During the March 8 edition of Fox Broadcasting Co.'s Fox News Sunday, host Chris Wallace allowed Sen. John McCain to falsely claim that, according to the Congressional Budget Office (CBO), "[a]ll of this spending, all of this debt, all of the policies" will, “in the long term, cause us to have a negative ... GDP growth.” In fact, CBO has not forecast “a negative” growth in gross domestic product (GDP), as McCain claimed; CBO has instead predicted a slight reduction in long-term GDP growth when compared to current projections -- though not enough to result in negative GDP growth -- due to the “crowding-out” effect of the increase in government debt resulting from the American Recovery and Reinvestment Act.

McCain appeared to be referring to CBO director Douglas Elmendorf's March 2 letter to Sen. Charles Grassley (R-IA) on the economic effects of the economic recovery act that discussed “CBO estimates ... relative to the agency's baseline forecast” and stated, “Beyond 2015, the legislation is estimated to reduce GDP by between zero and 0.2 percent,” not cause negative GDP growth as McCain claimed [emphasis added]. A table of projected real GDP, also provided in the CBO letter, lists the same future range of 0 to -0.2 percent as a "[p]ercentage change from baseline." Despite the estimated long-term reduction in GDP growth caused by the recovery act, the CBO still projects positive GDP growth over that period; according to its January report, “The Budget and Economic Outlook: Fiscal Years 2009 to 2019,” CBO estimates as its baseline forecast that real GDP will contract by 1.9 percent in fiscal year 2009, grow by 0.4 percent in fiscal 2010, and grow by at least 2 percent every year from fiscal 2011 to 2019. The January report was cited by CBO as its baseline forecast in its letter to Grassley.

While Elmendorf wrote that the recovery legislation “will reduce output slightly in the long run” primarily by " 'crowd[ing] out' private investment," he also wrote:

The crowding-out effect will be offset somewhat by other factors. Some of the legislation's provisions, such as funding for improvements to roads and highways, might add to the economy's potential output in much the same way that private capital investment does. Other provisions, such as funding for grants to increase access to college education, could raise long-term productivity by enhancing people's skills. And some provisions will create incentives for increased private investment. According to CBO's estimates, provisions that could add to long-term output account for between one-quarter and one-third of the legislation's budgetary cost.

From the March 8 edition of Fox Broadcasting Co.'s Fox News Sunday:

McCAIN: What we're doing is phenomenal, not only as far as the debt is concerned, but the transfer of what the free enterprise system does over the government. It's the biggest since Franklin Delano Roosevelt.

WALLACE: And do you think that is contributing to the decline in the market, this -- messages that the Obama administration is sending about its agenda?

McCAIN: I think so, but I'm always a little nervous about allowing short-term market activity to drive our conclusions, but I don't think there's any doubt talking to friends of mine on Wall Street and people that I know, that this is not a positive signal. All of this spending, all of this debt, all of the policies that will now, in the long term, cause us to have a negative GTB -- GB --

WALLACE: GDP.

McCAIN: -- GDP growth, according to the Congressional Budget Office over time.