New CBO report echoes earlier analysis: “Stimulus” too sloooow to stimulate
Last night, the Congressional Budget Office sent out a full analysis of the House stimulus bill — elaborating on the partial number-crunching that got disseminated last week. The new report elaborates on what the old one illuminated: the vaunted infrastructure spending will take years and years and years to kick in.
Here’s the e-mail the CBO debuty director sent out last night:
From: Bob Sunshine
Subject: CBO Cost Estimate for House Stimulus Bill (H.R. 1)
Sent: Jan 26, 2009 9:56 PM
This evening, CBO released a cost estimate for H.R. 1, the American Recovery and Reinvestment Act of 2009, which was introduced today in the House of Representatives. H.R. 1 would specify appropriations for a wide range of federal programs and would increase or extend certain benefits payable under the Medicaid, unemployment compensation, and nutrition assistance programs. The legislation also would reduce individual and corporate income tax collections and make a variety of other changes to tax laws.
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. That spending includes outlays from discretionary appropriations in Division A of the bill and direct spending resulting from Division B.
In addition, CBO and the Joint Committee on Taxation (JCT) estimate that enacting the provisions in Division B would reduce revenues by $76 billion in fiscal year 2009, by $131 billion in fiscal year 2010, and by a net of $212 billion over the 2009-2019 period.
In combining the spending and revenue effects of H.R. 1, CBO estimates that enacting the bill would increase federal budget deficits by $169 billion over the remaining months of fiscal year 2009, by $356 billion in 2010, by $174 billion in 2011, and by $816 billion over the 2009-2019 period.
The budgetary impact of the bill stems primarily from three types of transactions: Direct payments to individuals (such as unemployment benefits), reductions in federal taxes, and purchases of goods and services (either by the federal government directly or indirectly via grants to states and local governments). CBO estimates that impacts from the first two categories of transactions would occur fairly rapidly. In the third category, CBO estimates slower rates of spending than historical full-year spending rates in 2009 for a number of reasons:
The bill’s enactment would likely occur nearly half way through the fiscal year. Previous experience suggest that agencies have difficulty rapidly expanding existing programs while maintaining current services; the funding in H.R. 1 for some programs is substantially greater than the usual annual funding for those activities. Spending can be delayed by necessary lags for planning, soliciting bids, entering contracts, and conducting regulatory or environmental reviews. Agencies face additional challenges in spending funds for new programs quickly because of the time necessary to develop procedures and criteria, issue regulations, and review plans and proposals before money can be distributed. Frequently in the past, in all types of federal programs, a noticeable lag has occurred between sharp increases in funding and resulting increases in outlays. Based on such experiences, CBO expects that federal agencies, states, and other recipients of funding would find it difficult to properly manage and oversee a rapid expansion of existing programs so as to spend added funds quickly as they expend their normal resources. The seasonal nature of some spending also affects the speed at which activities can be conducted; for example, major school repairs are generally scheduled during the summer to avoid disrupting classes.
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.
The CBO cost estimate can be found on our Web site at:
link
Bob Sunshine Deputy Director
Congressional Budget Office
Let me excerpt directly from page 4 of the report:
Frequently in the past, in all types of federal programs, a noticeable lag has occurred between sharp increases in budget authority and the resulting increases in outlays. Based on such experiences, CBO expects that federal agencies, along with states and other recipients of that funding, would find it difficult to properly manage and oversee a rapid expansion of existing programs so as to expend the added funds as quickly as they expend the resources provided for their ongoing programs.
Lags in spending stem in part from the need to draft plans, solicit bids, enter into contracts, and conduct regulatory or environmental reviews. Spending can be further delayed because some activities are by their nature seasonal. For example, major school repairs are generally scheduled during the summer to avoid disrupting classes, and construction and highway work are difficult to carry out during the winter months in many parts of the country.
Brand new programs pose additional challenges. Developing procedures and criteria, issuing the necessary regulations, and reviewing plans and proposals would make distributing money quickly even more difficult—as can be seen, for example, in the lack of any disbursements to date under the loan programs established for automakers last summer to invest in producing energy-efficient vehicles. Throughout the federal government, spending for new programs has frequently been slower than expected and rarely been faster.
