CBO: Ten Years From Now We Will be Worse Off than if There Were No Stimulus Package at All

By Filed under Health Care Costs on February 5, 2009 with 6 comments

CBO sent a letter to Senator Gregg saying that the stimulus will help in the short term – but will shrink the GDP in the long term. CBO says the stimulus will result in so much debt that it will eventually start to crowd out private investment, shrinking the GDP more than if Congress hadn’t passed the stimulus in the first place.

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  1. Bret says:
    February 5, 2009 at 5:12 pm

    This is truly amazing.

  2. Bruce says:
    February 5, 2009 at 5:13 pm

    It is also very,very depressing.

  3. Tom H. says:
    February 5, 2009 at 5:18 pm

    Arrrrrgggggh. I’m going to go have a drink.

  4. Brian Williams says:
    February 9, 2009 at 11:35 am

    Here are some key points on the 2/4 CBO letter (http://cbo.gov/ftpdocs/96xx/doc9619/Gregg.pdf):

    • This letter was written to describe the macroeconomic effects of the Senate stimulus bill (before the 60-vote compromise achieved over the weekend).

    • According to CBO, the Senate stimulus bill will increase GDP between 1.2% and 3.6% by the end of 2010. • By the end of 2010, employment would increase between 1.3 million and 3.9 million jobs.

    • The effects of the stimulus will diminish rapidly after 2010.

    • In the longer run, by 2019, the stimulus bill would result in a 0.1% to 0.3% decrease in the GDP. This is from the CBO baseline, meaning that the stimulus will decrease the GDP more than if nothing had been done to stimulate the economy.

    • In the long run, the massive debt created by the stimulus bill will crowd out private investment as people hold their wealth as government bonds rather than financing private investment.

    • CBO’s assumption is that (in the long run) each dollar of additional government debt crowds out about one-third of a dollar’s worth of private domestic capital.

  5. Brian Williams says:
    February 12, 2009 at 11:32 am

    Here is the CBO’s estimate of the latest version of the stimulus package – reaching the same conclusion as before.

  6. Jim Frogue says:
    February 13, 2009 at 11:07 am

    Congressman Tom Price gives you a glimpse of the “stimulus” bill…

    http://www.youtube.com/watch?v=A68eWFAbClA