are thus generally larger than increases in the number of employed workers.)

 Two other points:

  •  The CBO estimates that the impact of the stimulus will continue to be felt over the next year, increasing GDP by up to 0.8 percent next year and creating up to 1.1 million jobs over what it would have been.
  • The longterm economic impacts of increased borrowing to fund the stimulus will be minimal or nonexistent. “In contrast to its positive near-term macroeconomic effects, ARRA will reduce output slightly in the long run, CBO estimates—by between zero and 0.2 percent after 2016,” its economists predict.

The Washington Times relays… Nay, the CBO says it was but a short-term fix, but will cause negative long-term consequences, sucka!:

The Congressional Budget Office on Tuesday downgraded its estimate of the benefits of President Obama’s 2009 stimulus package, saying it may have sustained as few as 700,000 jobs at its peak last year and that over the long run it will actually be a net drag on the economy.

CBO said that while the Recovery Act boosted the economy in the short run, the extra debt that the stimulus piled up “crowds out” private investment and “will reduce output slightly in the long run — by between 0 and 0.2 percent after 2016.”

The analysis confirms what CBO predicted before the stimulus passed in February 2009, though the top-end decline of two-tenths of a percent is actually deeper than the agency predicted back then.

All told, the stimulus did boost jobs and the economy in the short run, according to CBO’s models. At the peak of spending from July through September 2010, it sustained anywhere from 700,000 to 3.6 million, which lowered the unemployment rate by between four-tenths of a percent to 2 percent.

The Obama administration had promised 3.5 million jobs would be produced at the peak of spending.

For this current quarter CBO said the stimulus is sustaining between 600,000 and 1.8 million jobs, which has improved the unemployment rate by as much as 1 percent versus what it otherwise would have been.

The White House did not return a message seeking comment Tuesday afternoon, but officials there previously have said the Recovery Act stopped the economy from falling into another Great Depression…

CBO has re-evaluated the stimulus every three months, and its estimates for the total cost have varied. Initially the package was pegged at $787 billion, rose as high as $862 billion at one point, and is now projected to be $825 billion once all the money is paid out.

The nonpartisan agency also has changed its model for the spending’s impact on the economy, and the new calculations show the Recovery Act did less than originally projected.

CBO said it has concluded there is less of an indirect multiplier effect of federal spending.

Those changes caused it to drop its estimates for total employment sustained by the spending in 2011 from between 1.2 million and 3.7 million down to between 600,000 and 3.6 million.

As for the long-term situation, CBO said its basic assumption is that each dollar of additional federal debt crowds out about a third of a dollar’s worth of private domestic capital.

CBO said there is no crowding out in the short term, which is why the Recovery Act boosts the economy in the near term.

So, in closing, the federal stimulus package was clearly a wonderful/dreadful initiative.

Health Care Bill Draws Ire for Questionable Numbers

Posted on by
Reply

Jeffery H. Anderson of the Pacific Research Institute has a column published in today’s New York Post, labelling the latest health care reform bill as a harbinger of fiscal disaster. He also calls it a fraud (so, you know, not a fan). He contends:

The Senate Finance Committee yesterday voted on a fraud: Sen. Max Baucus’ "responsible" health-reform bill is actually a recipe for fiscal disaster — and the Congressional Budget Office report that supposedly bolstered the bill actually exposes it.

As others have noted, Baucus used all manner of budgetary gimmicks to oblige the CBO to give him the headlines he needed — a supposed pricetag of "just" $829 billion over 10 years, with enough other spending cuts and tax hikes to avoid adding to the federal deficit. But the CBO exposed the truth by taking the rare step of calculating what the bill would cost in its second 10 years.

In its second decade alone, the CBO projects, the bill’s costs would triple — to $2.8 trillion. The taxes and fines it levies would also triple — to $1.8 trillion. And its cuts to Medicare and related federal health programs would quadruple — to $1.9 trillion.

In its first two decades combined, the bill would cost $3.6 trillion and would raise taxes by $2.3 trillion.

Baucus’ most elementary trick was to have the bill’s "first 10 years" include several years when it hadn’t really kicked in. It was scored for 2010 to 2019, yet it wouldn’t be in full swing until 2015 — when its costs would exceed those of its first five years combined.

In fact, the bill wouldn’t cost anything in 2010. In its real first decade (2011-20), it would cost more than $1 trillion.

Furthermore, the CBO projects that, by the end of 2030, the Baucus bill would have cut spending on Medicare and other existing health programs by more than $2.6 trillion.  Continue reading →

Overhauling Medical Malpractice Laws the Right Thing to Do

Posted on by
Reply

Malpractice changes have been ignored, for the most part, in the health care reform discussion – now there are numbers to back why this needs to be a part of the solution.

