Free Market Fundamentalist Opinion

CBO Reports on Stimulus’ Effectiveness

The Congressional Budget Office reports on the costs of the stimulus package and its effect on employment.

The Congressional Budget Office (CBO) reported on the economic impact of the American Recovery and Reinvestment Act, better known as the stimulus package, in the fourth quarter of 2010 today.

The CBO now estimates that the stimulus will increase budget deficits over the 2009–2019 period by $821 billion. Close to half of the total impact occurred in fiscal year 2010 and about 70 percent of the stimulus’ budgetary impact was realized by the close of that fiscal year.

So the costs have been enormous. What of the economic impact? According to the CBO, the stimulus raised real (inflation adjusted) gross domestic product by between 1.1 and 3.5 percent; lowered the unemployment rate by between 0.7 and 1.9 percentage points; increased the number of people employed by between 1.3 and 3.5 million.

The effects of the stimulus peaked in the first half of 2010 and are now diminishing, the CBO estimates. The effects on employment have begun to wane in the last quarter.

The CBO notes that some of the jobs included in its estimates might have existed without the stimulus package. The Associated Press and The Economist reported last year that in infrastructure construction, which was supposed to receive a third of stimulus spending, no jobs had been created.

Officially, the American unemployment rate still exceed 9 percent but that does not take into account the millions of people who are estimated to have given up looking for work.