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Thread: Stimulus Will Increase U.S. Deficit More Than Originally Estimated

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    Stimulus Will Increase U.S. Deficit More Than Originally Estimated

    Stimulus will Increase U.S. Deficit More than Originally Estimated - The Note

    On one hand:
    ABC News’ Huma Khan reports: The Recovery Act will raise the U.S. deficit by $830 billion between 2009 and 2019, more than the original estimate of $787 billion, according to a report released today by the Congressional Budget Office.

    About half of that budget impact occurred in 2010, when most of the stimulus funds were distributed, the report stated.
    On the other:
    The stimulus raised the U.S. gross domestic product in the first quarter of 2011 by between 1.1 percent and 3.1 percent, and increased the number of people employed by 1.2-3.3 million. The program’s positive effects on employment and the economy, though, are expected to wane through the year, per the report.
    I'm wondering where they're getting the numbers on GDP and employment, but otherwise it's kind of a luke-warm report.
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    Re: Stimulus Will Increase U.S. Deficit More Than Originally Estimated

    Quote Originally Posted by tessaesque View Post
    I'm wondering where they're getting the numbers on GDP and employment, but otherwise it's kind of a luke-warm report.
    The GDP and employment numbers are straight from the CBO: http://www.cbo.gov/ftpdocs/121xx/doc...05-25-ARRA.pdf

    Those estimates for 2011 Q1 are little different from those estimated in the CBO's previous report (page 3 of the report, page 11 of the .pdf) on the effects of the stimulus program, (employment is identical, GDP impact was pared back slightly).

    Note: Due to high demand for the document, attempts to load it could time out.

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    Re: Stimulus Will Increase U.S. Deficit More Than Originally Estimated

    Quote Originally Posted by donsutherland1 View Post
    The GDP and employment numbers are straight from the CBO: http://www.cbo.gov/ftpdocs/121xx/doc...05-25-ARRA.pdf

    Those estimates for 2011 Q1 are little different from those estimated in the CBO's previous report (page 3 of the report, page 11 of the .pdf) on the effects of the stimulus program, (employment is identical, GDP impact was pared back slightly).

    Note: Due to high demand for the document, attempts to load it could time out.
    I more meant, how are they attributing those numbers to the stimulus.
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    Re: Stimulus Will Increase U.S. Deficit More Than Originally Estimated

    Quote Originally Posted by tessaesque View Post
    I more meant, how are they attributing those numbers to the stimulus.
    CBO uses a variety of economic models and historical data to estimate a program's impact on the budget, economic output (GDP), and employment. Multiplier ranges for each provision of the stimulus package is also derived from models and historical relationships e.g., the direct purchase of goods and services by the federal government had an estimated multiplier of 1.0 to 2.5. In other words, every dollar of direct purchases increased GDP by an estimated $1 to $2.50 during the period in which that added direct spending took place. Other provisions had lower multipliers.

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    Re: Stimulus Will Increase U.S. Deficit More Than Originally Estimated

    Quote Originally Posted by donsutherland1 View Post
    CBO uses a variety of economic models and historical data to estimate a program's impact on the budget, economic output (GDP), and employment. Multiplier ranges for each provision of the stimulus package is also derived from models and historical relationships e.g., the direct purchase of goods and services by the federal government had an estimated multiplier of 1.0 to 2.5. In other words, every dollar of direct purchases increased GDP by an estimated $1 to $2.50 during the period in which that added direct spending took place. Other provisions had lower multipliers.
    The same CBO that came out with two completely contradictory reports on Obamacare?
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    Re: Stimulus Will Increase U.S. Deficit More Than Originally Estimated

    well, they have to follow the rules they are given. when ordered to double count money, that's what they do.

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    Re: Stimulus Will Increase U.S. Deficit More Than Originally Estimated

    Yeah that's kind of unsurprising when the only positive argument for the ARRA is "...I'm sure it would have been MUCH WORSE if we hadn't passed it."
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    Re: Stimulus Will Increase U.S. Deficit More Than Originally Estimated

    Quote Originally Posted by tessaesque View Post
    The same CBO that came out with two completely contradictory reports on Obamacare?
    It should be noted that as new information becomes available, CBO often revises its estimates. Despite the advanced econometric modeling that is used and its efforts to be as objective as possible, the reality is that CBO is making its best guess. Estimates/predictions may differ from actual outcomes. Even modest changes in assumptions can have a big impact. For example, should the nation's interest rates rise somewhat faster than projected e.g., due to changing risk perceptions about U.S. debt, the long-term budget outlook could become materially worse. Were interest rates to rise more slowly than anticipated, the long-term outlook could be better than presently forecast.

    FWIW, the IMF's most recent interest rate assumptions are less favorable than either the CBO's and OMB's. Whether that will remain the case when the IMF conducts its 2011 Article IV assessment of the U.S., remains to be seen. The more sluggish growth than some had expected since the onset of the recovery is, unfortunately, par for the course following the kind of housing bust/financial crisis-induced recession the nation suffered through given the debt overhang that persists afterward (household debt and rapid cyclically-driven run-up in government debt). Based on the historic experience, a U-shaped recovery was always more likely than a V-shaped one. The U.S. is currently in the midst of a U-shaped recovery and various headwinds persist, not to mention risks that could begin to build should the U.S. fail to embark on a credible medium-term fiscal consolidation path. Overall, a slower growth trajectory can worsen long-term imbalances (slower tax revenue growth).

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    Re: Stimulus Will Increase U.S. Deficit More Than Originally Estimated

    Government spending pulled us out of the depression at the begining of WWII.. Nuff Said.. Stimulus spending works..

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    Re: Stimulus Will Increase U.S. Deficit More Than Originally Estimated

    Quote Originally Posted by DemonMyst View Post
    Government spending pulled us out of the depression at the begining of WWII.. Nuff Said.. Stimulus spending works..
    The money spent after the depression was spent in vastly different ways. Just spending money doesn't accomplish anything...there must be a practical application.
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