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CBO Questions Stimulus Plan   January 21st, 2009
Non-partisan budget office suggests stimulus plan could take 10 years to work       


More observations...

An interesting turn of events today as the non-partisan Congressional Budget office (CBO) reported that the proposed stimulus package would trickle into the economy over 10 years rather than providing an instantaneous shot in the arm to "create or save 3 or 4 million jobs." That has given Republicans legitimate pause and caused at least one Democrat to question the veracity of the CBO rather than reconsider the stimulus proposal.


House Republicans want to strike some compromises with the White House over the Democratic economic stimulus plan, after a new report showed the plan could take as long as 10 years to work its way into the economy.

The report came from the non-partisan Congressional Budget Office and said proposed money for construction, and school and highway repair, would only drip -- not gush -- into the economy...

Even though House Speaker Nancy Pelosi has said such spending should be timely, temporary and targeted, the CBO analysis found that the current bill is none of those things...

The other third, $118 billion, would not be spent until after the next presidential election...

In fact, the CBO and several economists predict the recession will be over before two-thirds of the stimulus money even takes effect.

This is probably why some economists have criticized the plan and suggested that it might start having an impact when the economy is already recovering by itself--a recipe for inflation. Today's CBO report suggests that that very well may be the case. I haven't heard any predictions that the current recession will last a decade... yet, according to the report, the impact of the current stimulus package will still be trickling money into the economy in 2018.

Of course, the Democratic Chairman of the House Appropriations Committee rejected the non-partisan budget office analysis: "I happen to think that CBO's estimate is off the wall but we're trying to respond to it nonetheless." (As an aside, Democrats didn't seem to have a problem with CBO estimates when they were about supposed surpluses during the Clinton administration).

Also worrisome was the Chairman's assertion that "Congress must quickly put aside deliberations and act on the program."

In other words, doing something fast is more important than doing it right. Because, after all, that worked so well with the bailout of the financial system.

Update 2/9/2009: The CBO also suggested the stimulus plan could result in a long-term decrease in the economic output of the U.S., and that it was anticipating the recession would end in 2009 even without the stimulus package.

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