THE REAL STIMULUS BURDEN
February 13, 2009
The final House-Senate stimulus bill will mark the largest single-year increase in domestic federal spending since World War II; it will send the budget deficit to heights not seen in 60 years; and it will establish a new and much higher spending baseline for years to come. Combine this new spending, and the borrowing it will require, with the trillions of dollars still needed for the banking system, and we are about to test the outer limits of our national balance sheet, says the Wall Street Journal.
The original economic theory of the economic "stimulus" bill was to spend money quickly to create jobs fast. However:
- Some of these "timely" stimulus payments won't hit the economy until after the 2016 Olympics.
- Even under the Congressional Budget Office's conservative estimate, the Senate bill increases outlays by $546 billion over 10 years.
- But to get this low a figure, CBO assumes that the half-trillion in spending will be a one-time wonder.
The Republican staff of the House Budget Committee has calculated what happens to future spending if Congress continues to fund 19 of the most politically untouchable programs at their new stimulus levels:
- The list of 19 includes Pell Grants, Head Start money for poor kids, nutrition programs for seniors, Medicaid, special education, food stamps and cancer research at the National Institutes of Health, among others.
- Across a 10-year period through 2019, these 19 programs alone would increase federal outlays and tax entitlements by $1.59 trillion.
The bill will increase the 2009 budget deficit, which is already the largest in modern history, says the Journal:
- During the Reagan years, the peak deficit was only 6 percent of gross domestic product (GDP) in 1983.
- In the Clinton years we were told taxes had to rise to reduce a deficit of merely 3.9 percent of GDP.
- CBO estimates the 2009 deficit will reach 8.3 percent of the economy, not including the stimulus or bank bailout cash.
- Toss in those, and analysts at the Strategas Group estimate the deficit could hit nearly $2 trillion, or 13.5 percent of the U.S. economy.
Source: Editorial, "The Real Stimulus Burden; We'll be paying for this in many ways, for many years," Wall Street Journal, February 12, 2009.
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