CBO revisits the "stimulus"

A new CBO report came out this morning analyzing the macroeconomic benefits of the “stimulus” package that was passed.

The results are not surprising, basically the conclusion is that we just wasted $800 BILLION.

In principle, the legislation’s long-run impact on output also will depend on whether it permanently changes incentives to work or save. However, according to CBO’s
estimates, the legislation will not have any significant permanent effects on those
incentives.

The long term effect on GDP is negative and following the CBO’s logic, will be more severely negative at a more rapid pace given the new budget proposals by the administration, which increase the deficit drastically. Basically the faster we accumulate debt the faster we will see a negative effect of government borrowing/spending. The negative effect will be reflected in lowering the GDP. The CBO points out that the reduction in GDP shouldn't necessarily impact employment figures, but will probably be reflected in underemployment or reduced wages.

The reduction in GDP is therefore estimated to be reflected in lower wages rather than lower employment, as workers will be slightly less productive because the capital stock is slightly smaller.

Smaller GDP and lower wages… what a stimulus!

Congrats! Your government just wasted nearly a TRILLION dollars of YOUR money.

Congressional Budget Office says the 'stimulus' will hurt long term

The CBO just issued a report that says the stimulus will actually DECREASE GDP in the long term! Read it yourself.

Ouch. That has to hurt.

There are also reports coming out now that President Obama plans to announce on Monday a plan to use the rest of the TARP funds to bail out struggling mortgages by refinancing them down to the current market value. Of course, that's only for troubled homeowners. If you have been paying your mortgage on time every month and are upside down in your house... and oh yes, there are lots of us, then you get SQUAT! This bailout is only for those who are about to default on their loan.

Hmm... I wonder what that will do to the number of people that are suddenly "struggling".

Very interesting.

This would be called reinforcing bad behavior and every parent knows that is a bad idea.