CBO finds 2009 stimulus still benefiting economy


For 2012, CBO now thinks the stimulus will grow the economy by as much as 0.8 percent. This is an increase from the last estimate in May, due in part to a new assumption about the Federal Reserve keeping interest rates lower, something that will have a larger multiplier effect on spending.

The effects of the stimulus peaked last year, CBO said, and are on the decline. In total, CBO estimated that the legislation created or saved 1.3 million jobs in 2009 and 4.8 million jobs in 2010. It now projects the stimulus to increase the number of full-time jobs by 3.7 million in 2011 and 1.3 million in 2012.

The 2009 stimulus cost some $870 billion and was a mix of tax relief, aid to the states, aid to the poor and direct government purchases of goods and services.

President Obama is compiling a new stimulus plan for release next month that is likely to be much smaller in scope, despite a historically weak recovery from the 2007-2009 recession. His leading proposals are extensions of the payroll tax cut and unemployment insurance, along with an infrastructure bank. The price tag is estimated to be $250 billion over 10 years.

Conservatives have long rejected CBO scores on the stimulus package, arguing they rely on flawed assumptions about how government spending displaces private-sector spending and how the prospect of increased taxation inhibits growth.