January 27, 2009

Real Recovery Numbers

Posted at 8:57 AM by John Quinterno

A post yesterday mentioned how critics of the “American Recovery and Reinvestment Act” were citing a nonexistent report from the Congressional Budget Office as finding that the package wouldn’t do much for the economy. The CBO subsequently has released an actual analysis that suggests that the measure “would have a noticeable impact on economic growth and employment in the next few years.” The report also finds that the bulk of the spending provisions will take effect by late 2010.

CBO Director Douglas Elmendorf summarized the report’s key findings in his blog:

In combining the spending and revenue effects of H.R. 1, CBO estimates that enacting the bill would increase federal budget deficits by $169 billion over the remaining months of fiscal year 2009, by $356 billion in 2010, by $174 billion in 2011, and by $816 billion over the 2009-2019 period.

The budgetary impact of the bill stems primarily from three types of transactions: Direct payments to individuals (such as unemployment benefits), reductions in federal taxes, and purchases of goods and services (either by the federal government directly or indirectly via grants to states and local governments). CBO estimates that impacts from the first two categories of transactions would occur fairly rapidly.

In many ways, the CBO analysis provides insights into the size of the package, its timing and its mix of spending, tax change and infrastructure provisions. And while these issues are legitimate subjects of debate, the CBO has made it possible to have — if our elected leaders want — a discussion based on real numbers rather than imaginary ones.

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