T Nation

Stimulus Costs 75 Billion More Than Expected

http://money.cnn.com/2010/01/26/news/economy/stimulus_cbo/index.htm?hpt=T1

Stimulus is now $75 billion more expensive
By David Goldman, staff writerJanuary 26, 2010: 2:06 PM ET

NEW YORK (CNNMoney.com) – The Congressional Budget Office hiked its forecast Tuesday for how much the stimulus bill will add to the nation’s deficit, raising its estimate by $75 billion to $862 billion.

The American Recovery and Reinvestment Act, passed in February 2009, was initially believed to have a price tag of $787 billion. With the glaring exception of skyrocketing unemployment compensation costs, the CBO said the Recovery Act’s effects on government spending and revenues have closely followed its initial estimate for 2009 and 2010.

The vast majority of the increased deficit impact is linked to anticipated spending in 2011 to 2019. It now appears to the Budget Office that stimulus will have a larger impact on the deficit in the years to come based on changing economic factors since the bill was signed into law 11 months ago.

Unemployment compensation: In CBO’s initial estimate for the Recovery Act, the unemployment rate was expected to cap at 9%, but the rate rose above 9% in May and soared above 10% in October.

As a result, the CBO said unemployment compensation in 2009 and 2010 will cost $58 billion. That’s $21 billion more than initially expected.

Food stamps: Nearly half of the additional $75 billion comes from more spending on food stamp benefits than originally anticipated. CBO said in its February 2009 estimate that the government would spend $20 billion on increased food stamp benefits through 2019, but it now believes that amount will be closer to $54 billion.

Food stamp benefits are adjusted incrementally every year as inflation rises but the maximum food stamp benefit for a family of four was jacked up by 13.6% to $668 per month as part of the Recovery Act. That maximum benefit was to remain at $668 per month until inflation caught up, at which point the normal incremental adjustments would begin again.

Last February, CBO had a much higher inflation projection than it does now. It believed that inflation would catch up with the $668 benefit by 2013. "But CBO now believes inflation won’t catch up with the benefit until 2019, which means the Recovery Act’s food stamp benefit increases will add $34 billion more to the deficit than initially anticipated.

Build America Bonds: The rest of the $75 billion comes from the Build America Bonds initiative. The popular stimulus program allocates federal money to pay state and local governments for 35% of their interest costs on taxable government bonds issued in 2009 and 2010 to finance capital spending.

CBO said that more than $60 billion in new bonds have been issued since the program began in April, which is “significantly higher” than original estimates. As a result, CBO added $26 billion to its projection for the cost of the program, which grew to a total of $30 billion. That’s more than seven times higher than the initial estimate.

Lower projections: The CBO report also included several lower projections from its original forecast.

The largest decrease in cost was for the Medicaid match program, in which the government helps states pay for Medicaid expenses. The CBO now estimates that the program will cost $3 billion less than originally thought

And it didn’t do shit…

But yet, it “needs” to continue to 2019.

But don’t worry, Obama is freezing spending, don’cha know.

Let’s see it pop up in the State of the Onion Address.

[quote]pat wrote:
And it didn’t do shit…[/quote]

IMF Revises Up Global Forecast to Near 4% for 2010

IMF Survey online

January 26, 2010

* World economy bouncing back, but advanced economies drag
* Global recovery from recession led by emerging markets
* Countries should maintain stimulus measures while recovery not well established 

The global economy, battered by two years of crisis, is recovering faster than previously anticipated, with world growth bouncing back from negative territory in 2009 to a forecast 3.9 percent this year and 4.3 percent in 2011, the International Monetary Fund said in its latest forecast.

But the recovery is proceeding at different speeds around the world, with emerging markets, led by Asia relatively vigorous, but advanced economies remaining sluggish and still dependent on government stimulus measures, the IMF said in an update to its World Economic Outlook, published on January 26.

