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CBO: Stimulus hurts economy in the long run

cpwill

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and in the short run... but hey, movement in the right direction, and (politically) a welcome realization of reality by the CBO.

The[URL="http://www.washingtontimes.com/topics/congressional-budget-office/"] Congressional Budget Office[/url] on Tuesday downgraded its estimate of the benefits of President Obama’s 2009 stimulus package, saying it may have sustained as few as 700,000 jobs at its peak last year and that over the long run it will actually be a net drag on the economy....

CBO said it has concluded there is less of an indirect multiplier effect of federal spending. Those changes caused it to drop its estimates for total employment sustained by the spending in 2011 from between 1.2 million and 3.7 million down to between 600,000 and 3.6 million.


As for the long-term situation, CBO said its basic assumption is that each dollar of additional federal debt crowds out about a third of a dollar’s worth of private domestic capital. CBO does not calculate crowding out in the short term, which is why the Recovery Act boosts the economy in the near term.
 
and in the short run... but hey, movement in the right direction, and (politically) a welcome realization of reality by the CBO.
WOW!!!! The Moony Times speaks.:roll:
 
But...but...but...massive government spending create economic improvement!
 
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. But CBO expects that the legislation will have no
long-term effects on employment because the U.S. economy
will have a high rate of use of its labor resources in
the long run.13
ARRA’s long-run impact on the economy stems primarily
from the resulting increase in government debt.14 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.
(The remainder of the rise in debt is offset by increases in
private saving and inflows of foreign capital.) Because of
uncertainty about the degree of crowding out, however,
CBO’s range of estimates of ARRA’s long-run effects
reflects the possibility that the extent of crowding out
could be more or less than one-third of the added debt.
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.
The effect of the crowding-out of some private investment
under ARRA will be offset somewhat by other
factors. Some of ARRA’s provisions, including its funding
for roads and highways, may add to the economy’s potential
output in much the same way that private capital
investment does. Others, including its funding of education,
may raise long-term productivity by enhancing
people’s skills. Still other provisions create incentives for
increased private investment. According to CBO’s estimates,
the provisions that potentially add to long-term
output account for between one-fifth and one-quarter of
ARRA’s budgetary cost.
ARRA’s long-run effect on output also depends on
whether it permanently changed people’s saving or their
ability or willingness to work. For example, to the extent
that ARRA reduced long-term unemployment during the
2009–2011 period, it might improve participation in
the labor force, employment, and productivity in later
years. However, CBO’s estimates of the long-term effects
of ARRA do not incorporate any effects of that sort.

For a discussion of the long-run effects of other debt-financed
policies for boosting output and employment, see statement of
Douglas W. Elmendorf, Director, Congressional Budget Office,
before the Senate Committee on the Budget, Policies for Increasing
Economic Growth and Employment in 2012 and 2013 (November
15, 2011).

found here

Congressional Budget Office - Policies for Increasing Economic Growth and Employment in 2012 and 2013

POLICIES FOR INCREASING ECONOMIC GROWTH AND EMPLOYMENT IN 2012 AND 2013
NOVEMBER 15, 2011
Testimony before the Committee on the Budget, United States Senate


THE ECONOMIC OUTLOOK
CBO expects that, in 2012 under current law,

The unemployment rate will remain close to 9 percent and
GDP growth will be about 2½ percent, with the level of GDP remaining well below its potential.
FISCAL POLICY OPTIONS FOR INCREASING ECONOMIC GROWTH AND EMPLOYMENT IN 2012 AND 2013
One criterion for evaluating fiscal policy options is the impact on the economy per dollar of budgetary cost. Based on that measure of cost-effectiveness:

Higher-impact policies

Reduce the incremental cost to businesses of adding employees or
Are targeted toward people who would be most likely to spend additional income.

Lower-impact policies

Primarily affect businesses’ cash flow but have little impact on their incentives to hire or invest.
Reductions in taxes and increases in government spending would produce short-term economic benefits—but without offsetting actions to reverse the accumulation of government debt, future output and future incomes would tend to be lower than they otherwise would have been
 
Ya....those idiots at the Tea Party will surely be red in the face when they find out more government spending was detrimental to the economy!


