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

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.

Tully: Trying to “Primary” Lugar Would be Ill-Advised

Indianapolis Star columnist Matthew Tully penned a column today contending that if a faction of the GOP was to push for a primary ousting of Sen. Richard Lugar in 2012, it would be an ill-fated and ill-advised decision. He writes:

However unrealistic it seems, it would be foolish to assume any long-term incumbent is untouchable, given the mood of the voting public of late. And most Republican insiders I’ve talked to expect Lugar to indeed face a challenge from a faction of the GOP that thinks he’s been in D.C. too long and worked with Democrats too often.

Still, there are reasons to believe Lugar will not suffer the same fate that has ended the political careers of some of his Senate colleagues. Here are five:

  1. Some social conservatives complain about Lugar, but he remains popular in the eyes of mainstream conservatives. Some ideologues portray Lugar as a liberal, a ridiculous suggestion for a guy who, according to The Washington Post, has voted with his party 84 percent of the time this year. That’s one percentage point less than the Senate GOP average. "There may be disagreements on certain policies," said Luke Messer, a former executive director of the Indiana Republican Party. "But he is deeply respected by Republicans.

  2. If Lugar does face a tough battle from the far right, many Democrats and independents likely would cross over to vote in the GOP primary in order to back him. "People on our side respect Dick Lugar," said former state Democratic Chairman Robin Winston.

  3. Gov. Mitch Daniels, who worked for Lugar for years, remains extremely popular. His support would help the senator. Additionally, the well-run political organizations of the two men have worked closely together and likely would continue to do so.

  4. Unlike some of his colleagues on the front end of the anti-incumbent wave, Lugar won’t be caught off guard. He has already made clear he is running again, a shrewd move that should keep any top-tier Republicans from entertaining the idea of a run.

  5. And here’s the final reason Lugar won’t lose in 2012: Hoosiers are smarter than that.

I’d like to "go rogue" here and offer my personal thoughts as a voter (which do not necessarily reflect the position of the Indiana Chamber): As someone who falls in the political center (a.k.a. abyss) of this conservative/liberal paradigm that’s been shoveled out in modern American politics, I find folks like Sen. Lugar to be rather refreshing in their willingness to think, compromise and generally try to make government actually work.

While it can be fun to draw ideological lines in the sand, get sanctimonious about protecting your team and toss around catchy barbs like "RINO," it’s far more productive to discuss ideas, consider the other side’s point of view and actually try to enact helpful legislation when the time warrants it. Personally, I’d argue Sen. Lugar has done that honorably for years.