Even though the Obama Administration, congressional Democrats, and Keynesian economists claimed that spending would get the country moving again, critics of the 2009 stimulus bill argued that the it was wasteful and would result in a negative impact on the economy when it was all said and done. Who was right? Well, a new report from the Congressional Budget Office shows that many of the criticisms of Obamanomics were well-founded:
The Congressional Budget Office on Tuesday downgraded its estimate of the benefits of President Obama’s 2009 stimulus package, saying it may have sustained as few as 700,000 jobs at its peak last year and that over the long run it will actually be a net drag on the economy.
CBO said that while the Recovery Act boosted the economy in the short run, the extra debt that the stimulus piled up “crowds out” private investment and “will reduce output slightly in the long run — by between 0 and 0.2 percent after 2016.”
The analysis confirms what CBO predicted before the stimulus passed in February 2009, though the top-end decline of two-tenths of a percent is actually deeper than the agency predicted back then.
CBO has re-evaluated the stimulus every three months, and its estimates for the total cost have varied. Initially the package was pegged at $787 billion, rose as high as $862 billion at one point, and is now projected to be $825 billion once all the money is paid out.
The nonpartisan agency also has changed its model for the spending’s impact on the economy, and the new calculations show the Recovery Act did less than originally projected.