What?


They predicted that?


Ooops...my bad.
 
It didn't do squat for the short term either. Let's not stop there either. TARP did major long term damage in many ways also.
 
and in the short run... but hey, movement in the right direction, and (politically) a welcome realization of reality by the CBO.

This short sighted quote completely ignores what the alternative was, which was much worse than the negatives from the stimulus program. The alternative was a meltdown of the US economy.

Printing large sums of money is always bad in the long run. There is no disputing that. Anyone who thinks different is a fool.

In 2008-2009, the question is "what was the alternative", what was your "other plan".

Here we have Greenspan's view at the time:
"There's been a very significant improvement in the financial system and it's been the financial system where the problems have been," he said.
When I asked him about the possibility of a collapse, Greenspan responded, “Collapse now, I think, is off the table.
When he last appeared on “This Week” in September 2008, the economy was in the midst of the financial crisis which Greenspan then called a "once-in-a-century type event."
This morning, he told me that the U.S. economy had gotten past the crisis.
"We were teetering for awhile,” he said, “but I do think that the TARP program, for example, was very helpful in shoring up the capitals, that stock of banks and the like. And not an insignificant event is the $3.5 trillion increase in the stock market value of American corporations.
Now, he says business inventories are so depleted that he anticipates a sharp turnaround in growth.
"It strikes me that we may very well have 2.5 percent in the current quarter," he said.
That would be significant because it would be near the level necessary to ease huge job losses.
“The unemployment rate is going to continue to rise," Greenspan told me, "but more slowly than it’s been.”
Greenspan: ‘We’ve already seen the bottom’ - ABC News

The economy could have COLLAPSED, like, that's REALLY BAD! But, the economy DID NOT COLLAPSE! TARP and the stimulus did that for us.

In August, 2009, what had caused the 3.5 billion increase in the value of US corporations that Mr. Greenspan spoke of? It was the stimulus, it was passed in Feb. 09 by the dems, and in March 09 the stock market started back up. The stimulus did that, with TARP having laid the foundation with the security there would not be any large scale bank failures.

So, I agree with the CBO there will be some long term negative results from the stimulus, however if that is the cost of PREVENTING ECONOMIC COLLAPSE of the US economy, it is a good trade-off, and your assertion that the stimulus was a bad thing is incorrect, because it lacks context and perspective.
 
So their estimate is now that the stimulus created between 600,000 and 3.6 million jobs? That's a pretty good range.

And of course stimulus hurts in the long run if you never pay pay it back. Is that supposed to be a revelation? :lol:
 
This short sighted quote completely ignores what the alternative was, which was much worse than the negatives from the stimulus program. The alternative was a meltdown of the US economy.

Prove it.

Here we have Greenspan's view at the time:

The ****ing idiot that helped cause this mess with his hair brained monetary policies.
 
:) astonishment. you are left with only ad sourcinem.
Why do all the links lead to the same list of CDO stories, but never links to the CBO itself?
 
Prove it.

I have supported my position with quotes from Greenspan, a lifelong republican and chairman of the federal reserve for 16 years, across repub and dem administrations.

You tell me what your alternative was, or show that collapse of the US economy was NOT an alternative, then we can talk. I'm already on the record with a supported position, and you've provided nothing but one liners. Your move.
 
Revised downwards what a shocker, not to mention it cost around a million a job.
 
THE ECONOMIC OUTLOOK
CBO expects that, in 2012 under current law, The unemployment rate will remain close to 9 percent and GDP growth will be about 2½ percent, with the level of GDP remaining well below its potential.

FISCAL POLICY OPTIONS FOR INCREASING ECONOMIC GROWTH AND EMPLOYMENT IN 2012 AND 2013

One criterion for evaluating fiscal policy options is the impact on the economy per dollar of budgetary cost. Based on that measure of cost-effectiveness:

Higher-impact policies: Reduce the incremental cost to businesses of adding employees or are targeted toward people who would be most likely to spend additional income.