The Congressional Budget Office (CBO) recently released data estimating government spending on programs such as Medicare, Medicaid and the Children’s Health Insurance Program would decrease by $41 billion over a 10-year period with proper reforms. The reason:  Physicians would no longer overuse tests as a way to protect themselves from lawsuits.

Changes in the malpractice system would also cut national health care spending by 0.5% a year ($11 billion in 2009). No, that doesn’t solve all the problems, but trying to fix the lawsuit-happy world we are living in is a step in the right direction.

CongressDaily reports the CBO’s analysis is based on a few reform factors such as capping noneconomic damages at $250,000 and punitive damages at $500,000. It also calculated the numbers based on a one-year statute of limitation for adults and three years for children from the time the injury is discovered.

A few senators rightly shared their support for reform (and dismay for dawdling Democrats), CongressDaily shares:

"This is an important step in the right direction, and these numbers show that this problem deserves more than lip service from policymakers," said Sen. Orrin Hatch, R-Utah. "Unfortunately, up to now, that has been all the president and his Democratic allies in Congress have been willing to provide on these issues." Hatch had requested the updated analysis from CBO.

Senate Finance ranking member Charles Grassley and National Republican Senatorial Committee Chairman John Cornyn of Texas also expressed disappointment that Democrats have not cracked down on medical liability issues. Cornyn urged senators to "take account of the CBO’s objective numbers and the experience of Texas and other states where healthcare access and affordability have been improved by setting reasonable limits on lawsuits against doctors."

Democrats are reluctant to cap payouts from medical liability lawsuits. But President Obama recently directed HHS Secretary Sebelius to look at ways to make changes to the system that will bring down spending.

CBO’s analysis makes a clear argument that malpractice reform should be part of health care reform discussions. Still, supporters have their work cut out for them based on this outlandish comment:

The findings "reiterate what we’ve always known: that medical malpractice claims have almost no effect on overall healthcare spending," said American Association of Justice President Anthony Tarricone. "The vast majority of empirical evidence suggests that there are only minuscule savings to be found in reforming our nation’s civil justice system."

Cap and Trade Vote Pending?

Posted on by
Reply

The Wall Street Journal takes a look at the proposed cap and trade legislation, which could get a vote as early as Friday. Many are still worried that if this measure does stop global warming, it may do so by freezing the wallets of American businesses and consumers in the process:

Despite House Energy and Commerce Chairman Henry Waxman’s many payoffs to Members, rural and Blue Dog Democrats remain wary of voting for a bill that will impose crushing costs on their home-district businesses and consumers. The leadership’s solution to this problem is to simply claim the bill defies the laws of economics.

Their gambit got a boost this week, when the Congressional Budget Office did an analysis of what has come to be known as the Waxman-Markey bill. According to the CBO, the climate legislation would cost the average household only $175 a year by 2020. Edward Markey, Mr. Waxman’s co-author, instantly set to crowing that the cost of upending the entire energy economy would be no more than a postage stamp a day for the average household. Amazing. A closer look at the CBO analysis finds that it contains so many caveats as to render it useless.

For starters, the CBO estimate is a one-year snapshot of taxes that will extend to infinity. Under a cap-and-trade system, government sets a cap on the total amount of carbon that can be emitted nationally; companies then buy or sell permits to emit CO2. The cap gets cranked down over time to reduce total carbon emissions.

To get support for his bill, Mr. Waxman was forced to water down the cap in early years to please rural Democrats, and then severely ratchet it up in later years to please liberal Democrats. The CBO’s analysis looks solely at the year 2020, before most of the tough restrictions kick in. As the cap is tightened and companies are stripped of initial opportunities to "offset" their emissions, the price of permits will skyrocket beyond the CBO estimate of $28 per ton of carbon. The corporate costs of buying these expensive permits will be passed to consumers.

The biggest doozy in the CBO analysis was its extraordinary decision to look only at the day-to-day costs of operating a trading program, rather than the wider consequences energy restriction would have on the economy. The CBO acknowledges this in a footnote: "The resource cost does not indicate the potential decrease in gross domestic product (GDP) that could result from the cap."

The hit to GDP is the real threat in this bill. The whole point of cap and trade is to hike the price of electricity and gas so that Americans will use less. These higher prices will show up not just in electricity bills or at the gas station but in every manufactured good, from food to cars. Consumers will cut back on spending, which in turn will cut back on production, which results in fewer jobs created or higher unemployment. Some companies will instead move their operations overseas, with the same result.

The Chicago Tribune also chimed in today, noting the bill has grown from 900 to over 1,200 pages in a matter of a couple days. Due to the added girth, do you think legislators actually know what they’re voting on at this point? Probably should considering the magnitude and implications this would impose. (Hat tip to our federal legislative guru Cam Carter for passing this story along.)