Stimulus Raised GDP, Lowered Unemployment

By Alex Pepper

May 26, 2010 12:51pm

ABC's Z. Byron Wolf reports: In a counterpoint to our earlier post on the skyrocketing debt: the nonpartisan Congressional Budget Office has a new report out on the now-more-than $800 billion off-budget stimulus program that Congress passed last year. Republicans have criticized that law ad-nauseum, pointing to the near-10 percent unemployment rate to argue that the stimulus did not work. But today’s CBO report confirms that things could have been much worse without the stimulus. For instance, the report guesstimates that the bill created 1.8 million to 4.1 million (a huge spread!) jobs that wouldn’t have existed otherwise and the unemployment rate would have been between .7 to 1.5 percent higher without the stimulus. The effects of the stimulus, according to the report, will continue to increase through part of 2010, before subsiding. From the report:
Looking at recorded spending to date as well as estimates of the other effects of ARRA on spending and revenues, CBO has estimated the law’s impact on employment and economic output using evidence about the effects of previous similar policies on the economy and using various mathematical models that represent the workings of the economy. On that basis, CBO estimates that in the first quarter of calendar year 2010, ARRA’s policies: • Raised the level of real (inflation-adjusted) gross domestic product (GDP) by between 1.7 percent and 4.2 percent,
• Lowered the unemployment rate by between 0.7 percentage points and 1.5 percentage points,
• Increased the number of people employed by between 1.2 million and 2.8 million, and 
• Increased the number of full-time-equivalent (FTE) jobs by 1.8 million to 4.1 million compared with what those amounts would have been otherwise. (Increases in FTE jobs include shifts from part-time to full-time work or overtime and are thus generally larger than increases in the number of employed workers.) The effects of ARRA on output and employment are expected to increase further during calendar year 2010 but then diminish in 2011 and fade away by the end of 2012.

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