The Democrats' stimulus raised economic growth by as much as 4.5 percent in the last quarter and may have increased the number of people with jobs by more than 3 million, according to a Congressional Budget Office (CBO) report released Tuesday.
The CBO report also provided a new estimate of the stimulus' 10-year cost — $814 billion, down slightly from its $862 billion estimate from earlier this year but slightly higher than the initial $787 billion projection from early 2009.
The report gives a small boost to President Obama and Democrats, who pushed the stimulus through Congress with minimal support from Republicans in February 2009. The White House and Democratic leaders have argued that the stimulus was necessary to prevent the economy from slumping into an even deeper recession and possibly a depression after the financial crisis.
That's been a tough argument for Democrats to press ahead of the midterm elections, given slow economic growth, an unemployment rate of 9.5 percent and new housing data that showed sales of existing homes plummeting in July.
Republicans have made the stimulus Exhibit A in their election-year case against Democrats. Republican leaders said the stimulus failed to keep the jobless rate around 9 percent or below, and has instead contributed to deficits of roughly $1.4 trillion in 2009 and this year.
House GOP leader John BoehnerJohn BoehnerFormer House leader Bob Michel, a person and politician for the ages Former House GOP leader Bob Michel dies at 93 Keystone pipeline builder signs lobbyist MORE (Ohio) on Tuesday said lawmakers and Obama could start cutting the deficit by repealing the rest of the stimulus — CBO said that 30 percent of stimulus funds will be left after September — and by returning to 2008 discretionary spending levels.
While Tuesday's CBO report hedged on exactly how effective the stimulus was, it suggested that the massive spending and tax-cut measure had a positive economic impact.
It found that the stimulus package cut the jobless rate by between 1.4 million and 3.3 million and increased the number of people employed by between 1.4 million and 3.3 million last quarter. The stimulus also increased gross domestic product somewhere between 1.7 percent and 4.5 percent for that period.
GDP growth for the second quarter was estimated last month to be about 2.4 percent by the Bureau of Economic Analysis, but that number is expected to be revised downward Friday to closer to 1 percent.
The effect of the stimulus, officially known as the American Recovery and Reinvestment Act (ARRA), will be smaller in coming quarters, as much of the money has already been spent, CBO said.
"The effects of ARRA on employment and unemployment are expected to lag slightly behind the effects on output; they are expected to wane gradually in 2011 and beyond," it said.