THE STIMULUS BILL REDUCES LONG-TERM GDP? FINE. THEN ELIMINATE SOME BUSINESS TAX CUTS.
A lot of righty bloggers are crowing about this:
President Obama's economic recovery package will actually hurt the economy more in the long run than if he were to do nothing, the nonpartisan Congressional Budget Office said Wednesday.
CBO ... said the House and Senate bills will help in the short term but result in so much government debt that within a few years they would crowd out private investment, actually leading to a lower Gross Domestic Product over the next 10 years than if the government had done nothing.
CBO estimates that by 2019 the Senate legislation would reduce GDP by 0.1 percent to 0.3 percent on net. [The House bill] would have similar long-run effects, CBO said....
Er, maybe those who are crowing ought to look at the last page of the CBO report itself (PDF) and see just which kinds of investments do and don't raise GDP (click to enlarge):
Why, it appears that government spending gets the job done much better than tax cuts. And tax cuts to business accomplish the least.
What raises long-term GDP the best, and why? Let's go to the letter:
As shown in the first two categories in the table, direct purchases of goods and services by governments, including investment in infrastructure, tend to have relatively large effects on GDP. Because infrastructure spending takes time to occur, increased funding for that purpose would not boost outlays or GDP much this year, but it would probably provide significant stimulus from 2010 through 2012.
And here's my favorite part:
... Transfers to persons (for example, unemployment insurance and nutrition assistance) would also have a significant impact on GDP. Transfers have a relatively strong effect on consumption because they tend to go to people, such as the poor or unemployed, who are likely to spend much of any additional income. For that reason and because transfers can be increased quickly, they are estimated to have a significant impact on GDP by early 2010. Transfers also include refundable tax credits, which have an impact similar to that of a temporary tax cut.
So good spending includes unemployment insurance, food assistance ... and the refundable tax credits right-wingers denounce as "welfare"?
Fine, then. Put more of all that into the bill. And dump the corporate tax breaks.
OOPS: Forgot to mention this, from the report:
... implementing the Senate legislation would ... increase employment [by the fourth quarter of 2010] by 1.3 million to 3.9 million jobs, as shown in Table 1. In that quarter, the unemployment rate would be 0.7 percentage points to 2.1 percentage points lower than the baseline forecast of 8.7 percent.
GDP ain't everything (though the bill increases GDP in the short term). This bill does something about the immediate crisis for people. As the saying goes, people don't need to eat in the long run. People need to eat every day.