â??For the moment, the recovery is very much based on policy decisions and policy actions. The question is when does private demand come and take over. Right now itâ??s ok, but a year down the line, it will be a big question,â?? said IMF Chief Economist Olivier Blanchard in an IMF video interview.

IMF Managing Director Dominique Strauss-Kahn has warned that countries risk a return to recession if anti-crisis measures are withdrawn too soon.

The IMF said it had revised upwards its earlier forecast for global growth by ¾ percentage point from the October 2009 forecast.


http://www.imf.org/external/country/USA/index.htm

[quote]Gambit_Lost wrote:

[quote]pat wrote:
And it didn’t do shit…[/quote]

IMF Revises Up Global Forecast to Near 4% for 2010

IMF Survey online

January 26, 2010

* World economy bouncing back, but advanced economies drag
* Global recovery from recession led by emerging markets
* Countries should maintain stimulus measures while recovery not well established 

The global economy, battered by two years of crisis, is recovering faster than previously anticipated, with world growth bouncing back from negative territory in 2009 to a forecast 3.9 percent this year and 4.3 percent in 2011, the International Monetary Fund said in its latest forecast.

But the recovery is proceeding at different speeds around the world, with emerging markets, led by Asia relatively vigorous, but advanced economies remaining sluggish and still dependent on government stimulus measures, the IMF said in an update to its World Economic Outlook, published on January 26.

â??For the moment, the recovery is very much based on policy decisions and policy actions. The question is when does private demand come and take over. Right now itâ??s ok, but a year down the line, it will be a big question,â?? said IMF Chief Economist Olivier Blanchard in an IMF video interview.

IMF Managing Director Dominique Strauss-Kahn has warned that countries risk a return to recession if anti-crisis measures are withdrawn too soon.

The IMF said it had revised upwards its earlier forecast for global growth by �¾ percentage point from the October 2009 forecast.


http://www.imf.org/external/country/USA/index.htm
[/quote]

Post hoc ergo propter hoc?

And we are not even in the “post” part yet.

[quote]orion wrote:

Post hoc ergo propter hoc?

And we are not even in the “post” part yet.
[/quote]

Even you admitted that stimulus programs would give a temporary boost to GDP. I believe you said something like, “How could they not?”

If the growth rates end up leveling off around where they were before the crisis, you’ll be back here admitting you were wrong, right? lol

BTW, 5.7% fourth quarter growth announced today in Freedomland. I can’t wait for you to explain how this rather eye-popping number had “nothing” to do with the stimulus.

[quote]Gambit_Lost wrote:

[quote]orion wrote:

Post hoc ergo propter hoc?

And we are not even in the “post” part yet.
[/quote]

Even you admitted that stimulus programs would give a temporary boost to GDP. I believe you said something like, “How could they not?”

If the growth rates end up leveling off around where they were before the crisis, you’ll be back here admitting you were wrong, right? lol

BTW, 5.7% fourth quarter growth announced today in Freedomland. I can’t wait for you to explain how this rather eye-popping number had “nothing” to do with the stimulus.

[/quote]

How come the US is still bleeding jobs then?

All of this is far from over and the US federal deficit is unsustainable.

Lets see what happens when commercial real estate collapses or interest rates rise.

Plus, GDP numbers are more or less worthless when it comes to deficit spending. They could dig holes and fill them up again and the GDP would still rise. The few jobs created are in government and those are not produktive jobs.

You mean one year in and Obama hasn’t solved all the world’s problems yet?!? Looks like he isn’t the magic negro we all thought he was… (2:48) http://www.thedailyshow.com/watch/tue-january-19-2010/the-first-364-days-23-hours

[quote]orion wrote:
GDP numbers are more or less worthless when it comes to deficit spending. They could dig holes and fill them up again and the GDP would still rise. The few jobs created are in government and those are not produktive jobs.

[/quote]

For just so many reasons… facepalm

Perhaps you can EXPLAIN why you facepalm a statement that government spending even if unproductive counts towards GDP?