CBO Reports Stimulus Damaged Country Long-Term
Of course, this was known when it was first proposed. We were mortgaging the future (in debt) for short-term gain after all.
No wonder this report came out on a Friday. It’s bad news that no one of a Keynesian economic perspective will want to hear.
The American Thinker blog finds that the heart of the report is of course buried on Page 8:
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.
In short, government spending adds weighted debt to the economy, private investment spending adds growth to the economy.
Anyone want to take a guess what we’ve been doing for the bulk of the last decade?
But what about the metrics of the economy you have to be asking yourself? How did they do?
Not great either:
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.
Notice that they’ve stopped using the phrase “saved and created jobs” a long time ago.