After writing this morning's post on the subject, I've been calling around the Hill to figure out what's going on with the Congressional Budget Office report. Republicans say it proves infrastructure investment won't help the economy in the short term. What's become clear is, first and most important, there was no CBO "report," a definition that office takes seriously.

I've obtained the document that reporters were looking at and learned that it is a preliminary calculation of the spending schedule for one portion of the stimulus bill; it was performed for committee staffers before January 15. Since that time, the entire bill has changed a good deal and an actual CBO report outlining all of its costs will be forthcoming in the next week or so. The other thing to realize is that CBO cost estimates are based on historical projection of how departments spend money. Officials are confident that the executive branch can increase its rate of spending on shovel-ready projects given the urgency of the situation, so those historical projections apply less during an economic crisis like the one we currently face.

Also, in my earlier post I referenced reports that Peter Orzag, former CBO director, current Office of Management and Budget director, has promised a different analysis. Indeed, following a meeting today between the president, his staff, and congressional leadership, Orzag released a letter sent to Sen. Kent Conrad, chair of the budget committee:

The Congressional Budget Office recently released an analysis of a component of the economic recovery proposal; that analysis, however, did not assess the overall package. Our analysis indicates that at least 75 percent of the overall package (including its tax component and the other spending provisions that were not analyzed by the Congressional Budget Office) will be spent over the next year and a half (the rest of fiscal year 2009 and fiscal year 2010).

We are committed to maintaining at least a 75 percent spend-out rate for the package as a whole as the legislation moves through the Senate and House and into conference.

One somewhat worrying note about this response: The CBO report suggested that a little more than half of the infrastructure component would not be spent before 2010. Which makes it a little less than a quarter of the entire bill. Perhaps this CBO report isn't entirely wrong.

The assumptions it makes about spending schedules are conservative, though, given the situation. And critics of the stimulus should probably acknowledge that this recession will continue through 2010. Thus, continued infrastructure spending through that year will be an important part of the recovery process. There is a compromise to be had between getting money into the economy and ensuring that it is spent on wise investments. Though there is plenty that can be done in the next two years, money shouldn't be spent immediately on frivolous projects if a year down the line, when economists are still projecting minimum 8 percent unemployment (higher than now), there are solid investments to be made.

-- Tim Fernholz

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