The CBO Report That Never Was
By Justin Gardner | Related entries in Economy
It’s been widely reported the past couple days that the Congressional Budget Office did a report that showed the stimulus package wouldn’t have immediate effects.
Well, that has turned out to be false.
Reports of a recent study by the Congressional Budget Office, showing that the vast majority of the money in the stimulus package won’t be spent until after 2010, have Democrats on the defensive and the GOP calling for a pullback in wasteful spending.Funny thing is, there is no such report.
“We did not issue any report, any analysis or any study,” a CBO aide told the Huffington Post.
Rather, the nonpartisan CBO ran a small portion of an earlier version of the stimulus plan through a computer program that uses a standard formula to determine a score — how quickly money will be spent. The score only dealt with the part of the stimulus headed for the Appropriations Committee and left out the parts bound for the Ways and Means or Energy and Commerce Committee.
Because it dealt with just a part of the stimulus, it estimated the spending rate for only about $300 billion of the $825 billion plan. Significant changes have been made to the part of the bill the CBO looked at.
The CBO numbers were given to a small number of congressional Democrats and Republicans, but were not posted online because they’re not an official CBO product. (Media outlets, while reporting widely about the “report,” have declined to post it online. Here’s the whole thing.) Democratic aides say they are certain that the GOP leaked it to the Associated Press in order to undercut the spending portion of the stimulus.
This is obviously troubling because it means that somebody in the GOP knowingly spread a lie, but in the process they’re undermining the credibility of all of their colleagues.
How could they be so short sighted?
Still, the most important part of all of this is the following…
The White House followed up with a letter from Peter Orszag, head of the Office of Management and Budget. The CBO “analysis, however, did not assess the overall package,” wrote Orszag. “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.”
Long story short, the stimulus will have immediate effects.
More as it develops…
This entry was posted on Saturday, January 24th, 2009 and is filed under Economy. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
January 24th, 2009 at 1:54 pm
This story shows why the GOP will continue to lose elections if they continue to lie to the American people.
January 24th, 2009 at 9:21 pm
Regardless of the report, even looking at the numbers Obama is giving, this doesn’t add up.
$825,000,000,000 dollars to create or save 3,000,000 jobs equals $275,000 for each job. Now I realize that this measure is an over-simplification, but that is a huge number that ought to give us pause.
If we were to put his money to other use, it seems it would be much more efficient. You would not have to give a company $275,000 dollars to create an incentive for them to create or save 1 job.
Secondly, Obama says at least 75% of the money will be spent in the first 18 months. But even 25% is still hundreds of billions of dollars for things that have nothing to do with stimulus. Since this is a stimulus package, how do you justify the number of money being spent in the next year and half to be anything less than 100%? The other 25% are just run-of-the-mill government spending, hundreds of billions of dollars worth, that Obama wants to get into a bill that can’t fail. Some of that spending might be warranted, but why not debate that on its own merits instead of rushing it through with the rest of the stimulus spending?
But then again, he won, so I guess we’ll see how this goes.
January 25th, 2009 at 10:09 am
“This is obviously troubling because it means that somebody in the GOP knowingly spread a lie, but in the process they’re undermining the credibility of all of their colleagues.”
What a funny site this is. The above is stated like Republicans spreading false information is something new. NOT!
MIKE – “$825,000,000,000 dollars to create or save 3,000,000 jobs equals $275,000 for each job”. This is Limbaugh math. That is – while the number is factually true, it is a gross misrepresentation of fact that is stated in a way to be DELIBERATELY misleading. Most of the money being spent is going to be spent on roads, bridges, repairs, etc. SO, some of the money pays 3,000,000 people to work, and most of the rest goes to buy parts and materials from American companies which further helps the jobs base of the country.
January 25th, 2009 at 1:31 pm
“$825,000,000,000 dollars to create or save 3,000,000 jobs equals $275,000 for each jobâ€.
