File Under Shooting One’s Own Foot Off Dept. (UPDATED)

There is likely to be no shortage of right-wing crowing over the CBO findings reported upon in notorious conservative rag the Washington Times. Specifically the bit about how, “President Obama’s economic recovery package will actually hurt the economy more in the long run than if he were to do nothing…”

But experts tend to agree that reading the fine print often is a good thing, and it would appear that the obstructionists have missed a significant part of said fine print.

Steve M at No More Mister Nice Blog catches it though.

The primary quibble with Obama’s stimulus plan according to the CBO is that it would lower the GDP by a whopping .1-.3%, though the CBO does acknowledge that the stimulus would be good in the short term (which is at least part of its design. To a degree… What the economy will do ten years down the road is anybody’s guess, involving numerous factors that no one can honestly predict. The prime objective of the stimulus package is to fix things in the near term which would allow us to recalibrate in the long term. Establishing some long term goals is essentially secondary as far as desired stimulus response is concerned).

And so, as far as the right-wing argument goes, because the CBO says that the plan would hurt in the long run, therefore it’s a bad bill and it’s all Obama’s fault. Hooray for the right! They win again.

But wait, the next natural question to ask is WHY would the stimulus package hurt the GDP. As Steve (linked above points out), it’s actually the government spending that gets the job done, according to the CBO’s own numbers, and the corporate tax cuts that are dragging the stimulus bill down.

So, sure, the stimulus package may have a negative long term effect, however such a negative effect is not the cause of wasteful government spending like we lefties like, but the result of wasteful corporate tax cuts that the righties want.

And, besides, this is largely irrelevent, without a short term solution, there may not be much of a long term to worry about.

UPDATE: Ha, and in my absence, it looks like this whole situation just got FUNNIER! At the same time as reader, Glasnost, posted a comment below, I ran across the following breakdown by a Daily Kos diarist:

Here comes some fun fun fun math!!

SHORT-TERM EFFECT: 2.6 to 7.7 GDP UP!!!

LONG-TERM EFFECT: 0.1 to 0.3 GDP DOWN!!

So, what’s the COMBINED TOTAL EFFECT over both the long and short term (in other words, “through 2019”)???

Okay. Add the big number and subtract the little number. The worst case number is a net effect of 2.5 percent GDP increase.

You only get a net negative from now through 2019 if you count only the CBO’s downside effect prediction and not their upside effect prediction.

Maths, they’ll get ya every time. I’ll admit, I didn’t catch this either, but now it’s worth mentioning that not only did the conservative Washington Times bring to attention the fact that government spending is far more effective at growing the economy than corporate tax cuts, they also managed to fail at math and deny the fact that the stimulus would grow the economy in both the short and the long term.

I’m sure they’ll publish a correction sometime in the relatively not too distant future.

3 Responses to “File Under Shooting One’s Own Foot Off Dept. (UPDATED)”

  1. glasnost says:

    The Washington Times article is wrong in a much more fundamental way than that.

    Stay with me here: the net impact of the bill over the next 10 years INCLUDES THIS YEAR AND NEXT YEAR.

    Got that?

    So we have a 3-6% increase in the next 2 years and a 0.1-0.3 net decrease over the next 10 years.

    Do me a favor. Please add these two numbers together.

    What is the bill’s combined impact over the next ten years?

    A positive number. The net impact over the next 10 is positive.

    A badly written CBO blog and a dipshit Washington Times summary are producing a very nasty false rumor. Would you please update your post? K?

  2. Actually, yeah. I just got home and saw a KOS Diarist had done the same math you did, you caught me just as I was heading over to update!

  3. Brian Fox says:

    I’m glad someone treated this thoughtfully. The right has been playing fast and loose with a lot of numbers and being intellectually dishonest.

    I, too read the CBO report as implying an overall positive impact from the stimulus. A couple of question/points on the math, though…

    The CBO says that by 2019 the Senate legislation would reduce GDP by 0.1% to 0.3% *on net*. I’m not sure whether to read this as a forecast reduction at the end of 2019 (single point in time) vs. an aggregate (cumulative) decrease of 0.1% to 0.3% over the 10 year period. I think *on net* here probably just means compared to the CBO baseline. The CBO letter was not clear on this and did not detail their analysis.

    The only sensible economic way to value this proposal is to consider the overall cumulative benefit in current dollars vs. the cost. However, even if it does slightly decrease in the aggregate, it is probably worth having very slightly retarded growth over the long haul for the short term benefit during a historic recession. Also, the point is well taken that the 10 yr estimate is almost certainly a crap shoot and difficult to nail down.

    From a pure math standpoint, you cannot simply subtract the 2019 and 2009 GDP numbers, because the CBO analysis presents the percentages vs. the GDP baseline, which itself grows over the period (from 14.2B in 2009 to 22.5B in 2019). And the comparison needs to be made in present value terms to account for inflation. Even so, the impact (if it is indeed in the outlying years) should be much smaller than the benefit from the early years.

    *sigh* — I wish the CBO would be more clear about their analysis. One thing is for certain — the right is not bothering to check their math…

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