Fox News' Jim Angle uncritically aired Rep. Paul Ryan's false claim that "[m]ost" of the stimulus money will not "spend out until 2011," and Larry Kudlow did not challenge Ryan when he repeated the falsehood on CNBC.
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On the April 1 edition of Fox News' Special Report, chief Washington correspondent Jim Angle uncritically aired Rep. Paul Ryan's (R-WI) claim that "[m]ost of the money in the stimulus package doesn't even spend out until 2011." Angle then added that 2011 is "[w]ell after the Obama administration predicts the recession will have ended." Similarly, on the same day's edition of CNBC's The Kudlow Report, host Larry Kudlow did not challenge Ryan's assertions that "[m]ost of the spending" in the stimulus package "is 2011 and beyond" and that "[m]ore than half the money doesn't even get spent for two more years." In fact, according to the Congressional Budget Office (CBO) score of the enacted version of the recovery act, 59 percent of the spending and 74.2 percent of the combined spending and tax cuts included in the stimulus package will take effect by the end of fiscal year 2010 (September 30, 2010).
Ryan's alternative budget plan includes the "repeal of 'stimulus' funding beyond this year, excluding unemployment insurance." But his claim that "[m]ost" of the stimulus money would not "spend out until 2011" is false, according to CBO's estimate.
CBO director Douglas Elmendorf outlined CBO's tally of the year-by-year "spending and revenue effects" of the stimulus bill in a February 13 letter:
Combining both spending and revenue effects, CBO estimates that enacting the conference agreement for H.R. 1 would increase federal budget deficits by $185 billion over the remaining months of fiscal year 2009, by $399 billion in 2010, by $134 billion in 2011, and by $787 billion over the 2009-2019 period.
Based on those figures, $185 billion of the $787 billion recovery bill would be spent by the end of fiscal year 2009, or 23.5 percent of the bill's total cost. Likewise, $584 billion ($185 billion for fiscal year 2009 plus $399 billion for fiscal year 2010), or 74.2 percent of the bill's total cost, would take effect within 19 months, through the end of fiscal year 2010. And $718 billion ($185 billion for fiscal year 2009 plus $399 billion for fiscal year 2010 plus $134 billion for fiscal year 2011), or 91.2 percent of the bill's total cost, would be spent by October 2011, through the end of fiscal year 2011.
Ryan's claim is still false when taking into account only spending included in the stimulus bill, excluding all tax cuts. In his February 13 letter, Elmendorf noted that the bill includes $34.8 billion in estimated appropriations outlays for fiscal year 2009, $110.7 billion in estimated appropriations outlays for fiscal year 2010, $85.3 billion in estimated direct spending outlays for fiscal year 2009, and $108.6 billion in estimated direct spending outlays for fiscal year 2010. Elmendorf's letter also noted that the total amount of the stimulus bill's estimated appropriations outlays through 2019 is $308.3 billion, and the total amount of the bill's total estimated direct spending outlays through 2019 is $267 billion. Therefore, $339.4 billion ($34.8 billion plus $110.7 billion plus $85.3 billion plus $108.6 billion) of the stimulus bill's $575.3 billion ($308.3 billion plus $267 billion) in total spending, or 59 percent, will occur by the end of fiscal year 2010.
Moreover, economists, including Elmendorf, have said that fiscal stimulus in 2011 or later could be effective in the current economic situation, in which economic output is projected to remain below its potential long after the technical beginning of the recovery. In written congressional testimony submitted on January 27, Elmendorf stated that, unlike in ordinary "periods of economic weakness" that "are fairly short-lived," "CBO projects that economic output will remain significantly below its potential for several more years, so policies that provide stimulus for an extended period of time may be appropriate."
Likewise, in a January 27 blog post, New York Times columnist and Nobel laureate Paul Krugman wrote that, because of the particular circumstances of the current economic situation, it would not be a problem if "some or even most" of stimulus spending occurred after the recession technically ends:
It's not a problem if some or even most of the stimulus arrives after the official recession, as determined by the NBER [National Bureau of Economic Research], is over. Why? Because in modern recessions, unemployment keeps rising long after the NBER has determined, based on things like industrial production, that the recession proper is over. You can see that the need for stimulus doesn't end with the recession by the simple fact that in each of the last two recessions the Fed continued to cut interest rates long after the official cycle trough. if it's good enough for the Fed, it's good enough for fiscal policy.
So what is the right criterion? Actually, I think it's quite straightforward. The reason we're talking about fiscal policy is the fact that monetary policy is up against the zero lower bound. Stimulus will still be valuable as long as we're still up against that bound -- which is likely to be the case for a long time.
From the April 1 edition of Fox News' Special Report with Bret Baier:
ANGLE: House Republicans say their alternative will spend 4.8 trillion less than the president, borrow 3.6 trillion less, and create 2.1 million more jobs than the Democratic plan. How do they do it?
RYAN [video clip]: Rescind the Democrats' stimulus package, starting in the year 2010, except for unemployment insurance for those who've already lost their jobs. Most of the money in the stimulus package doesn't even spend out until 2011.
ANGLE: Well after the Obama administration predicts the recession will have ended.
From the April 1 edition of CNBC's The Kudlow Report:
KUDLOW: A capital gains tax holiday? My kind of stuff. It's all in the Republicans' new alternative budget. And let's bring in the principle author, Republican House budget expert Paul Ryan. Good evening, Paul.
RYAN: Hey, Larry. Good evening.
KUDLOW: All right, so, you basically want to recall, repeal, and roll back the Obama budget with your own plan, as I understand it.
RYAN: That's right. We're saying, starting next year, rescind the stimulus. It's not working. We don't think it was going to work in the first place. Most of the spending is 2011 and beyond. And let's have some pro-growth tax policy to actually grow the economy.
Cut the corporate rate down to the international national average rate -- 25 percent; a two-year, or through 2010, tax holiday on capital gains; and bring the top individual rate down to 25 percent by giving individuals a choice of having a simplified tax system with a top rate of 25 percent or if they want to stick with the current system with all of its bells and whistles and loopholes and deductions, they can do that, too.
We're saying, let's not play class warfare. Class warfare doesn't create jobs. Tapping into people's emotions of fear and envy may make good politics, but it's really bad economics. We want good economic policy, and that's why we're proposing this with a whole bunch of spending discipline on top of it as well, Larry.
KUDLOW: You know, we just heard from Forbes magazine publisher Rich Karlgaard. He believes the economic recovery is already beginning, right now, as we move into the second quarter. Is this massive government spending simply unnecessary? And has the Federal Reserve's monetary ease already done the job?
RYAN: If he's right, it's because of the Fed's pumping all this liquidity. It's because of the Federal Reserve policy, not because of this fiscal stimulus, with a -- which has a huge debt hangover. More than half the money doesn't even get spent for two more years.
So we're saying rescind all of that and let's use that money to actually reduce tax rates on our businesses, on entrepreneurs, on investors, on small businesses, on American companies so they're more globally competitive.