34% of that money will go for the tax cuts the republicans want. For most who get the tax cuts, that money will be saved in these unsure times. It will not be used to create jobs. The people who will spend any money they get (because they have to) are those who don’t make enough to pay income tax. Increasing earned income credit (which the republicans oppose) and child credits will not only allow the working poor to survive, but the money they get will actually go into the economy when they pay rent and buy groceries and gasoline. Tax cuts (especially tax cuts for those who need it least) create/save the fewest jobs of any part of the stimulus package.
Unfortunately, only 18 % of the stimulus goes to building infrastructure. Economist report that not only does this create the most jobs for the amount spent, it leaves something of value for our children who will have to pay off this debt. America became a great nation because of the infrastructure built by the New Deal. Three generations of my family have attended a school that my grandfather helped build as a part of the New Deal. The job allowed him to feed and clothe his family. The school is still serving children today.
Most of the remainder of the stimulus goes to states to keep services such as unemployment compensation going for people who loose their jobs and can’t get another one. It will go for Medicaid programs to provide health care to those who have nothing else. I hope it will be there for me if I loose my job and get sick. The money to states will allow them to keep paying teachers so your children or grandchildren can continue to go to school.
Times are going to get a whole lot worse than they are now. There are few of us who are as secure as we think we are. I want to keep the country running and that means keeping the states running. I don’t want to see mass starvation and homelessness and that means helping the unfortunate – it might be us someday.
Our infrastructure is not just falling apart, it is not up to the job of creating a new economy which is what will have to happen if America is ever to be prosperous again. The old economy is in it’s death throws. Government is the only entity that has ever been able to create massive infrastructure. Private business won’t do it because the short term profits are too small and are spread out too evenly over the population.
I say forget the tax cuts, help the desperate (if we don’t they will do desperate things which we will not enjoy at all), and build, build, build.
January 25th, 2009 at 3:50 pm
Mark, when Obama speaks of creating or saving 3 million jobs, I assume he is talking about not just the direct effects of his policies but also the indirect effects that you speak of. Clearly, he is not planning on putting 3 million people directly to work on infrastructure projects. So the indirect effects have already been counted in the “Limbaugh math”. If this were not so, we should expect much more than 3 million jobs to be created. If I’m wrong, can you point me to were Obama talks about the 3 million as only the direct effects of his policies?
So, if creating jobs is the primary goal of the stimulus package, the numbers I brought up are valid and beg the question: is this the most efficient the package can be?
Which brings me to Geri’s point. Yes, I have heard that some economists have said that infrastructure projects generate more jobs than tax cuts, although it doesn’t make sense to me because it seems it would take a relatively small tax break to create an incentive not to lay off a person. But, I’m not an economist so I’ll leave the tax cut vs. government spending debate to the professionals, and I’m concede you might be right about that. I’m not partial to either party, so if the Republicans are wrong to push for tax cuts, they deserve criticism also.
However, you also point out that the goal of the package is not just stimulus but also support of state government programs and such to help those suffering most because of the recession. I agree that is part of it, and perhaps justifiably so, but there is no question that the stated primary goal of the package is job growth, but it seems to be lacking in its ability to do so, considering its cost. If the only reason that is so is because it is loaded down with other spending for other goals, then one has to question whether the stated primary goal of job growth is sincere. And, as a side note, one of the best ways to help those who are worst hit by the recession is to create more jobs, so I stand by my criticism that this plan seems to be quite costly to accomplish the stated goals, even using Obama’s own numbers.
January 25th, 2009 at 5:32 pm
Rush Limbaugh said it all: “I hope he fails.” So why wouldn’t his acolytes in Congress
spread lies about a CBO report?
Why I don’t get is why the Democrats cower and grow defensive as a result?
How sad for us all … that there are no opposition parties, i.e., just liars and apologists.
January 25th, 2009 at 5:40 pm
“it seems it would take a relatively small tax break to create an incentive not to lay off a person.”
If there are not enough customers purchasing a business’s product to keep an employee busy, the business will lay the worker off whether they get a tax break or not. It is not business that creates jobs- it’s customers.
January 25th, 2009 at 6:12 pm
Americans pay a price each time we treat Conservatives as though they had any credibility.
January 25th, 2009 at 6:31 pm
Alistair: The only “lying” go on here is the attempt to suggest that the CBO numbers are somehow not correct because they were not provided in the form of a formal report.
