CBO new report on Stimulus - Using Private, Commercial Forecasting Models

The Congressional Budget Office has a new report out on the Stimulus.

Buried deep in the actual report is this little mention, in an appendix:

In analyzing the economic effects of ARRA, CBO drew heavily on versions of the commercial forecasting models of two economic consulting firms, Macroeconomic Advisors and Global Insight, as well as on the FRB-US model used at the Federal Reserve Board.

The CBO outsourced their job? Anyone aware that Global Insight has produced biased reports for corporate lobbyists?

Firstly, one would have to be dead to not hear about the massive errors from the White House on jobs created from the Stimulus. It appears the CBO is busy covering the White House's ass from the CBO blog statement:

New Budget Deficit Numbers, $1.6 Trillion for 2009

From the CBO blog

Today CBO issued its annual summer update of the budget and economic outlook. CBO estimates that the federal budget deficit for 2009 will total $1.6 trillion, which, at 11.2 percent of gross domestic product (GDP), will be the highest since World War II. That deficit figure results from a combination of weak revenues and elevated spending associated with the economic downturn and financial turmoil. The deficit has been boosted by various federal policies implemented in response, including the stimulus legislation and aid for the financial, housing, and automotive sectors.

CBO releases social security update

Next Time someone screams social security must be privatized, refer to this.

Without changes in law, CBO expects that the Social Security trust funds will be exhausted in 2043. If that point is reached, the Social Security Administration will not have the legal authority to pay full benefits and the amounts that could be paid would be about 17 percent less than those scheduled under current law.

CBO on House Health Care Bill

The Congressional Budget Office Director's Blog has a new primarily estimate on H.R. 3200, the House Health Care Bill.

According to CBO’s and JCT’s assessment, enacting H.R. 3200 would result in a net increase in the federal budget deficit of $239 billion over the 2010-2019 period. That estimate reflects a projected 10-year cost of the bill’s insurance coverage provisions of $1,042 billion, partly offset by net spending changes that CBO estimates would save $219 billion over the same period, and by revenue provisions that JCT estimates would increase federal revenues by about $583 billion over those 10 years.

CBO on 2008 Tax Rebates Effectiveness

The Congressional Budget Office has released a brief, Did the 2008 Tax Rebates Stimulate Short-Term Growth?

What was the economic impact CBO predicted?

40% spent in first 6 months.

Raise Consumer Consumption by:

Q2    2.3%
Q3    1.0%
Q4   -1.0%

CBO says the results were:

Q2    2.3%
Q3    0.2%
Q4    1.0%

So, what's with the brief? Other economists are studying the effects of the 2001 and 2008 rebates and claiming they have negligable effect.

One of the 2008 tax rebates by Christian Broda and Jonathan Parker that used weekly data provided by participating consumers, who, in their homes, scanned the bar codes on their purchases, mainly from grocery stores, mass merchandise outlets, and drugstores. The researchers’ findings imply that about 19 percent of the tax rebates was spent in the second quarter of 2008 and that cumulative spending amounted to about 33 percent through the third quarter

A survey found that half used the rebate to pay off debt, one third saved the money and one third spent it.


By itself simple observation of aggregate consumption over time may not detect the effect of rebates

(in other words, if one does not examine the time line with enough granularity you might miss that blip on the screen!)

Gee wiz, even with the graph data does anyone believe that's a really effective tool to increase people's income in a recession? I guess I suffer from some hypothesis that people need permanent income.