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CBO Estimate for HR 1: Jan 26th, 2009

(UPDATE: For some reason the detailed outlay tables vanished from the PDF linked to here. Leading some to put on their tin foil hats. Fear not, I have uploaded them and they appear under the fold). (UPDATE 2: Larger images at CBO Tables)
Via Prof. K. It turns out the ‘suppressed’ CBO ‘Report’ turned out to be a partial version of the appendix to the full estimate released concurrently with the filing of the bill. Meaning some people can take off their tin-foil hats. And BTW Boehner’s numbers are wrong precisely because the document he used was incomplete. In any event here is the real deal.
Congressional Budget Office Cost Estimate: H.R. 1 American Recovery and Reinvestment Act of 2009 and key grafs:

Assuming enactment in mid-February, CBO estimates that the bill would increase outlays by $93 billion during the remaining several months of fiscal year 2009, by $225 billion in fiscal year 2010 (which begins on October 1), by $159 billion in 2011, and by a total of $604 billion over the 2009-2019 period. That spending includes outlays from discretionary appropriations in Division A of the bill and direct spending resulting from Division B.

In addition, CBO and the Joint Committee on Taxation (JCT) estimate that enacting the provisions in Division B would reduce revenues by $76 billion in fiscal year 2009, by $131 billion in fiscal year 2010, and by a net of $212 billion over the 2009-2019 period.

Combining the spending and revenue effects of H.R. 1, CBO estimates that enacting the bill would increase federal budget deficits by $170 billion over the remaining months of fiscal year 2009, by $356 billion in 2010, by $174 billion in 2011, and by $816 billion over the 2009-2019 period.

52.6% of projected spending by the end of the first nineteen months (end FY 2010). It helps to use complete numbers.
As noted above the outlay tables can be found under the fold.

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Op-Ed: Misplaced Handwringing on the Stimulus

Tom Bozzo

has observed EconomistMom Diane Lim Rogers run multiple items pertaining to claims that it’s inappropriate to use deficit spending for longer-run public investments. I opine that such claims do not make a hell of a lot of sense. As Rogers is following basically Republican sources (the Washington Post op-ed page, Bruce Bartlett, the Wall Street Journal), at least the strong implication is that deficit-financing households’ consumption — or at least transferring debts from the private to the public sector — is OK (for that’s what individual tax cuts are; do read Bob Herbert for the latest installment of the ‘Party of Ideas’ Watch*).

I incorporate by reference Bruce’s post below on the actual front-loading of the draft House stimulus package, and reassert the important fact that New GFY 2010 is just 7-1/2 calendar months from the likely date of enactment. More to the point, if in 7-1/2 months we’re all sitting around agreeing, “Gee, we didn’t need so much stimulus after all,” the occasion will be one for Champagne-cork popping, raising taxes on the rich, and preparing kleptocrats’ show-trials; having spent a little more than “necessary” on the likes of schools, roads, transit, and the electricity grid shouldn’t keep anyone up at night.

Investments and consumption of durable goods are the exact sorts of expenditures for which “deficit spending” generally can be justified, and IOKIYPS** in that nobody in their right mind would says that businesses or households should avoid borrowing money (within reason, natch) for those purposes. I suggest as a matter of principle that the public sector should not needlessly be subject to regulations that would be stupid to apply to the public sector — i.e., that expenditures must be pay-as-you-go. This is not, of course, to say that we should throw long-term fiscal discipline out the window (in fact, I think Republicans were foolish when they in fact defenestrated that part of the Rubin-Summers program).

Now a good Republican should object that business investment is subject to market discipline including affirmative planning to generate sufficient expected income to repay the debt and provide returns to shareholders, whereas political processes can be waylaid in various ways. As a good technocrat, my response is that I have no objection to competently-performed cost-benefit analysis among other controls on public investments. As a good liberal, I’d note that the stimulus durable spending is concentrated in areas (roads, transit, schools, R&D) that in theory are under-provided by the private sector — and, moreover, are underprovided in practice, unless you happen to think that our roads, rails, schools, and intertubes are too good. And, it is not a bad time to borrow long if you happen to be the U.S. federal government.

