CBO Director's Blog

Here is what the CBO director has to say.

Monthly Budget Review
April 6th, 2009 by Douglas Elmendorf

Today CBO released the latest Monthly Budget Review, reflecting an analysis of budget data through the end of March 2009. CBO estimates that the Treasury Department will report a deficit of about $953 billion for the first six months of fiscal year 2009, $640 billion more than the deficit recorded through March 2008.

Budget accounting issues are clouding the deficit forecasts for this year. The above estimate of this year’s deficit to date includes outlays of about $290 billion for the Troubled Asset Relief Program (TARP). Although the Treasury has been recording most spending for the TARP on a cash basis, CBO believes that the budget should record the program’s activities on a net present-value basis adjusted for market risk. Using that approach, CBO estimates that outlays of $140 billion should be recorded for the TARP through March. That approach would yield an estimated deficit of $803 billion for the first half of the year.

March receipts were estimated to be about 30 percent lower than receipts in March 2008. More than half of the decline reflects a drop in net corporate income tax receipts, which fell by 90 percent from March of last year, in part because firms may be applying current-year losses to obtain refunds of taxes paid in previous years.

He might want to revise and extend his remarks

Pennywise, dollar foolish

Trust me, we don't make this stuff up. This great and wonderful Oz, I mean, stimulus plan will provide a short-term boost, but have negative effects in the long run. This is not me, but Dr. Douglas Elmendorf, director of the non-partisan Congressional Budget Office. This is what he says, in part, in his blog:

We estimate that the legislation will raise gross domestic product (GDP) and increase employment in the short run—by adding to aggregate demand and boosting the utilization of labor and capital. In contrast, we expect that the legislation will reduce output slightly in the long run because the resulting increase in government debt will tend to “crowd out” private investment and thereby reduce the stock of productive private capital. That crowding-out effect will be diminished to the extent that some of the funding in the legislation will go for activities that could add to the nation’s long-term output.

At the risk of repeatedly sounding redundant and saying the same thing over and over, again and again, time after time, Congress has risked our future for a short-term gain.

Is this want one of our founding fathers called pennywise and dollar foolish? Let's borrow our way to prosperity. Oh, that's right, that won't work.

Our wonderful, loving and benevolent government is going to "crowd out" private investment, thereby reducing our freedoms and liberty.

We need an infusion of Ronaldus Magnus about now.

What will universal health care do? Not much, according to the CBO

So, do you want universal health insurance? If so, you can expect your wage increases to slow, and don't expect health care to improve.

You don't have to believe me, but that is what the Congressional Budget Office is saying. Check out Page 4 of the testimony given to a Senate budget committee here (a PDF file).

Here is part of the testimony: "The available evidence also suggests that a substantial share of spending on health care contributes little if anything to the overall health of the nation, but finding ways to reduce such spending without also affecting services that improve health will be difficult."

Also: "... the growth of health care costs has contributed to slow growth in wages because workers must give up other forms of compensation to offset the rising costs of employment-based insurance."

We might be forced to pay higher taxes for universal coverage: "Many analysts would agree that controlling federal costs over the long term will be very difficult without addressing the underlying forces that are also causing private costs for health care to rise."

And this: "Fourth, many of the steps that analysts would recommend might not yield substantial budgetary savings or reductions in national spending on health care within a 10-year window—and others might increase federal costs or total spending ... ."

CBO: Stimulus plan has harmful long-term effects

I am not sure how the $780 billion stimulus package will pan out, but the Congressional Budget Office said an earlier version would be more harmful to the U.S. economy (because if will add to government debt) than if President Barack Obama did nothing. Check out the CBO blog or the Washington Times story.