Why did the Obama administration delay releasing the budget reconciliation numbers for a month, then try to sneak them into a Friday afternoon document dump in the middle of Barack Obama’s vacation? They knew that the addition of more than $2,000,000,000,000 (trillion!) to their deficit projections was more than an admission of poor forecasting. It also meant acknowledging that Porkulus failed, as I explain in my new American Issues Project column:
Back in February, when the White House and OMB first claimed that they had knocked two trillion dollars off of the projections thanks to the superpowers of their economic stimulus package, the CBO sounded quite pessimistic. OMB director Peter Orszag at the time replied on the OMB blog that the CBO didn’t give enough consideration to the power of Porkulus:
During last Thursday’s briefing on the President’s FY 2010 Budget, CEA Chair Christina Romer was asked many questions about the economic forecast underlying the Budget – and since then some news reports have highlighted differences between the Administration’s forecast and the Congressional Budget Office (CBO) forecast.
The problem with this comparison is that our forecast includes the effects of the American Recovery and Reinvestment Act, which has now been signed into law. The CBO forecast, by contrast, was published in January and did not take into account the effects of the Recovery Act.
To put the forecasts on an “apples-to-apples” basis, one can take the CBO forecast and add in the effects from CBO’s macroeconomic analysis of the Recovery Act—which included both a “high” and “low” estimate for the projected effect of the act. …
The results show that the Administration’s GDP forecast is entirely consistent with CBO’s forecast (and indeed right in the middle of CBO’s “high” and “low” estimates) once the effects of the Recovery Act are included.
This is an important point, and one which the media seems largely to have missed. The CBO estimate turns out to have been quite accurate, perhaps even a bit optimistic, but at least now almost entirely in consonance with current OMB projections. If that’s the case, then the data shows that the economic stimulus has had no impact on the nation’s economy, despite its hefty $787 billion price tag.
Consider: the OMB had the same economic data as the CBO from which to build baseline projections of economic activity. Orszag in his blog post says that the OMB reached the same conclusions as the CBO without including their estimates of stimulus reaction. The “apples to oranges” that Orszag references is that OMB included those promised effects when calculating deficits for the future decade, not – as he claimed later – that the recession was deeper before OMB and CEA concocted those projections. In fact, estimates of first-quarter GDP got revised upward later this year, and the Obama administration hailed the Q2 result of -1% GDP growth as an “improvement” in the economy, a small demonstration of economic illiteracy.
This dovetails with Keith Hennessey’s estimation of net job losses in 2010 of 2.3 million, or nearly 200,000 a month. The failure of Porkulus will become even more obvious then, as the stimulus package ramps up spending without creating jobs. However, the admission that the CBO had been right all along makes it clear enough that the stimulus package has had no effect at all on the American economy, and we can chew on that while we contemplate how to pay its $787 billion tab.
Be sure to read it all. While you’re at AIP, check out the other columns and blogs, too. John Hanlon looks at the Kennedy campaign for health-care reform. Lorie Bryd contemplates the suddenly-relevant term “bazillions”. Cassy Fiano has issues with Social Security. (Already? She looks so young!) Kim Priestap takes a look at the admission of the exploding deficit from a perspective of trust.