Ostensibly moderate technocrats who like fiscal discipline should be wary of being played by people who seem to be on their side but who more fundamentally just don’t like public spending. I think that eating our public capital is so ingrained that it looks like radicalism to do otherwise.

* Regarding which saying we must conclude that Daniel Patrick Moynihan was offering a backhanded compliment or was nuts.

** It’s OK If You’re Private Sector.

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The TARP and the Welfare Queens

by cactus

The TARP and the Welfare Queens

Yves Smith had a post up yesterday entitled Quelle Surprise! Big Banks Who Got TARP Funds Reduced Lending. It’s worth a read, but essentially the post is true to its title.

Which brings me to a post I wrote back in October, right after TARP came to pass, entitled Welfare Queen. Allow me to reproduce it in its entirety since I think the post’s predictions have been borne out:

Some thoughts on the bail-out:

1. Goldman’s market cap is about 50 billion. The gubmint is gonna buy $10 billion worth of (non-dilutive, non-voting) shares, for which it gets essentially, well, nothing. Nothing at all. Goldman will go about its business. So… Goldman is getting an infusion equal to 20% of its worth, plus a guarantee that the gubmint will replace whatever excrement it purchased with something of value. And somewhere along the line, you can bet that the gubmint will also end up doing the same favor to everyone who bought excrement Goldman sold. Even a company that sold wedgies would make a mint with that sort of gubmint help.

2. The bail-out will succeed only, repeat, only in the sense that the US succeeded in Iraq in 2003 and 2004 when Simone Ledeen and the rest of the Heritage interns were running around the country handing out trash bags full of money and giving Halliburton money for services it would never begin to render. There will be less yabbering of silly catchphrases like “but what about all the schools that were painted?” this time around, though, because the schools will be exploding when GW is no longer in office. To be extremely precise, this is what I think the success will look like: shady, undeserving characters will be enriched, young versions of the idiots who got us into the mess will launch successful careers (can you say “Kashkari”?), and the promised benefits to the American public, the schmucks footing the bill, will never materialize.

3. The reason the bail-out won’t succeed, like Iraq, is that it doesn’t address a real problem. Banks going under is not a problem. Bankers having incentives to make risky decisions is a problem, and this bail-out will do nothing to stop it. (Non-voting shares, remember?) My guess is that we’ll find some entities (and I would bet money Goldman Sachs will be on that list) will be found to be gaming the system. There will be a tsk-tsk when that comes to light, but they will not have to pay back the gubmint for gaming the system.

4. The bigger problem, that there was a housing bubble, and that home prices cannot and should not stay as high as they have been is not addressed by the bail-out. If it ever does get addressed, it will be addressed in a counter-productive way.

5. The even bigger problem, that the American public has been stretched thin financially for years now and can’t afford the sort of consumption that makes up about two thirds of the economy is also not going to be addressed by the bail-out.

I hope I’m wrong, because I don’t see this coming out well. I do have a proposal, a small one. I figure if the gubmint doesn’t get any say in how banks do business (exactly why is it so important to keep the “talent” that created this mess in the first place?) and foots the bill, can we at least require every bank that takes government money to include the words “Welfare Queen” in its name? I think it would be a very useful thing if Goldman Sachs were forced to call itself Welfare Queen Goldman Sachs. It might make a few members of the voting public realize exactly how the system work.

I would also note, in comments, a major improvement to the post was suggested by Lambert Strether:

Goldman, Welfare, Queen & Sachs has a nice ring to it.

