Saturday, February 7, 2009

First, Do No Harm/CBO Pans Obama Plan


The non-partisan Congressional Budget Office (CBO) has concluded that the Stimulus Package proposed by President Obama will actually reduce economic growth and thus GDP over the long haul, when compared to doing nothing at all. The CBO concludes that the stimulus bill will create jobs in the short run, but that, over the longer run, the spending and borrowing necessary to support it will crowd out private investment and thus REDUCE GDP in the longer run, since the forgone investment would have enhanced national productivity.

The study is answer enough to the claim by Stephen Pearlstein of the Washington Post that all spending is stimulus, no matter what. That may well be true, in the short run, but spending on digging holes and refilling them (or refurbishing Federal Buildings) will not make America more productive and will, over time, crowd out private (and public) investment that would.