CBO Numbers: Good News for Democrats

The nonpartisan Congressional Budget Office has released preliminary numbers regarding the Senate healthcare bill with reconciliation fixes. The CBO analysis is good news for Democrats.

According to the CBO preliminary numbers (a final report is forthcoming):

The bill will cost $940 billion over the first 10 years and reduce the deficit by $130 billion during that period. In the second 10 years -- so, 2020 to 2029 -- it will reduce the deficit by $1.2 trillion. The legislation will cover 32 million Americans, or 95 percent of the legal population.

The CBO preliminary release has given Democrats needed momentum. Republicans, however, are scrambling to dismiss the numbers.

Run: Facts! CBO Says Stimulus Created 1-2 Million Jobs in Q4

Although only 6% of the public believes that the stimulus has created jobs, private economic forecasters have concluded that the statute has created over 1 million jobs. Now, the Congressional Budget Office -- which provides nonpartisan fiscal analysis of government policy -- has reached a similar conclusion. According to a CBO report, the stimulus was quite successful in the last quarter of 2009:

CBO estimates that in the fourth quarter of calendar year 2009, ARRA added between 1.0 million and 2.1 million to the number of workers employed in the United States, and it increased the number of full-time-equivalent jobs by between 1.4 million and 3.0 million. Increases in FTE jobs include shifts from part-time to full-time work or overtime and are thus generally larger than increases in the number of employed workers.

The CBO estimates are larger than some earlier reports (particularly from the White House) because those reports were based on self-reporting by direct recipients of stimulus funding. Those numbers, however, do not include subcontractor hiring to complete projects demanded by stimulus recipients. The figures also do not include the "multiplier" effect of stimulus subsidies, job creation, etc. In other words, the earlier numbers do not account for new jobs created because people have more money to spend due to stimulus funds.

This is particularly good news for the Obama administration. Nevertheless, the overall unemployment rate must fall substantially before voters will have more optimism about the economy. Still, this news provides a factual counter to the empty rhetoric that the stimulus was irrelevant on the issue of jobs. Well, even Republicans who initially floated this argument quietly disagree with it today!

Query: If the stimulus had substantial success later in 2009 -- yet unemployment remains high -- does this validate Paul Krugman's argument that the stimulus should have been larger and that it should have included more items of direct spending and fewer tax cuts?

Is "Rosy" Back? Economists Question Obama's Economic Forecasting

President Barack Obama seeks to slice the enormous federal budget deficit in half by 2013. This seems like an impossible task, especially in light of the magnitude of the deficit he inherited from Bush, the increasing rate of government spending, and the implementation of new tax cuts.

But if the economy recovers as rapidly as Obama anticipates that it will, he might actually accomplish his goal. Many economists, however, question the administration's economic forecasts because they greatly exceed the projections of private economists and the Congressional Budget Office.

Here's a clip from a Yahoo News article on the story:

"They used to joke during the Reagan years that the highest-ranking woman in the administration was Rosy Scenario," said Nariman Behravesh, the chief economist at IHS Global Insight, a major private forecasting firm.

Rosy may be back in town, said Behravesh, who called the Obama administration's forecasts "way too optimistic."

For its part, the administration insisted that it hadn't cooked the books to show greater growth, and thus more tax revenues, in coming years. But the administration forecast is far higher than the projections for growth in the overall economy, as measured by the gross domestic product, of many private analysts. . . .

GDP plays the biggest role in determining the accuracy of deficit forecasts because weaker-than-expected growth swells government payments for such things as unemployment benefits and food stamps and reduces tax receipts.

In its budget, the administration predicted that the overall economy, as measured by the gross domestic product, will shrink by 1.2 percent this year but will grow by a solid 3.2 percent in 2010. That growth would be followed by even stronger increases of 4 percent in 2011, 4.6 percent in 2012 and 4.2 percent in 2013.

By contrast, the consensus of forecasters surveyed by Blue Chip Economic Indicators in February predicted that the GDP will fall by a larger 1.9 percent this year and then increase at weaker rates of 2.1 percent in 2010, 2.9 percent in 2011 and 2012 and 2.8 percent in 2013.