CBO: "Stimulus" Package Has Negative Long-Run Payoff

The message is along the lines of "eat more broccoli, avoid dessert."

The Congressional Budget Office reports that the enormous debt that would be required to implement either the House or the Senate "stimulus" would slightly reduce economic output in the long run.

CBO acknowledges that "funding for infrastructure spending, education programs, and investment incentives ... might increase economic output in the long run." However, the bulk of the $800+ billion programs do not lie in these "stimulating" activities; CBO estimates only one-dollar-in-four (this is the broccoli we should eat more of) in the Senate package.

What we -- the taxpayers -- want, of course, is to see output increase in the long run, preferably at a pace comparable to the growth in the labor force. That's not what has happened in the past eight years.

In 2001, we had 131,826,000 non-farm jobs, according to the Bureau of Labor Statistics. For 2008, the estimate is 137,248,000. That's a growth of 4.1% over an eight-year period (only 3.7% private nonfarm job growth), and there were fewer jobs in 2004 than in 2001. In comparison, during the eight years of the Clinton Administration, jobs grew at 18.9%; Reagan Administration, 11.8%.

Since 2001, however, jobs have grown more slowly than the number of people looking for jobs, which is why unemployment rose while Bush43 was on watch.

This enormous debt package currently winding its way through Congress -- one of my Forum members called it a "spendulus" -- is projected to decrease GDP by 2019, according to the CBO. The only justification for such a massive borrowing scheme would be to provide a cushion for people who have lost jobs. And yes, companies are shedding jobs and the economy is contracting. But there was a housing rebound (of sorts) in December in hard-hit Arizona. And unemployment levels have not begun to approach those of the 1980s, much less those of the Depression.

But investments in infrastructure that have proven multiplier effects should go forward -- although not at the expense of poor planning. After all, we have $2.2 trillion in infrastructure projects pending. This category includes the $7,500 tax credit, which should be extended to any home buyer to help stabilize the housing market.

And no tax cuts. Period. Any stimulus effect due to money-in-hand would not be felt until sometime in 2010. Maybe.

If Congress then wants to talk about borrowing to help the unemployed -- extending unemployment benefits or job retraining -- or wants to talk about borrowing to help states with federal programs like Medicare, go to it, separately from any stimulus package. Because those are not stimulus acts, no matter how pretty the rhetoric; they're government stimulus bills.

Oh. One more thing. No more massive (600+ page) bills. And Axelrod, remind the President of his pledge to wait five days between Congressional passage and legislative signature, would ya?

See:
:: Support For Stimulus Plan Dropping
:: Deconstructing a Political Poll
:: Economic Stimulus Package Has A Little Something For (Almost) Everyone
:: Ron Paul on the Stimulus Package