Bottom line: It’s still the timing, stupid.
The Democratic stimulus package the U.S. Congress will weigh on Wednesday falls billions of dollars short of President Barack Obama’s goal to pump most of the money into the economy quickly, a report released on Monday showed.
The $816 billion package will pour some $525.5 billion, or 64 percent, via spending and tax cuts into the ailing economy within 19 months, according to the report issued late on Monday by the non-partisan Congressional Budget Office.
Last week, Obama’s budget director, Peter Orszag, told lawmakers the administration’s goal was to pump at least 75 percent of the money from the stimulus package into the economy by Sept. 30, 2010.
The report expands on another from the same office Republicans had touted last week as showing that less than 40 percent of the stimulus money would filter into the economy over the 19-month period. Democrats complained report was a partial review and CBO on Monday concurred.
The legislation “provides immediate stimulus to help create jobs and makes long-term, targeted, and responsible investments to keep our nation’s economy growing for years to come,” House of Representatives Speaker Nancy Pelosi said in a statement.
Republicans seized on the report as evidence the Democrats’ spending plan would take too long to help the economy.
“Once again, it highlights the fact that a huge chunk of the Democrats’ so-called stimulus plan comes way too late to make any real difference in fixing the economy,” said Kevin Smith, a spokesman for House Minority Leader John Boehner.
I’ve been saying it for more than a year.
Politico reports this morning that the GOP may be finally stiffening its spine. Manage your expectations, though. B.O. Republicans have bent over before:
President Barack Obama is coming to the Capitol this afternoon to curry favor with congressional Republicans. But it appears GOP leaders have already made up their minds to oppose his $825 billion stimulus plan.
House Republican Leader John A. Boehner and his No. 2, Whip Eric Cantor, told their rank-and-file members Tuesday morning during a closed-door meeting to oppose the bill when it comes to the floor Wednesday, according to an aide familiar with the discussion.
This should dampen the mood for an early afternoon meeting with the president, who is making the trek to hear Republicans’ input on the legislation before Wednesday’s vote. Once Obama is done with House Republicans, he will cross the Capitol to join the Senate Republican Conference lunch to pitch them on the stimulus.
Senate Minority Leader Mitch McConnell (R-Ky.) said on NBC’s “Today” show Tuesday morning that Democrats in Congress are “drifting away” from Obama’s preferred stimulus plan, which was supposed to to include 40 percent tax cuts and be free of earmarks.
“Listening to what he said he wanted, we think we may be closer to that, oddly enough, than the Democratic majority, which seems to be pulling in the direction of fewer tax — less tax relief and things like fixing up the [National] Mall. You know, most people don’t think that’s the way we ought to spend stimulus money,” McConnell said.
Despite the grim outlook for Republican support, administration officials are not giving up. In addition to the president’s visit, Chief of Staff Rahm Emanuel is hosting a group of congressional Republicans at the White House tonight. Vice President Joe Biden is visiting the Senate Democratic lunch, and the Senate Finance Committee is undergoing a lengthy markup of the legislation.
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Categories: fiscal stimulus
The “stimulus” is too late for the economy but not too late to entrench socialist entitlements and giveaways.
And the politicians in D.C. will still ignore all evidence that this “stimulus” package will NOT work because they don’t care if it works or not as a stimulus plan. This is about getting their pet projects into the permanent budget.
Huh. You know, if I wasn’t feeling all Hopey-Changey, I’d be tempted to say that was the purpose all along.
BUT BUT the ONE said the economy will fail if we don’t vote for this. The ONE can never be wrong!!!
/sarc
This has always been about permanently securing the Democrats in power for the next 100 years, and not about helping the economy. For Democrats power is everything. America will always take a back seat to the desires of the Socialists in Congress. Am I saying they are not patriotic? Absolutely!
Correct.
The socialists are about money, sex and power.
And nothing else.
The guy’s name is actually Bob Sunshine?
granite: I have a visual of Nancy Pelosi when you say that! Choking… on…. own…. vomit… RedDog…. out…
That is the big DUH! of the morning
Just the lawsuits alone would stretch it into the next 1/2 century. I can see the lawyers lining up now. Sierra club, Greenpeace, the global warming crown etc etc etc all ready to take their share of the money for legal fees.
