President Obama’s stimulus may have boosted the economy when it passed in 2009, but it’s now beginning to take a toll and will soon begin to leave the economy worse off than if it had never passed, according to a new report from the Congressional Budget Office.
Mr. Obama signed the stimulus into law five years ago last week, vowing it would help rescue the economy from its post-Wall Street collapse tailspin, and saying it would save millions of jobs.
The CBO said it’s been successful at that, helping sustain between 700,000 and 3.6 million jobs at its peak in 2010. But the scorekeepers had always warned that borrowing all of that money would eventually catch up with the economy and, over the long run, leave it slightly worse-off than if no stimulus had ever passed, and that is about to come true.
“In contrast to its positive near-term macroeconomic effects, ARRA will reduce output slightly in the long run, CBO estimates — by between zero and 0.2 percent after 2016,” the analysts said in their new report.
They said the cause is all of the borrowing for the $830 billion program, which dramatically boosted the federal debt.
“To the extent that people hold their wealth in government securities rather than in a form that can be used to finance private investment, the increased debt tends to reduce the stock of productive private capital. In the long run, each dollar of additional debt crowds out about a third of a dollar’s worth of private domestic capital,” the CBO estimated.
Just as striking, more than $40 billion of the stimulus remained unspent as of the end of 2013, the CBO said.
The stimulus was initially projected to cost $787 billion over a 10-year period, but the CBO now puts the price tag at $830 billion.
The money that did go out in 2013 supported between 100,000 and 500,000 jobs and held the unemployment rate down by as much as three-tenths of a percentage point, the analysts calculated, based on economic modeling of government spending and taxes.
The findings come on top of several other CBO reports that found Obamacare and a minimum wage hike of the magnitude being pushed by Democrats would both leave the job market rougher in a few years.
In terms of Obamacare, the CBO said that the subsidies and other government incentives included in the massive health overhaul will entice more people to quit jobs, figuring they can end up ahead by taking government benefits instead. That will cause the equivalent of about 2 million people to drop out of the workforce by 2017, the agency said.
As for the minimum wage, the CBO said hiking it to $10.10 per hour by 2016 will cause employers to shed about 500,000 jobs that year.