05 February 2009

CBO's negative forecast of the effect of the Senate stimulus package

I know, I know - I'm over-posting today. I really need to stop reading the news.

The Congressional Budget Office (CBO) has revised its forecast on the effects of the Senate stimulus bill should it pass as is today. The overall effect on the economy is now projected to be negative in both the near and long-term outlooks, especially as regards GDP. Why? That's right Virginia - debt!

The last paragraph of the director's blog sums it up:

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.

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