• The Heritage Network
    • Resize:
    • A
    • A
    • A
  • Donate
  • Questionable Short-Term Gains, Guaranteed Long-Term Pain

    Congressional Budget Office Director Douglas Elmendorf has a post up at his Director’s Blog on the Macroeconomic Effects of the Senate Stimulus Legislation. This is what he writes about the short term benefits of Obama’s Trillion Dollar Debt Plan:

    CBO estimates that the legislation would raise employment by 0.9 million to 2.5 million at the end of 2009; 1.3 million to 3.9 million at the end of 2010; and 0.6 million to 1.9 million at the end of 2011.

    Increase employment by between 0.9 million and 2.5 million? The spread between those numbers is larger than the lower bound estimate. In other words Elmendorf is admitting that the employment projections are really just wild guesses.
    But now let’s move to the long-term costs. Elmendorf writes:

    In contrast to its positive near-term macroeconomic effects, the Senate legislation would reduce output slightly in the long run, CBO estimates, as would other similar proposals. The principal channel for this effect is that the legislation would result in an increase in government debt. To the extent that people hold their wealth in the form of government bonds rather than in a form that can be used to finance private investment, the increased government debt would tend to “crowd out” private investment—thus reducing the stock of private capital and the long-term potential output of the economy.

    Do we really want to gamble one trillion dollars on short-term employment gains at the cost of our future economic viability?

    Posted in Ongoing Priorities [slideshow_deploy]

    2 Responses to Questionable Short-Term Gains, Guaranteed Long-Term Pain

    1. John D. Froelich, Up says:

      Much of the package makes no particular sense as stimulus, altho it's pretty good as political payoffs to Democratic Party interest groups.

      But, the "buy American" clause is very scary, and I would hope that it is eliminated. We do not need a repeat of the Depression and Smoot-Hawley!

    2. lynda hawkins, 226 p says:

      How can we save America? I am so upset over the stimulis bill and all the pork. My husband and i own a small business and no is paying us. what a mess. We as americans have forgotten about what God created us as a nastion for. Thanks for all your support. God Bless America.

      lynda

    Comments are subject to approval and moderation. We remind everyone that The Heritage Foundation promotes a civil society where ideas and debate flourish. Please be respectful of each other and the subjects of any criticism. While we may not always agree on policy, we should all agree that being appropriately informed is everyone's intention visiting this site. Profanity, lewdness, personal attacks, and other forms of incivility will not be tolerated. Please keep your thoughts brief and avoid ALL CAPS. While we respect your first amendment rights, we are obligated to our readers to maintain these standards. Thanks for joining the conversation.

    Big Government Is NOT the Answer

    Your tax dollars are being spent on programs that we really don't need.

    I Agree I Disagree ×

    Get Heritage In Your Inbox — FREE!

    Heritage Foundation e-mails keep you updated on the ongoing policy battles in Washington and around the country.

    ×