Lower-impact policies: Primarily affect businesses’ cash flow but have little impact on their incentives to hire or invest. Reductions in taxes and increases in government spending would produce short-term economic benefits—but without offsetting actions to reverse the accumulation of government debt, future output and future incomes would tend to be lower than they otherwise would have been

Nice Post, Simon. I copied the part I liked the most ;) again...just because. Actually, this has a bit of good news (bad?) for both sides of the aisle. But for President Obama? This does not bode well.
 
CBO: Stimulus added up to 3.3M jobs - Josh Boak - POLITICO.com


The economy would have been in much worse shape without the 2009 stimulus — which increased employment in the third quarter of this year by as many as 3.3 million full-time jobs, according to a report by the Congressional Budget Office.

Republican lawmakers and presidential candidates have blasted the $800 billion pumped into the economy through the American Recovery and Reinvestment Act as a waste of taxpayer dollars that failed to put people back to work.

The nonpartisan CBO figures offer a more nuanced picture of how government spending impacted an economy still coping with unemployment above 9 percent. It provides an alternative glimpse of an economy with even higher unemployment and drastically lower growth.

The CBO figures released Tuesday estimate that the stimulus package raised the gross domestic product this past quarter by 0.3 percent-1.9 percent.

The CBO report provided a broad range of the estimated number of full-time jobs created because of the stimulus — from a low of 500,000 to a high of 3.3 million jobs.

[snip]​
 
I have supported my position with quotes from Greenspan, a lifelong republican and chairman of the federal reserve for 16 years, across repub and dem administrations.

Again, you say you can prove it by quoting the guy who is as responsible for the collapse as much as anyone. It's like quoting Captain Hazelwood if your arguement is that drinking on the job can be safe.

You tell me what your alternative was, or show that collapse of the US economy was NOT an alternative, then we can talk. I'm already on the record with a supported position, and you've provided nothing but one liners. Your move.

We were told that if we did not enact TARP that the markets might fall all the way to 7000. We did enact TARP and the markets still fell to 7000. All TARP did was put those who should actually be in prison back in the drivers seat.
 
Again, you say you can prove it by quoting the guy who is as responsible for the collapse as much as anyone. It's like quoting Captain Hazelwood if your arguement is that drinking on the job can be safe.

We were told that if we did not enact TARP that the markets might fall all the way to 7000. We did enact TARP and the markets still fell to 7000. All TARP did was put those who should actually be in prison back in the drivers seat.

And still we have no alternate plan, and no facts to support why it would have worked better.

I don't remember ANYONE saying if we did not do TARP the market would fall to 7000, please cite a source.

Without TARP there would have been a LONG string of Lehman Bros. bankruptcies. How many banks, large and small, would have failed without TARP? Lots of them. A nation needs a banking system. What would we have looked like with bankrupt AIG, Goldman Sachs, Merrill Lynch, Morgan Stanley, Citigroup, Washington Mutual all going down in one quarter?

You think we were not headed to collapse? Housing industry died. Banking industry could have been nuked. Auto industry nearly died. Everyone was scared to death. TARP saved the financial industry and the auto industry. Stimulus plan reassured the nation and people's apprehension began to decline, and the consumer began to spend again, slowly.

Greenspan did play a role in the republican housing and mortgage debacle, but a minor role compared to the mortgage lenders and big investment banks. He drove rates too low in 2003 and 2004 and left them low for too long, which he did to get Bush re-elected in 2004, since Bush's tax cuts in 2001 and 2003 failed to stimulate the economy. Greenspan had power to regulate the banks and he failed to use it, being a free market advocate. By 2009, the time of the interview I quoted, Greenspan had NOT been fed chairman for 3 years, he was not speaking for the administration, and he has told the truth since he stepped down as fed chairman.

