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February 23, 2013
CBO gives Obama's stimulus an F
The Congressional Budget Office issued its quarterly report yesterday to the sound of crickets from the mainstream media (find it here).
Why would this report be Liberal Kryptonite? Because way back on page 8 we learn the lasting legacy of Obama's and the Democrats' ultimate spending spree in the name of recovery (bolds are mine):
ARRA's Long-Run Effects
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...
ARRA's long-run impact on the economy will stem primarily from the resulting increase in government debt. To the extent that people hold their wealth in government securities rather than in a form that can be used to finance private investment, the increased debt tends to reduce the stock of productive private capital. In the long run, each dollar of additional debt crowds out about a third of a dollar's worth of private domestic capital, CBO estimates...
Over the long term, the output of the economy depends on the stock of productive capital, the supply of labor, and productivity. The less productive capital there is as a result of lower private investment, the smaller will be the nation's output over the long run.
So let me paraphrase what the CBO is saying here:
Government spending bad, private spending good.
Over the long run the stimulus will have a negative effect on the economy and the primary reason is due to government money crowding out private investment and the resulting unpaid debt will be a drag on the economy. It is also clear from the CBO's comments that private investment is "productive capital" and government investment is generously referred to as "less productive".
So what about the lasting effect of the $878 billion "investment" that has been 90% spent? Again from the CBO report:
CBO estimates that ARRA's policies had the following effects in the fourth quarter of calendar year 2012 compared with what would have occurred otherwise:
• They raised real (inflation-adjusted) gross domestic product (GDP) by between 0.1 percent and 0.6 percent,
• They lowered the unemployment rate by between 0.1 percentage points and 0.4 percentage points,
• They increased the number of people employed by between 0.1 million and 0.8 million, and
• They increased the number of full-time-equivalent jobs by 0.1 million to 0.8 million.
The effects of ARRA on output peaked in the first half of 2010 and have since diminished, CBO estimates. The effects of ARRA on employment are estimated to lag slightly behind the effects on output; CBO estimates that the employment effects began to wane at the end of 2010 and continued to do so through the fourth quarter of 2012. Still, CBO estimates that, compared with what would have occurred otherwise, ARRA raised real GDP in 2012 by between 0.1 percent and 0.8 percent and increased the number of people employed in 2012 by between 0.2 million and 1.1 million.
No mention here of 3.5 million jobs saved or created. After four years and almost a trillion dollars in stimulus payments, all we have to show for it is 113,691 full time equivalent jobs, $16 trillion in debt that will never be repaid, 7.9% unemployment, 14.5% real unemployment, negative GDP, and continuing record deficits.
Based on this report card, Obama gets an A for rhetoric but an F for results.
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