So the “stimulus” would work as slowly as the president talks.
Let’s hold these agencies to the same standards the dems want to hold the Oil industry with in regards to land leases, “Use it or Lose It.” If you’re project hasn’t started by the end of FY 2009, where a cash infusion might do some good, then the money doesn’t get spent.
Stimulate – irritate, all the same to a Liberal, but that money, sex and power business is appealing
throw in a head of hair and I might……..
buy a few more bricks of ammo this week before He Who Has Come stops that as a Constitutional Right to forbid Constitutional Rights.
We need to remove “the power of the purse” from the hands of Congress. They are raging incompetents.
Give the resposibility to the states and let them put the federal government on a strict allowance. If they protest, they get put in time-out with no supper.
I heard only 3% of the 825B would make it to the economy in 2009. Demo-bats. Can’t live with ‘em, can’t shoot ‘em.
Bada-bing!
The Dems cause a financial crisis, then go running around screaming that we MUST spend trillions of dollars (on stuff that won’t help) to fix it.
Obummer’s own economic advisor, Christina Romer, did a study that showed that cutting taxes does much more to stimulate the economy than government spending. Will he listen to her?
Pelosi’s Pork Package (aka “stimulus” bill) will be one of many miserable failures under Obama.
Just because the CBO (not the OMB) thinks too much of the money may be spent a couple years down the line doesn’t mean it isn’t money well spent. If the recession is as bad as it seems, we will still need that stimulus money in 2010 and 2011 too. That doesn’t mean we shouldn’t try to have stimulate the economy on a shorter term basis, but neither does it mean we shouldn’t spend the money in the long term either.
The stimulus is a no-brainer. The states need the money, the federal government has a much easier way of raising money than the states, cash is a lot cheaper to get than in years past, and because of the housing crash, services and raw materials are much, much cheaper right now than they will be when the economy gets better, when we would otherwise spend this money.
Exactly.
They start a fire; and then scream for more gasoline to pour onto it….
I agree. Only someone with no brain would think that the cure for too much debt is to borrow some more.
What historical economical model are you basing that statement on?
Taken out of context I agree totally. There is little reflective thought in the stimulus plan. But then it is nnot meant to stimulate, but to entrench.
Mercilessly slash discretionary spending at all levels, cut corporate and capital gains taxes in half and watch the economic engine of the U.S. pull us right out of this.
Simple, easy, and effective. Also, historically predictable in its positive results.
One of the few things that will get money and investments flowing again is a capital gains tax cut to ZERO, even if it’s temporary — 2 years is a good start.
But of course, the uneducated, and highly misinformed Democrats who have never paid attention to economic models, or historical evidence to this fact will disregard this as another “tax cuts for the rich” scheme.
Ah…remember the ol’ Andy Griffith song?
Spread a little sunshine everyday
Spread a little sunshine every way
Help someone along life’s way…
Spread a little sunshine everyday
There you have it. The Obama/Pelosi/Reid/Socialists stimulus plan cannot work and will not work
That doesn’t mean it won’t happen. They will force it to happen even though a large majority of Americans do not want it and we know it won’t work.
This is the leadership most voters wanted. This is the change they demanded. Ignorance is bliss, they say.
Thomas Sowell this morning in Townhall:
Sunshine in my eyes makes me cry…
With apologies to John Denver.
What do you mean you can’t build a bridge and a couple of highways next week? Where are those 200,000 fawning Germans when you need them?
When has “mercilessly slashing” discretionary spending (thereby putting millions out of work) pulled the country out of a deep recession?
I’m not sure if I understand the question, since there’s no “historical economic model” that can predict how long this recession will last, but most economists agree it would take a miracle for the economy in 2011 to be as strong as it was in, say, 2006.
RedState: When have government workers (those who “spend” that discretionary money) ever contributed to the national economy and provided a way out of a deep recession?
Thomas Sowell has a great column about this. My favorite quote:
Using long drawn-out processes to put money into circulation to meet an emergency is like mailing a letter to the fire department to tell them that your house is on fire.
Here’s my hero dropping some real knowledge about the “stimulus” on some talking heads this morning.
Video here.
