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.

Be Socia­ble, Share!