Urbin Report

Monday, February 09, 2009

CBO on recession and recovery

The nonpartisian Congressional Budget Office has release new data on the current recession.

CBO anticipates that the current recession, which started in December 2007, will last until the second half of 2009, making it the longest recession since World War II. (The longest such recessions otherwise, the 1973–1974 and 1981–1982 recessions, both lasted 16 months. If the current recession were to continue beyond midyear, it would last at least 19 months.) It could also be the deepest recession during the postwar period: By CBO’s estimates, economic output over the next two years will average 6.8 percent below its potential—that is, the level of output that would be produced if the economy’s resources were fully employed (see Figure 1). This ecession, however, may not result in the highest unemployment rate. That rate, in CBO’s forecast, rises to 9.2 percent by early 2010 (up from a low of 4.4 percent at the end of 2006) but is still below the 10.8 percent rate seen near the end of the 1981–1982 recession.


Note that this is without the federal government increasing the debt by another Trillion plus dollars.

The CBO has some other statements about the massive spending package our Dear Leader and the democrats in congress are calling a "stimulus" package that we'll cover later on.

Let's review some basic facts about the "stimulus" package. The goal, according to the democrats who claim that "something" must be done and done quickly, is to borrow nearly a trillion dollars, filter it through the federal government, losing 30 cents on the dollar in administrative overhead if we're lucky, and pump that money into the economy in order to get the economic engine running smoothly again.

Ok, even you buy into that 100% (I'm not saying you should, but for this exercise, we'll let it slide), you have to admit that the money isn't going to do one damn bit of good until it is actually spent.

Which brings us to the findings of Harvard economics professor Greg Mankiw.

A mere 8% of stimulus is to be spent in 2009. 59%, nearly two thirds, is not to be spent until after 2010. If it is so important to pass this bill Right Now, No Questions Asked!, or else he economy will get even worse, why is only 8% of the nearly one Trillion dollars being spend in 2009? Why is nearly two thirds not going to be spent until after 2010?

Let's get back to that most recent CBO announcement. The recession will probably end in the later half of 2009 even if the Federal Government doesn't do anything!

So, as informed and educated citizens of this Republic, we had to ask why the democrats are so keen to push through nearly a trillion dollars in mostly government spending if most of it clearly has nothing to do with the current economic climate?

Ok, that isn't really honest, the democrats so called "stimulus" bill will probably do more harm to economy in the long term than it will do any good in the short term, again, according to the non partisan Congressional Budget Office.

One of the factors that got us into this mess was uncontrolled government spending. Doing more of the same probably isn't a good idea. If the democrats, including President Obama, wanted to get money into the economy quickly, in order to help American citizens, they would concentrate on transfer payments to the states, and tax cuts. Good old JFK style, across the board tax cuts, and targeted cuts to stimulate business, especially small business growth. Once they get the economic engine revved up again, the average American probably won't be so set against increased government spending.

HT to Gateway Pundit for the latest CBO report.

Update: US News & World Report has picked up on this story.