I've got a cottage industry here debunking ridiculous conservative arguments based on faulty readings of Congressional Budget Office reports. Today, the Washington Times is in a tizzy because of a new report requested by Senators Judd Gregg and Chuck Grassley.
The report is pretty straightforward: The stimulus will work in the short term, raising both GDP and employment, but taking on a lot of government debt will result in some crowding-out effect, which by 2019 could lessen GDP by .1 to .3 percent. Essentially, the stimulus will work to alleviate the recession, but long-term debt remains an issue -- it will "reduce output slightly in the long run" -- which basically anyone could tell you. And I think the Obama administration has been pretty clear that after the recession they're going to look to cut deficits and lower that debt; part of that is health-care reform, part of that is some kind of "entitlement reform" (a special Gregg issue) and part of it will be tax reform. But instead of recognizing what basically everybody already knows (that long-term debt is problematic and the government will have to deal with it after the recession), the Times runs with this:
CBO: Obama stimulus harmful over long haul
CBO, the official scorekeepers for legislation, said the House and Senate bills will help in the short term but result in so much government debt that within a few years they would crowd out private investment, actually leading to a lower Gross Domestic Product over the next 10 years than if the government had done nothing.
Love that they don't choose to mention that scale of the lowered productivity. Why explain accurately what you can demagogue? And of course the recession will eventually go away if we do nothing, but the problem is the cost to our productivity, the lives of our citizens, and our international standing.
The agency projected the Senate bill would produce between 1.4 percent and 4.1 percent higher growth in 2009 than if there was no action. For 2010, the plan would boost growth by 1.2 percent to 3.6 percent.
CBO did project the bill would create jobs, though by 2011 the effects would be minuscule.
Well of course, because most of the spending will be completed by 2011 -- it's a temporary bill. Really, this is terrible analysis.
-- Tim Fernholz
