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New CBO Report Echoes Earlier Analysis: "Stimulus" Too Sloooow to Stimulate
"[S]pending for new programs has frequently been slower than expected and rarely been faster.
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Last night, the Congressional Budget Office sent out a full analysis of the House stimulus bill — elaborating on the partial number-crunching that got disseminated last week. The new report elaborates on what the old one illuminated: the vaunted infrastructure spending will take years and years and years to kick in.

Here’s the e-mail the CBO debuty director sent out last night:

From: Bob Sunshine

Subject: CBO Cost Estimate for House Stimulus Bill (H.R. 1)

Sent: Jan 26, 2009 9:56 PM

This evening, CBO released a cost estimate for H.R. 1, the American Recovery and Reinvestment Act of 2009, which was introduced today in the House of Representatives. H.R. 1 would specify appropriations for a wide range of federal programs and would increase or extend certain benefits payable under the Medicaid, unemployment compensation, and nutrition assistance programs. The legislation also would reduce individual and corporate income tax collections and make a variety of other changes to tax laws.

Assuming enactment in mid-February, CBO estimates that the bill would increase outlays by $92 billion during the remaining several months of fiscal year 2009, by $225 billion in fiscal year 2010 (which begins on October 1), by $159 billion in 2011, and by a total of $604 billion over the 2009-2019 period. That spending includes outlays from discretionary appropriations in Division A of the bill and direct spending resulting from Division B.

In addition, CBO and the Joint Committee on Taxation (JCT) estimate that enacting the provisions in Division B would reduce revenues by $76 billion in fiscal year 2009, by $131 billion in fiscal year 2010, and by a net of $212 billion over the 2009-2019 period.

In combining the spending and revenue effects of H.R. 1, CBO estimates that enacting the bill would increase federal budget deficits by $169 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.

The budgetary impact of the bill stems primarily from three types of transactions: Direct payments to individuals (such as unemployment benefits), reductions in federal taxes, and purchases of goods and services (either by the federal government directly or indirectly via grants to states and local governments). CBO estimates that impacts from the first two categories of transactions would occur fairly rapidly. In the third category, CBO estimates slower rates of spending than historical full-year spending rates in 2009 for a number of reasons:

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.

This is the first cost estimate that CBO has prepared for H.R. 1 in its entirety. A previous preliminary estimate that has been widely cited addressed only the budgetary impacts of an earlier version of the provisions contained in Division A, at the request of the House Committee on Appropriations.

The CBO cost estimate can be found on our Web site at:


Bob Sunshine Deputy Director

Congressional Budget Office

Let me excerpt directly from page 4 of the report:

Frequently in the past, in all types of federal programs, a noticeable lag has occurred between sharp increases in budget authority and the resulting increases in outlays. Based on such experiences, CBO expects that federal agencies, along with states and other recipients of that funding, would find it difficult to properly manage and oversee a rapid expansion of existing programs so as to expend the added funds as quickly as they expend the resources provided for their ongoing programs.

Lags in spending stem in part from the need to draft plans, solicit bids, enter into contracts, and conduct regulatory or environmental reviews. Spending can be further delayed because some activities are by their nature seasonal. For example, major school repairs are generally scheduled during the summer to avoid disrupting classes, and construction and highway work are difficult to carry out during the winter months in many parts of the country.

Brand new programs pose additional challenges. Developing procedures and criteria, issuing the necessary regulations, and reviewing plans and proposals would make distributing money quickly even more difficult—as can be seen, for example, in the lack of any disbursements to date under the loan programs established for automakers last summer to invest in producing energy-efficient vehicles. Throughout the federal government, spending for new programs has frequently been slower than expected and rarely been faster.

Bottom line: It’s still the timing, stupid.

The Democratic stimulus package the U.S. Congress will weigh on Wednesday falls billions of dollars short of President Barack Obama’s goal to pump most of the money into the economy quickly, a report released on Monday showed.

The $816 billion package will pour some $525.5 billion, or 64 percent, via spending and tax cuts into the ailing economy within 19 months, according to the report issued late on Monday by the non-partisan Congressional Budget Office.

Last week, Obama’s budget director, Peter Orszag, told lawmakers the administration’s goal was to pump at least 75 percent of the money from the stimulus package into the economy by Sept. 30, 2010.

The report expands on another from the same office Republicans had touted last week as showing that less than 40 percent of the stimulus money would filter into the economy over the 19-month period. Democrats complained report was a partial review and CBO on Monday concurred.

The legislation “provides immediate stimulus to help create jobs and makes long-term, targeted, and responsible investments to keep our nation’s economy growing for years to come,” House of Representatives Speaker Nancy Pelosi said in a statement.

Republicans seized on the report as evidence the Democrats’ spending plan would take too long to help the economy.

“Once again, it highlights the fact that a huge chunk of the Democrats’ so-called stimulus plan comes way too late to make any real difference in fixing the economy,” said Kevin Smith, a spokesman for House Minority Leader John Boehner.

I’ve been saying it for more than a year.

Politico reports this morning that the GOP may be finally stiffening its spine. Manage your expectations, though. B.O. Republicans have bent over before:

President Barack Obama is coming to the Capitol this afternoon to curry favor with congressional Republicans. But it appears GOP leaders have already made up their minds to oppose his $825 billion stimulus plan.

House Republican Leader John A. Boehner and his No. 2, Whip Eric Cantor, told their rank-and-file members Tuesday morning during a closed-door meeting to oppose the bill when it comes to the floor Wednesday, according to an aide familiar with the discussion.


This should dampen the mood for an early afternoon meeting with the president, who is making the trek to hear Republicans’ input on the legislation before Wednesday’s vote. Once Obama is done with House Republicans, he will cross the Capitol to join the Senate Republican Conference lunch to pitch them on the stimulus.

Senate Minority Leader Mitch McConnell (R-Ky.) said on NBC’s “Today” show Tuesday morning that Democrats in Congress are “drifting away” from Obama’s preferred stimulus plan, which was supposed to to include 40 percent tax cuts and be free of earmarks.

“Listening to what he said he wanted, we think we may be closer to that, oddly enough, than the Democratic majority, which seems to be pulling in the direction of fewer tax — less tax relief and things like fixing up the [National] Mall. You know, most people don’t think that’s the way we ought to spend stimulus money,” McConnell said.

Despite the grim outlook for Republican support, administration officials are not giving up. In addition to the president’s visit, Chief of Staff Rahm Emanuel is hosting a group of congressional Republicans at the White House tonight. Vice President Joe Biden is visiting the Senate Democratic lunch, and the Senate Finance Committee is undergoing a lengthy markup of the legislation.

(Republished from by permission of author or representative)
• Category: Ideology • Tags: Fiscal Stimulus