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Thursday, November 24, 2011

CBO Downgrades Obama Stimulus Effects

Not a good review, even from the normally pliant CBO. From IBD:

So in other words, the CBO now says it's possible that the stimulus had virtually no meaningful effect on growth and employment despite its massive price tag.

All this comes after the CBO increased that price tag to $825 billion from its initial $787 billion — a 5% hike.

Adding insult to injury, the new report also says the stimulus will hurt economic growth in the long run because of "the resulting increase in government debt." Each dollar of additional debt, it reports, "crowds out about a third of a dollar's worth of private domestic capital."

In our view, even the CBO's downgraded estimates are too high, because they're still based entirely on Keynesian economic models that simply assume extra government spending results in added economic growth.

Frankly, the GDP was likely barely improved from the increased spending because of the crowding out effect in the private sector. All it did was reduce future GDP growth and add $1 trillion to our debt.