Over on huffpo, the dems are blaming everything on republicans. Despite having majorities in both houses and the white house those idiots still seem to thing the GOP runs the show.
Wiskey Echo Alpha Kilo.
When has “mercilessly slashing” discretionary spending ever been tried?!
Out of curiousity, how much of a stimulus would there be if we opened up the OCS and ANWR to drilling? It seems to me that wouldn’t cost the taxpayers a single dime and would have a darn near immediate impact.
Dexter: Read post # 26…
The fact is the “stimulus” has never been about stimulating, it is all about using a crisis to make government bigger, more intrusive, and more powerful. This is how it has always worked throughout history. The only way to make government smaller (historically speaking), is to have a mass revolt – which is usually very bloody, as the government controls the military.
nail,
Great minds…
Sorry, I read the article and rushed over to post.
Red State – Keynesian economics(gov. spending, pump priming) has been repeatedly shown not to work. This is because it is inefficient and reduces the overall productivity of the nation. What has been shown to work repeatedly is the reduction of government spending and it’s intrusion into the market place. When taxes are reduced on those who actually pay them (the rich) the revenue to the government increases due to the increase in economic activity. Check it out, review the history, work with facts instead of ideology.
Arrgghhh!!
“Submit” fouled up.
Another try:
The states
needwant “money”.What they want is purchasing power.
What they will get is devalued currency, after the Feds find they cannot tax any more, and resort to printing more money.
Duh, that wouldn’t have anything to with the facts that only the Feds can tax nationwide; and only the Feds can print more “money”, would it?
That’s all they can do: tax, spend, confiscate, print more money.
The government cannot create purchasing power, cannot create value.
Reminds me of the Dan Ackroyd as Carter news conference on SNL ~30 years ago during the disaster that was Carter- I saw the original airing, and almost fell on the floor laughing!!!
Links (hopefully at least one will work for ya):
http://smithsense.com/2008/01/23/inflation-is-our-friend/
http://www.wendymcelroy.com/print.php?news.1326
http://snltranscripts.jt.org/78/78dcarter.phtml
http://www.dailyreckoning.com.au/tax-rebates/2008/01/21/
http://whatwoulddynamodo.wordpress.com/2008/01/23/dan-aykroyd-as-jimmy-carter/
A Message From the President of the United States
President Jimmy Carter…..Dan Aykroyd
President Jimmy Carter: Good evening. On Tuesday, we Americans will have the opportunity to exercise our role as citizens in a free democracy. Yet, only a third of the eligible voters will actually cast ballots. The other two-thirds are, in a sense, very lucky. Because they do not know what’s going on.
Last week, I delivered a message on inflation. Since then, the dollar has dropped in value, the stock market has sustained record losses, and the whole sow price index increased 0.9%. In other words, our economic system is screwed, blued and tatooed! We just have to face the fact that there is simply no way to fight inflation in a capitolly-intensive, highly-technological, conflict-riddled, anything-for-a-thrill world of today. That’s why, tonight, I want you to try to look for in inflation, an entirely new word: Inflation is our friend.
For example, consider this: in the year 2000, if current trends continue, the average blue-collar annual wage in this country will be $568,000. Think what this inflated world of the future will mean – most Americans will be millionaires. Everyone will feel like a bigshot. Wouldn’t you like to own a $4,000 suit, and smoke a $75 cigar, drive a $600,000 car? I know I would! But what about people on fixed incomes? They have always been the true victims of inflation. That’s why I will present to Congress the “Inflation Maintenance Program”, whereby the U.S. Treasury will make up any inflation-caused losses to direct tax rebates to the public in cash. Then you may say, “Won’t that cost a lot of money? Won’t that increase the deficit?” Sure it will! But so what? We’ll just print more money! We have the papers, we have the mints.. I can just call up the Bureau of Engraving and say, “Hi! This is Jimmy. Roll out some of them twenties! Print up a couple thousand sheets of those Century Notes!” Sure, all these dollars will cause even more inflation, but who cares? Everyone will be a millionaire!
In my speech last week, I said that America would have to undergo an austerity program, but since this revolutionary new approach welcomes inflation, our economy will be free to grow, and we can spend, spend, spend! I believe the watchwords for the 80′s should be “Let’s Party!” And in that spirit, I’d like to say, “Live, from New York, it’s Saturday Night!”
