Despite rumors to the contrary, there was no Congressional Budget Office report on the economic stimulus legislation until yesterday, when the CBO released this -- pleased to see new CBO Director Doug Elmendorf continue Peter Orzag's blogging ways. Read the whole thing, but consider that the projections for direct spending -- the infrastructure investment part of the plan -- still indicate that outlays will come out about as slowly as the early computer run predicted, with a little less than half of that portion of the bill being spent by the end of fiscal 2010 (which is Oct. 1, don't forget). Why does CBO think the investment section of the bill will take time?
* The bill's enactment would likely occur nearly half way through the fiscal year.
* Previous experience suggest that agencies have difficulty rapidly expanding existing programs while maintaining current services; the funding in H.R. 1 for some programs is substantially greater than the usual annual funding for those activities.
* Spending can be delayed by necessary lags for planning, soliciting bids, entering contracts, and conducting regulatory or environmental reviews.
* Agencies face additional challenges in spending funds for new programs quickly because of the time necessary to develop procedures and criteria, issue regulations, and review plans and proposals before money can be distributed.
Frequently in the past, in all types of federal programs, a noticeable lag has occurred between sharp increases in funding and resulting increases in outlays. Based on such experiences, CBO expects that federal agencies, states, and other recipients of funding would find it difficult to properly manage and oversee a rapid expansion of existing programs so as to spend added funds quickly as they expend their normal resources. The seasonal nature of some spending also affects the speed at which activities can be conducted; for example, major school repairs are generally scheduled during the summer to avoid disrupting classes.
Fair enough, though I have to wonder if the emphasis on shovel-ready projects will increase the speed of investment. The analysis does seem to also confirm the White House claim that 75 percent of the total bill will be spent in the eighteen months after it is passed, noting that "combining the spending and revenue effects of H.R. 1, CBO estimates that enacting the bill would increase federal budget deficits by $170 billion over the remaining months of fiscal year 2009, by $356 billion in 2010, by $174 billion in 2011, and by $816 billion over the 2009-2019 period." As this blog has noted before, having a chunk of the investment package hang over through fiscal 2011 is not a bad thing, since we can expect the recession to last well through that time.
-- Tim Fernholz
