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CBO Latest to Confirm Success of Stimulus

February 23, 2010

With its estimate Tuesday that the $787 billion Obama stimulus package created up to 2.1 million jobs in the last quarter of 2009, the Congressional Budget Office (CBO) joined in the near-unanimous chorus of voices proclaiming the package's success. Of course, it wasn't just the overwhelming consensus of economists which concurred that the stimulus saved or created about two million jobs while adding over three percentage points to U.S. gross domestic product. As the Washington Times, the Wall Street Journal, Bloomberg and ThinkProgress all documented, the hypocritical groveling of Republican Congressmen for stimulus dollars they opposed only served the validate that the recovery package was good public policy.
Echoing Obama administration claims that the American Recovery and Reinvestment Act (ARRA) produced a net of between 1.5 and 2.0 million jobs for the economy, the CBO estimated that the economic stimulus law added between 1 million to 2.1 million workers to employment rolls by the end of last year. As ABC noted, the Recovery Act "also boosted the country's economic growth by 1.5 to 3.5 percent during the time period and lowered the nation's unemployment rate by between 0.5 and 1.1 percentage points."
And going forward, the CBO forecasts, the picture is brighter still:

CBO projects that the stimulus measure to have a greater impact this year, boosting gross domestic product by 1.4 to 4 percentage points and lowering the unemployment rate by 0.7 to 1.8 percentage points.

Just as important for policymakers, CBO Director Douglas Elmendorf shed some light on which aspects of the stimulus bills gave taxpayers the biggest bang for the buck. As most Democrats argued, federal spending on goods and services, transfers to state and local governments for infrastructure and other aid, and unemployment benefits delivered the highest estimated "multipliers." Tax cuts, especially for wealthy Americans and corporations, yielded the smallest returns.

Sadly, President Obama deferred to Congressional Republicans in larding up the tax cuts provisions to over 40% of his reduced stimulus bill. For his trouble, he received exactly three GOP votes in the Senate - and none in the House.
Elmendorf also provided the Obama administration more ammunition in battling its stimulus critics. As ABC noted:

In the report, the CBO noted that economic growth in 2009 was worse than they had predicted at the time that the stimulus was enacted, but that was due to a weaker economy than originally expected, rather than any failings of the stimulus.
"Economic output and employment in 2009 were lower than CBO had projected at the time of enactment," the CBO stated. "But in CBO's judgment, that outcome reflects greater-than-projected weakness in the underlying economy rather than lower-than-expected effects" of the stimulus package.

The Congressional Budget Office has plenty of company in confirming that the stimulus is working as designed. In September, stimulus foe and South Carolina Republican Senator Lindsey Graham asked for $360 million to improve Interstate 73 near Myrtle Beach, funding he said "is expected to create 5,789 new jobs in the I-73 corridor region." And Oklahoma's Tom Cole, who called the stimulus a "recipe for disaster," nevertheless sought a grant to help develop an international trade center as part of a project he called, "a catalyst for the potential creation" of almost 30,000 jobs. They and dozens of other Republicans are saying in private what the CBO and virtually the entire economic profession is saying in public.
The stimulus is working.
UPDATE: The White House responds to the CBO report on the success of the stimulus, noting "it doesn't get any clearer than this." Just in case there was any doubt, the administration's Jared Bernstein cites former McCain economic adviser Mark Zandi, who remarked, "the stimulus did what it was supposed to do: short-circuit the recession and spur recovery."

4 comments on “CBO Latest to Confirm Success of Stimulus”

  1. Of course the "stimulus" is working... the DEMS need to keep reminding the public. Then we all can watch the GOP squirm on the hook of public review.
    They will pay a price in November for all their road blocking and just saying "No," but only if the DEMS keep up the positive message... no nastiness, just the facts to show that the GOP, again, is on the wrong side of history.

  2. The howling of right-wing denials will continue, and probably grow louder. The GOP usually doesn't try to persuade with reason, logic, facts, history, science, or generally held objective theories. Rather, they appeal to emotions (e.g. fear [especially of mortality], hate, bigotry, greed, insecurity, jingoism) and rely on sophistry and cognitive biases to dupe the uninformed. To name just a few:
    [Mis]information cascade - they drumbeat their "talking points" regularly on CSPAN and through other mass media; the more often something is heard, the more people will tend to believe it (the Obama[?] bank bailout);
    Negativity bias - they play on the tendency of people to pay more attention to, and give more weight to, negative versus positive information (one underwear bomber and we are all doomed, or, ignore GDP growth - Obama missed his unemployment projection);
    Confirmation bias - they stress favorable exceptions and ignore unfavorable evidence (the DC snowmageddon disproved global warming);
    Fallacy of composition - they generalize from a preferred part to imply characteristics of a dissimilar whole (my cousin's neighbor heard of an 85 year old Canadian who died in a Montreal hospital, thus Obama-care will kill you);
    Availability heuristic - anyone gathering news from the mass media is continually bombarded with reverberations from their echo chamber, thus making GOP spins firmly implanted in the listeners' minds, readily retrievable for the decision making process, but not necessarily recalled as carefully examined premises on which to build conclusions (tax cuts lead to high employment and budget surpluses);
    Hyperbolic discounting - leveraging the fact that most people will opt for less now, rather than more later (consider the national debt with associated interest, infrastructure and educational declines, waging wars with borrowed money, and abnormally low taxes on the wealthy);
    Normalcy bias - the assumption that since a disaster never has occurred, it never will occur (recall global warming denials); and,
    Bandwagon effect - the probability of an individual adopting a belief increases with the proportion who have already done so; people will follow the herd (recall exaggerations of the size of tea party crowds and astroturf orchestrated town hall meeting shout downs).
    The list goes on and on; the campaign never ends. They peddle their fractured cheap-jack ideology like diet pills and hair growth tonic. A party of burnished Madison Avenue sandwich boards, devoid of original thought. While delivering their daily diatribes on CSPAN from the floors of Congress, they often sound like uneducated rubes, but beware. LBJ once warned that whenever someone claims to be just a plain ole country boy, you'd better grab your wallet.

  3. Texas, under Duhbya as Governor instituted malpractice limits. (McCain referred to the Texas model as a success, and it is a gold mine for the insurance companies.)
    The result has been that lawyers will not take cases because the cap usually won't even cover court costs and legal fees, so the lawyer gets nothing, even if they win, and of course the patient gets nothing.
    So only the very wealthy can afford to sue.
    Physician's premiums did NOT go down. They went up.
    The insurance companies made a huge profit by decreasing their costs on one hand, and increasing their income on the other.
    Its a certain bet that an injured patient will be droped by the insurance company.
    There are innumerable stories (The one I remember is a cover story in Texas Monthly about 6 years ago.) from conservative parrot brained citizens who backed Tort reform and have since needed malpractice relief and cannot get it becasue no lawyer can afford to take the case on contingency and the citizen can't afford to pay a couple of hundredK up front to hire a lawyer.


Jon Perr
Jon Perr is a technology marketing consultant and product strategist who writes about American politics and public policy.

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