Uncanny and spooky.
This skit is at least the equal of “Atlas Shrugged” for prescience.
Links:
http://snltranscripts.jt.org/78/78dcarter.phtml
http://smithsense.com/2008/01/23/inflation-is-our-friend/
http://www.wendymcelroy.com/print.php?news.1326
A Message From the President of the United States
President Jimmy Carter…..Dan Aykroyd
President Jimmy Carter: Good evening. On Tuesday, we Americans will have the opportunity to exercise our role as citizens in a free democracy. Yet, only a third of the eligible voters will actually cast ballots. The other two-thirds are, in a sense, very lucky. Because they do not know what’s going on.
Last week, I delivered a message on inflation. Since then, the dollar has dropped in value, the stock market has sustained record losses, and the whole sow price index increased 0.9%. In other words, our economic system is screwed, blued and tatooed! We just have to face the fact that there is simply no way to fight inflation in a capitolly-intensive, highly-technological, conflict-riddled, anything-for-a-thrill world of today. That’s why, tonight, I want you to try to look for in inflation, an entirely new word: Inflation is our friend.
For example, consider this: in the year 2000, if current trends continue, the average blue-collar annual wage in this country will be $568,000. Think what this inflated world of the future will mean – most Americans will be millionaires. Everyone will feel like a bigshot. Wouldn’t you like to own a $4,000 suit, and smoke a $75 cigar, drive a $600,000 car? I know I would! But what about people on fixed incomes? They have always been the true victims of inflation. That’s why I will present to Congress the “Inflation Maintenance Program”, whereby the U.S. Treasury will make up any inflation-caused losses to direct tax rebates to the public in cash. Then you may say, “Won’t that cost a lot of money? Won’t that increase the deficit?” Sure it will! But so what? We’ll just print more money! We have the papers, we have the mints.. I can just call up the Bureau of Engraving and say, “Hi! This is Jimmy. Roll out some of them twenties! Print up a couple thousand sheets of those Century Notes!” Sure, all these dollars will cause even more inflation, but who cares? Everyone will be a millionaire!
In my speech last week, I said that America would have to undergo an austerity program, but since this revolutionary new approach welcomes inflation, our economy will be free to grow, and we can spend, spend, spend! I believe the watchwords for the 80′s should be “Let’s Party!” And in that spirit, I’d like to say, “Live, from New York, it’s Saturday Night!”
Government produces nothing. It only consumes. The private sector produces goods and services. Our nation’s economy is like a sailing ship. Government expenses act like a sea anchor. The ship slows until it eventually just drifts.
Private sector jobs as investments add more sails on the ship. The jobs will not be lost, just redirected. And those whose jobs are truly lost displace the illegal aliens from their jobs, so we send them home.
What’s more efficient; FedEx or the USPS; Health and Human Services or the Salvation Army?
Dex,
Not to worry.
I agree, great minds think alike!
We also like a think!
I tried posting the above twice, but it was never “submitted”.
I saw this hilarious skit on SNL ~30 years ago when it first aired, during the disaster that was Carter, and remember just about rolling on the floor laughing with tears in my eyes!
The states may
needwant “money”.What they want is purchasing power.
What they will get is simply devalued “money”.
Sure, the Feds can raise “money” better than the states, because only the Feds can tax nationwide; and only the Feds can print “money”.
But that’s all they can do: tax, spend, confiscate, and print “money”.
No government can “create” purchasing power; no government can create “value”.
I know conservatives love to deny the impact that the New Deal had in bringing the country out of the depression just like they deny the existence of evolution and global warming, but if that’s not good enough for you, then World War 2 definitely helped. That’s a LOT of people working for the government, and as far as I know, it helped the economy pretty good.
Of course, WW2 was the granddaddy of stimulus, and if we even thought of running up the deficit the way the US did then, we would have so much inflation that no one would buy our debt. But it still illustrates the obvious fact that giving people jobs helps the economy.
How is it that the de-funding of social security is not mentioned in this review?
Clearly, if we are ‘refunding’ payroll contributions there are many long term, think retirement, considerations that need to be exposed.