At the end of the day, we could have a failed banking system and failed housing market that spiral down the whole economy as people are laid off and quit consuming everything except food (that is what took down the auto industry) and we can wait and see how many industries fail and how far down we go until we hit only necessary businesses (lot of pain long and short term), or we could step in, print money, backstop the banks, and provide money to people so they don't have to stop all consumption (long term pain from inflation due to devalued currency). There was no painless way out of the financial crisis the republicans put us in. To believe otherwise is juvenile.

So, what was your other plan, and what do you cite to support it? Have you got anything beside a soundbite?
 
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I thought in this country it was ok to let businesses fail. I didn't like when Bush gave money to the auto industry, and I didn't like it when Obama gave them more. Furthermore, the financial institutions should have failed. Other banks would have bought their valuable assets to offset the loss of bad investments. Instead we gave them money to get rid of their bad investments, and they kept the good ones. We didn't let the free market work, and we are now paying the price for it.
 
I thought in this country it was ok to let businesses fail. I didn't like when Bush gave money to the auto industry, and I didn't like it when Obama gave them more. Furthermore, the financial institutions should have failed. Other banks would have bought their valuable assets to offset the loss of bad investments. Instead we gave them money to get rid of their bad investments, and they kept the good ones. We didn't let the free market work, and we are now paying the price for it.

We let businesses fail, like MF Global just failed. What we cannot do is allow THE WHOLE SYSTEM to fail, or to let a failure in one sector, like housing, bring down a whole string of sectors, like morgage operations, banking, auto sector, and on, and on...

See 1930's. That's bad.

I don't see anyone who has proposed a comprehensive plan to deal with the situation we faced in 08-09, who describes all the major expected outcomes, and it happens without significant short term pain, and discusses the expected long term results also. Until someone does, you're all just bitchin.
 
And still we have no alternate plan, and no facts to support why it would have worked better.

I don't remember ANYONE saying if we did not do TARP the market would fall to 7000, please cite a source.

I'll find the quotes for you later when I have some time. TARP initially failed. The markets took a small drop and then stabalized. They did not crash until AFTER the TARP vote.

The rest of your arguement is nothing more than highly partisan drivel. All but the extremely partisan realize the problems were created by BOTH parties. I do enjoy debating this with those with an open mind and a understanding of the history of what caused this.

I do not believe that describes your arguements. If you wish to provide a more sensible understanding of who all caused the problems I would be happy to present what I believe should have been done.
 
This short sighted quote completely ignores what the alternative was, which was much worse than the negatives from the stimulus program. The alternative was a meltdown of the US economy.

Printing large sums of money is always bad in the long run. There is no disputing that. Anyone who thinks different is a fool.

In 2008-2009, the question is "what was the alternative", what was your "other plan".

Here we have Greenspan's view at the time:

Greenspan: ‘We’ve already seen the bottom’ - ABC News

The economy could have COLLAPSED, like, that's REALLY BAD! But, the economy DID NOT COLLAPSE! TARP and the stimulus did that for us.

In August, 2009, what had caused the 3.5 billion increase in the value of US corporations that Mr. Greenspan spoke of? It was the stimulus, it was passed in Feb. 09 by the dems, and in March 09 the stock market started back up. The stimulus did that, with TARP having laid the foundation with the security there would not be any large scale bank failures.

So, I agree with the CBO there will be some long term negative results from the stimulus, however if that is the cost of PREVENTING ECONOMIC COLLAPSE of the US economy, it is a good trade-off, and your assertion that the stimulus was a bad thing is incorrect, because it lacks context and perspective.

WRONG. What TARP and the "Stimulus" did was make Washington Elites look like they were doing something rather then letting the system clear out the trash. A hard sharp fall followed by a natural recovery would, long term be far better then the softened drop and long term harm caused. However, NOT acting was not politically... beneficial. Anyone that believes the system was "saved" by the Government is ignorant to reality.
 
"Stimulus," my ass. Loan from the Federal Reserve is what "Stimulus" is. Why don't we say that. Why not state what we all know "that you cannot borrow your way out of debt." Why do the gov't people keep saying stimulus instead of "loan?" Is it that we don't want to remind people that we are printing more money? If you don't ask the right question, you will never get the right answer.
 
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