In a blow to the Obama administration, the Congressional Budget Office (CBO) has concluded that the president’s economic stimulus plan created fewer jobs than expected and “crowds out” private investment.
A new report the CBO released on Tuesday finds that the American Recovery and Reinvestment Act may have boosted the economy in the short run by sustaining some 700,000 jobs at its peak in 2010 but “will reduce output slightly in the long run — by between 0 and 0.2 percent after 2016.”
The report estimates that the total number of jobs the plan produced was far fewer than the 3.5 million the Obama administration predicted during the peak of spending.
The CBO estimates that the stimulus is responsible for sustaining between 600,000 to 1.8 million jobs during this quarter, which lowered the nation’s unemployment rate by as much as 1 percent.
In July, the conservative Weekly Standard estimated that Obama’s stimulus package had cost taxpayers $278,000 for every job it created.
There was no immediate comment from the White House on the CBO report, but officials haveinsisted in the past that the economy would have fallen into a depression without the jobs act..
In September, White House press secretary Jay Carney called it “uncontestable” that the infrastructure projects the act created “were very well managed, came in on budget or under budget and led to the creation of many, many jobs” that would not have been created otherwise.
CBO, a nonpartisan agency, has re-evaluated the stimulus every three months with varying estimates of the total price tag — from $787 billion, up to $862 billion and now $825 billion.
The agency also has changed its model for the spending's impact on the economy, and the new calculations show that the act did less than originally projected.
CBO’s latest report reveals that the top-end decline of two-tenths of a percent is deeper than the agency predicted before the stimulus passed in February 2009, according to a report in The Washington Times.
At the peak of spending from July through September 2010, the American economy sustained between 700,000 and 3.6 million jobs, which lowered the unemployed rate between four-tenths of a percent to 2 percent, The Times reports.
An opinion piece in the Atlanta Journal-Constitution acknowledges that the stimulus failed to keep unemployment below 8 percent, as the Obama administration had projected, but blamed the discrepancy on a greater decline in the gross domestic prodcut than previously estimated.
“In short, in early 2009 we thought the economy had fallen off a ladder,” the article says. “In reality, it had fallen off a six-story building.”
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