Rather than simply ALLOWING Obama and the Democrats to call this defunding a tax cut, it needs to be exposed as the serious reorganization of social security that it really is.
So to clarify, you don’t have any actual historical precedent that the way to get out of a recession is to fire government employees, just the fact that the private sector is more efficient than government.
Of course I agree with you, but in the spot we’re in right now, all the tax-cutting in the world isn’t going to get the economy on the right track for several years. We can’t wait for the market to work its way through this debacle. If you want to say that contractors should be the beneficiaries of the stimulus, that’s a valid point, but it has to be something.
I don’t deny the impact of the New Deal or evolution and global warming.
What I fail to find is a credible argument that: 1) the New Deal actually helped and didn’t prolong the Great Depression; 2) that evolution exists in the first place — where are today’s “tweeners” for man and monkey?; and, 3) global warming is either man-made or even existent.
Until someone can present credible (not emotional) proof, I will remain a skeptic, but not a denier.
What so many people forget is that during WW2 Rosevelt stomped all over the labor unions. This broke the pricing monopoly, and supports, that the government and labor had used to strangle the free market CAUSING a simple recession to turn into a long series of recessions which came to be known as the ‘great depression’.
And of course, just last night, Obama was casually explaining how we will be in this new OBAMA recession for MANY years!
Tell you what, cut my taxes and I’ll do MY part to help the economy and it will start this Friday (when my paycheck is deposited). I will save, invest and spend what Uncle Sam doesn’t take from me.
But, don’t take my taxes to spend on road and bridge projects that won’t start for at least 12-18 months — at best!!!
Interesting that everything started to go downhill when the DEMOCRATS too control of both houses of Congress in 2006. And yet, they blame the Republicans.
GET A LIFE.
That’s the problem with the left. They can’t wait.
They can’t wait for the problem to correct itself, so they’ll do something that will end up prolonging the problem. (See New Deal).
They can’t wait for drilling to produce oil to lower fuel costs, so they’ll get us all to inflate our tires.
Let’s do what’s right instead of what’s expedient.
RSSkeptic: Wow! Why didn’t I think of that! I’ll just give jobs to the next 100 people I meet. If you do the same and everybody else on this site does so as well, why, we’ll be out of this fix in no time!
Although most of us don’t have the financial backing to start a business, a product to sell, especially one consumers want, and we can handle all the government regulation that will descend upon us and we meet our hiring quotas, why, this is nothing short of brilliant.
Move over Al Gore, RSSkeptic is going to ger a Nobel Prize in Economics!
/sarc off
Correct.
It’s hard to wait when you’re arrogant, ignorant, and immature.
Sorry, get, not “ger!”
Why not?
The Alaska Oil Pipleine was initiated, planned, surveyed, and completed in 18 months at a cost of 8 billion dollars because the ROI was there. Now look at New Orleans and Cedar Rapids, Iowa as models of government responding “quickly.”
Open ANWAR and the Continental Shelf and just stand back! Clear the way for refineries, clean coal, and nuclear power. Watch what happens to the economy when businesses have cheap energy and families can spend more of their money on things besides food, gas, and utilities.
To be fair if you want to spend my tax dollars on a big government program that I would support, increase NASA funding ten fold. The return in new technology would be cost-effective.
Maybe his middle name is “Ray”.
BS
Prove it.
http://readthestimulus.org/
The stimulus is nothing but an emotional ploy that plays on Americans’ fears about the economy. It solves nothing. It builds nothing. It puts little, if any, actionable resources in the hands of the producers and those that create jobs.
There’s this little thing that happens when the printing presses over at Treasury work over time: inflation. When you flush the market with too much cash, nothing, including services and products, are cheap. Short term political gain will mean long-term pain for the American people.
Are the roots of the sub-prime mortgage and banking fiasco being solved? What is happening to Freddie and Fannie? They’ve already asked for more cash ’cause they have to either write down more of their toxic assets or get another “loan” (cough cough bailout) to prop ‘em up.
How much longer to you think that countries like China and Saudia Arabia (and other Gulf nations) will prop up our economy? Will they continue to buy our treasury notes at the expense of their own currency? Or will they trade in what they have to keep things afloat at home?
You tell me, economic genius. You seem like another naive, uneducated liberal dope not grounded in reality.