I guess we are back to the days of “depends on what the meaning of the word ‘is’ is.”
January 25th, 2009 at 7:56 pm
Geri,
(Not that it’s important, but ironically I actually heard Rush Limbaugh make that argument a week ago or so. I’m not a regular listener by the way, but I heard him make that point and I disagree. He was saying Obama was trying to make businesses look bad for not hiring. Anyway…).
Actually I think it depends on the business. There may be a lack of customers purchasing a product at a particular price point, which may make it unprofitable to keep people employed making that product. However, if a tax break effectively decreases the cost of employing that person, and then allows the company to stay profitable selling the product at a lower price (at which consumers will buy), then that job is saved.
I’m no expert (not that you were wondering:), but it seems to me that most jobs are lost at the margins. People typically don’t lose their jobs because they suddenly are worthless. Every employee adds some amount of value to the company (admittedly, this amount is hard to measure), and one that value becomes less than the amount required to employ them, they get laid off. If companies have an additional tax incentive to keep that job, that would effectively decrease the amount that it costs to employ them, meaning they would be more likely to be able to keep their jobs.
So yes, I think it would take a relatively small tax break to create or save a job.
However where I think the “Limbaugh math”, as Mark put it, does fall short (I admitted before it was an over-simplification) is that there is a diminishing return here. If my goal is to save 1 job, I could probably create enough incentive using only maybe 10,000 of tax break. There’s bound to be some company looking to hire (or not lay off), if only they had a bit of extra cash on hand. However, creating 3 million jobs is a different story. Once you run out of the low-hanging fruit, you have to start paying more and more to create each job.
Still, it seems to me that there is a lot in this bill that is put there just because its a great opportunity to get some spending in that might not get passed otherwise. When Obama says 75% will be spent in the next 18 months, I just can’t help but think about the HUGE amount that the other 25% represents, which should be debated on its own merits.
January 26th, 2009 at 12:10 am
@Mike’s America
You do realize that the CBO numbers that were circulated, when put into proper context, demonstrates the exact opposite of what Republicans claimed, right? But I guess there’s really no point trying to point out the truth to somebody who writes posts entitled “Obama Gives Terrorists A License to Kill.”
Get a new schtick.
To the other Mike,
Your $275,000 number is a really misleading characterization of the stimulus. The point of the stimulus isn’t to just create jobs. It’s to rebuild our country’s infrastructure so we can be competitive in the near future. And that, in turn, will produce millions more jobs.
January 26th, 2009 at 4:22 am
“This is obviously troubling because it means that somebody in the GOP knowingly spread a lie”
Troubling? Um, hasn’t that been pretty much the only thing the GOP has done for the past 8 years?
January 26th, 2009 at 9:44 pm
Justin,
I don’t disagree that infrastructure projects, and many other things in the bill such as health care IT, might be worth it. However, they are primarily short term stimulus. The reason Obama has said he wants to act fast with this is that it is short term stimulus that is time sensitive. If it is also laden with other government spending (worth while or not), then it seems irresponsible to push it through quickly without giving it the time we would normally take to debate specifics on how that money would be best used.
So it seems to me the best solution would be to strip out anything that does not create jobs in the very short term, and then debate the rest of the spending in separate bills. The only logical reason I can see to lump them together is to make it easier to get them through and make anyone who might oppose them appear to be against saving the economy.
January 26th, 2009 at 9:47 pm
Sorry, that should be “… the are NOT primarily short term stimulus…”
January 26th, 2009 at 11:20 pm
[...] The situation with the CBO report is not as cut-and-dry as the Wall Street Journal made it appear (The CBO Report That Never Was), a fact I missed due to the problems with this [...]
January 27th, 2009 at 12:43 pm
Good to hear so many roads and bridges are being built with our money. Any bridges in Alaska? That was an issue a few months ago but I guess now it is just acceptable? By the way….do you guys serioulsy believe the Microsoft engineers who are losing their jobs will pick up a shovel or get a job running a road paving machine? This is nothing more than spreading our wealth to Democratic supporters as a vote buying scheme.
Give me a break….