"Including the effects of both crowding out of private investment (which would
reduce output in the long run) and possibly productive government investment
(which could increase output), CBO estimates that by 2019 the Senate legislation
would reduce GDP by 0.1 percent to 0.3 percent on net"
"CBO has developed a range of estimates of the effects of the Senate legislation on
GDP and employment that encompasses a majority of economists’ views.
According to these estimates, implementing the Senate legislation would increase
GDP relative to the agency’s baseline forecast by between 1.2 percent and
3.6 percent by the fourth quarter of 2010. It would also increase employment at
that point in time by 1.3 million to 3.9 million jobs, as shown in Table 1. In that
quarter, the unemployment rate would be 0.7 percentage points to 2.1 percentage
points lower than the baseline forecast of 8.7 percent. The effects of the
legislation would diminish rapidly after 2010. By the end of 2011, the Senate
legislation would increase GDP by 0.4 percent to 1.2 percent, would raise
employment by 0.6 million to 1.9 million jobs, and would lower the
unemployment rate by 0.3 percentage points to 1.0 percentage point."
So, if someone wants to make a point about this letter, please do not deliberately distort what the CDO is saying just to further some ideological crusade. It is always humorous to see such distortion created by those claiming to expose bias. The real question is whether the significant and favorable short term impact is worth the possible long term slight adverse impact. I would add that the short term is more predictable than what may happen in 2019.
Another distortion, which I am not going to discuss today, is the claims made about the cost per job created by the spending portion of the bill. Suffice to say, you have to align the jobs per year with the expenditures for that year. Another issue is to take into consideration the fact that employee costs are a fraction of the total cost to build a needed infrastructure project or a new school that would otherwise be built when funding would become available.
I saw a story that Nissan was cutting 20000 jobs worldwide. GM announced that it is cutting 10000 jobs this year. WSJ.com
There was an article in the WSJ this morning about European investors cutting way back in buying debt issued by governments and companies located outside their home nation. WSJ.com
This could have an impact, assuming the trend continues, on the U.S. ability to finance its trillion + dollar deficits in the coming years.
Cisco sold about 4 billion in bonds to add to its cash. Interest rates were favorable for it. Cisco will be paying just 4.979% for a ten year note and 5.916% for a 30 year. WSJ.com