Friday, November 25, 2011

Porkulus: Mostly Useless, With Long-Term Harm

Well, well.

Congressional Budget Office admits the "Doh":

After nearly all the stimulus money has been spent, the Congressional Budget Office now admits it cost more than advertised, did less to boost growth and will hurt the economy in the long run.

...the CBO says the extra infrastructure money didn't boost growth as much as it previously claimed, because states reacted by spending less out of their own budgets on highways.

So in other words, the CBO now says it's possible that the stimulus had virtually no meaningful effect on growth and employment despite its massive price tag.

All this comes after the CBO increased that price tag to $825 billion from its initial $787 billion — a 5% hike.

Oh, by the way, that's the GOOD news.

...the new report also says the stimulus will hurt economic growth in the long run because of "the resulting increase in government debt." Each dollar of additional debt, it reports, "crowds out about a third of a dollar's worth of private domestic capital."


HT:  McCain


J. Strupp said...

"the CBO now says it's possible that the stimulus had virtually no meaningful effect on growth and employment despite the massive pice tag"

No they don't. They've lower their worst case/best case scenario forecasts. As you say in your previous paragraph, most of Fed. infrastructue spend was offset by the collapse in state spending as state revenues fell apart. OTW, net spending didn't go up as much as forecast (I've only been saying that for 2 years now).

And as I've said before, infrastructure spending was a very small portion of ARRA. Most of these funds were tax cuts and necessary stabilizer benefit extensions.

Finally, you might want to link directly CBO next time instead of McCain (who then links to a hack of an article written at Investors Daily). Apparently no one wants to actually read the CBO.

Anonymous said...

In a roundabout way, dad confirms that tax cuts don't lead to job growth.


Dad29 said...

Reality time: it's the long-term effects which are worst.

Short-term SHORT TERM SHORT TERM, the Keynes theory works.

It cannot be sustained longer-term, and that's because of the debt.

But as you know Struppster, no one in DC has any interest in what Keynes actually said.

Jim said...

Here is an article from The Wall Street Journal in May 2011 about the May CBO report. It confirms J's assertion that your sources have cherry-picked the worst of the worst case/best case scenarios.

This Politico article also backs up J, citing the most recent CBO report.

You may also want to read an article from the Washington Post that analyzed nine separate studies of the Stimulus. Quick take: six studies said it worked, one said it worked a little, and 2 said it didn't work.

If we throw out seven of the nine, obviously the Stimulus failed. (snark, for the snark-impaired.)

Reality time: it's the long-term effects which are worst.

Assuming you are referring to the "crowding out" alluded to by the article linked from the article that you linked to (whew), it seems hard to believe that corporations with $2-3 Trillion in cash lying around are going to be worrying any time soon about not being able to borrow from capital markets because of the Stimulus.

Dad29 said...

Corporations are the ONLY borrowers? In the whole wide world?

I'll take the under for $100.00, Alex.

Not likely the over is going to play out, given the Gummint we have.

Not to mention Europe.

Jim said...
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