The 2009 economic stimulus law still is having a lingering positive effect on the economy, boosting employment in the second quarter of this year by between 200,000 and 1.2 million jobs, the Congressional Budget Office says in a new report.
According to the CBO, the impact of the stimulus (PL 111-5) has steadily dwindled since its influence across the economy peaked in the third quarter of 2010, when at least 1 million people — and as many as 5.1 million — were working than would have been if the law had not been enacted.
The law, a mixture of spending programs and tax cuts, is expected to have minimal effect on the economy by the end of 2013. CBO now estimates the cost of the stimulus over 10 years to be $833 billion, up from the $787 billion cost the independent agency and the Joint Committee on Taxation estimated in 2009.
The CBO is required by law to provide a regular analysis of the broad combination of spending and tax cuts the Obama administration backed to cope with the deep recession in 2008-09. The CBO tracks government outlays and uses economic models to arrive at its conclusions. Because most of these economic models are locked in, the quarterly CBO reports have been fairly predictable, with each new study usually matching previous forecasts.
Although the CBO estimated the near-term impact of the stimulus package has been positive, the agency projected the longer-term impact would be more subdued. It estimated that the stimulus would reduce economic output between zero and 0.2 percent after 2016 because of the increase in federal debt, which CBO said would push some investment toward government securities rather than into private investment instruments.
But the “crowding out of some private investment” will be offset by other factors, CBO said, such as funding for infrastructure projects, education and investment incentives that increase output.
Despite CBO’s conclusion that the stimulus has created or saved millions of jobs, the public has viewed the law skeptically because the economy has weakened this year and President Obama and other Democrats rarely mention the stimulus on the campaign trail.
Although most studies of the stimulus have said that it worked to at least some degree, a few conservative economists question that assertion.
Mitt Romney, the presumed Republican nominee for president, has blasted the stimulus as “the biggest, most careless one-time expenditure by the federal government in history.”