Right-Wing Media Use CBO Director's Testimony To Launch Bogus Attack On Stimulus

››› ››› DAVID SHERE

Right-wing media have suggested that Congressional Budget Office director Douglas Elmendorf "admitted" in recent Senate testimony that the stimulus "will shrink the economy." In fact, while the CBO predicted the plan would reduce GDP by between 0.1 and 0.3 percent in 2019, economists say the program has thus far increased output and employment, as was predicted.

Right-Wing Media Use Elmendorf Comments To Attack Stimulus, Accuse Him Of Changing Position

RedState's Horowitz: Elmendorf "Admitted" That Stimulus "Will Shrink The Economy." From RedState:

We could have done a lot of good things with the $830 billion that was flushed down the toilet through the 2009 stimulus. That money could have been used to permanently transform our entitlement programs to free-market personal ownership accounts. It could have been used for massive pro-growth tax cuts. Instead, it was used to grow perennial dependency and for special interest handouts. But all of the supercilious smart economists say that it helps stimulate the economy, right? After all, it is called stimulus.

Well, earlier today, CBO Director Doug Elmendorf admitted to Senator Sessions that in the long run the stimulus will shrink the economy. He testified at a Senate Budget Committee hearing that the stimulus will indeed "be a drag on GDP" over the next ten years. Any diligent student of history already knew that, but now we have the "gold standard" of budget and economic scoring to affirm that self-evident truth. Nevertheless, fear not, the stimulus will have a stimulating effect in the short-term. That's why we are enjoying a robust annual average GDP growth of.....1.4%. [RedState.com, 11/15/11]

Limbaugh: CBO Initially Said The Stimulus Was "Something The Opposite Of What He's Now Admitting That It Will Be." From Premiere Radio Networks' The Rush Limbaugh Show:

LIMBAUGH: One other item here before we move on to other things. The Congressional Budget Office director Doug Elmendorf appeared before a Senate committee yesterday that had as one of its members Senator Sessions of Alabama. And yesterday, they -- now listen to me on this -- the Congressional Budget Office director Doug Elmendorf admitted -- he told Senator Sessions that Obama's stimulus bill will shrink the economy down the road. He testified at a Senate Budget Committee hearing. He said the stimulus will indeed, quote, "be a drag on GDP over the next 10 years."

Now, we already knew this. But this is the first time that a government official has admitted that Obama's stimulus is nothing of the sort. This is the CBO. This is the guy that led the group that scored the stimulus as something the opposite of what he's now admitting that it will be.

They all said, "Well, in the short term the stimulus will have a" -- they all said, "Yeah, it will stimulate. It will have a -- it will boost." Right. It'll boost. What's our GDP? What's our unemployment at? What kind of boost did we get out of it? Zero.

It is going to be something that will shrink the economy over 10 years. CBO director admitted it yesterday before Senator Sessions at a Senate Budget Committee hearing. [Premiere Radio Networks, The Rush Limbaugh Show, 11/16/11]

Limbaugh Suggests Elmendorf "Knew This From Day One" But Was "Hogtied" Into Saying Otherwise. From Premiere Radio Networks' The Rush Limbaugh Show:

LIMBAUGH: Doug Elmendorf, CBO director, admits to Jeff Sessions that Obama's stimulus over 10 years shrinks the U.S. economy. Now, I submit to you that Mr. Elmendorf knew this from Day One. But he was hogtied into saying, "Well, the initial results of this, the initial impact will be a bit of a boost to the economy." Which we're seeing.

Of course, they're out there saying, "Well, if we hadn't done the stimulus, you know how much worse it would be?" Don't want to contemplate it. It's all smoke and mirrors. [Premiere Radio Networks, The Rush Limbaugh Show, 11/16/11]

But Economists Say Stimulus Has Increased GDP And Employment

CBO Estimates That As Of July 2011, Stimulus Increased GDP By 1.1 To 3.1 Percent. In its seventh quarterly report on ARRA, the president's Council of Economic Advisers (CEA) reported that the CBO estimated that the stimulus had boosted GDP between 1.1 percent and 3.1 percent:

[Council of Economic Advisers, 7/1/11]

Private Analysts Estimate That As Of July 2011, Stimulus Increased GDP By 1.8 To 2.7 Percent. In its seventh quarterly report on ARRA, the president's Council of Economic Advisers (CEA) estimated that the stimulus "has raised the level of GDP as of the first quarter of 2011, relative to what it otherwise would have been, by between 2.3 and 3.2 percent." CEA also provided a chart showing that private analysts estimate that the stimulus boosted GDP between 1.8 and 2.7 percent:

[Council of Economic Advisers, 7/1/11]

Private Analysts Estimate That As Of July 2011, Stimulus Increased Employment By 2.4 To 2.5 Million. In its report, the CEA provided the following chart showing that private forecasters estimate that as of the first quarter of 2011, the stimulus increased employment between 2.4 and 2.5 million:

[Council of Economic Advisers, 7/1/11]

And Elmendorf Made Same Points In 2009

Elmendorf: Stimulus Will Raise GDP For Several Years And Result In "Slight Decrease" In GDP "In The Longer Run." From a letter written by Doug Elmendorf to then-Senate Budget Committee Ranking Member Judd Gregg:

CBO estimates that this Senate legislation would raise output and lower unemployment for several years, with effects broadly similar to those of H.R. 1 as introduced. In the longer run, the legislation would result in a slight decrease in gross domestic product (GDP) compared with CBO's baseline economic forecast. [CBO, 2/4/09]

Elmendorf: "The Senate Legislation Would Reduce Output Slightly In The Long Run," Because Of "Crowding Out." From a letter written by Doug Elmendorf to then-Senate Budget Committee Ranking Member Judd Gregg:

In contrast to its positive near-term macroeconomic effects, the Senate legislation would reduce output slightly in the long run, CBO estimates, as would other similar proposals. The principal channel for this effect is that the legislation would result in an increase in government debt. To the extent that people hold their wealth as government bonds rather than in a form that can be used to finance private investment, the increased debt would tend to reduce the stock of productive capital. In economic parlance, the debt would "crowd out" private investment. (Crowding out is unlikely to occur in the short run under current conditions, because most firms are lowering investment in response to reduced demand, which stimulus can offset in part.) CBO's basic assumption is that, in the long run each dollar of additional debt crowds out about a third of a dollar's worth of private domestic capital (with the remainder of the rise in debt offset by increases in private saving and inflows of foreign capital). Because of uncertainty about the degree of crowding out, however, CBO has incorporated both more and less crowding out into its range of estimates of the long-run effects of the Senate legislation. [CBO, 2/4/09]

Posted In
Economy, Budget, Jobs, Wages, & Unemployment
Network/Outlet
Premiere Radio Networks
Person
Rush Limbaugh
Show/Publication
The Rush Limbaugh Show, Red State
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