CBO Analysis Throws More Cold Water on Stimulus Plan

The Congressional Budget Office has thrown its two cents in and their conclusions are not going to make anyone very happy. They have looked at the various elements of the plan that relate in some way to the infrastructure part of the plan and have concluded that no more than half of the money allocated will have been spent by 2010. That will do very little in the short run to push the economy forward and by some estimations this money would come cascading into the economy at precisely the wrong moment – as recovery has started to take place on its own. If the government surge coincides with a recovery it will flood the system with cash at just the moment that cash is coming from other quarters and this could well fuel serious inflation.

Analysis: The overall CBO conclusion is that there are too many barriers and limitations to fast tracking most of these programs. The Democrats who have worked on the bill have countered that the CB only looked at the slower moving parts of the package and failed to consider the more rapid aspects like increased unemployment payments, health care for the poor and tax cuts. This logic is a little hard to follow however. It is true that unemployment benefits will be spent rapidly but for the vast majority of recipients, these funds will go to bills and immediate needs – not the kind of consumer spending that boosts the economy. The contribution that health care for the poor makes to the overall economy is even less. Tax cuts will likely be treated like the last set of tax cuts were and the impact will be negligible. The CBO report makes it very clear that those efforts designed to create jobs that allow people to become reengaged in the economy will take time to develop. The report doesn’t assert that this stimulus attempt will fail but it is not likely to be a quick impact. The GOP critics are therefore asserting that something else be tried or at least – added. There are many suggestions but none have seemed to make the cut thus far.