Since this post is kinda an episode of where are they now, I should note Lambert is also revisiting an earllier post that he wrote on the subject.
by cactus

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Boehner is still wrong (even though the CBO ‘Report’ maybe kind of exists)

by Bruce Webb
January 26, 2009 H.R. 1 American Recovery and Reinvestment Act of 2009
(oops link fixed)

Reader m.jed points us to this PDF
which does give a breakdown of Authorization and Spending by year and cites CBO as a source. Now the title is a little odd, it seems too self-referential with ‘as provided on the’ ‘website’ ‘on Jan 15th’. In the normal course of events the provision, its placement, and its date would be evident: you are on the website, clearly you are reading something provided by the webmaster, and typically it would have a date. Now certainly there was a package of material released on Jan 15th under the signature of the Chairman:
But I simply could not find the original of the above link.

And the host is a little odd in that when I went to the parent I got an ‘Access denied’ message. Now a little Googling shows some obviously authentic material, that is we have the Stimulus Bill’s full text up as: to go with m.jed’s
Oddly enough I couldn’t get to either through Huff Post’s main page or search engine.

So something is out of whack. That being said there seems to be no reason to doubt the numbers themselves, they seem perfectly reasonable in themselves, and moreover at first glance supports Boehner’s claim that the stimulus package spends less than half of the money in the first two years.

Vindication for ‘Boner’? Nope not at all. Instead he is cherry picking numbers in a pretty dishonest way. Something that comes clear once we examine the numbers ourselves.

First thing to notice is that every category of spending is reported in two ways, first as ‘Budget Authority’ and second as ‘Estimated outlays’, both by date. Now you would think that in terms of stimulus the important date would be the actual spending. And generally you would be right. But then again not everything can be built out in a year, we could have contracts ready and full engineering and environmental assessment completed tomorrow and we would still be more than two years out from a clean grid. Same for most transportation and water projects, even with the best will in the world Rome just doesn’t get built in a day. So lets take a look at the numbers and consider the implications.

We can take Budget Authority as being the time that the money is committed and so the time that the receiving governments and contractors can begin the hiring process. How much of the total package is committed in the first two fiscal years? Most of it.
FY 2009: $274 bn, 2010 $66.5 bn, 2011 $4.1 bn, 2012 $3.5 bn, 2013-2019 $9.8 bn.
Well that is pretty front loaded, particularly when the projected enactment date of the bill is almost five months into the Fiscal Year. Given the pace of FY2009 at an average of $39 bn per month authorized, we can expect almost all of this money to be officially committed by the end of Calender Year 2009. In effect almost all the checks will be in the mail by Christmas .

So how do outlays look?
FY 2009: $26 bn, 2010 $110 bn, 2011 $103 bn, 2012 $53 bn, 2013-2019 $62 bn.
So when Boehner claims less than half of the spending goes out in the first two years he is technically right, if that is you use Fiscal Years. We are looking at $136 billion by FY 2010 end (Sept 2010) vs $228 in the nine years after. But if you figure this by calender years (as most people naturally do) and figure that almost half of FY 2011 will be over by Feb 2011 we end up with a two year figure of about $180 billion vs nine years at $184 billion. If we return to Fiscal Years and look at the third year number we get to $239 billion vs $115 billion. The claims that most of this money won’t get spent until it is too late to matter is in a technical term, hooey.

This is particularly true when we examine where 2012’s $53 bn and 2013-2019’s $62 billion actually get spent.
Title V: Energy and water 2012 $9.5 bn, 2013-2019 $18.6 bn
Title VI: Federal buildings 2012 $1.6 bn, 2013-2019 $3.2 bn
Title VIII: Clean water 2012 $1.7 bn, 2013-2019 $1.6 bn
Title XII: Highway 2012 $4.2 bn, 2013-2019 $17.4 bn
Title XII: Other transportation 2012 $1.8 bn, 2013-2019 $6.4 bn

Almost all of this spending is in categories heavily weighted towards large scale and so long term infrastructure projects. If we total FY 2012 spending we end up with a total of $18 billion or 34% of the total $53 bn. For 2013-2019 we have $47.2 bn or 75% of $62 bn in total outlays. True enough not every penny in these totals is necessarily for infrastructure build out. On the other hand the other Titles all have their own share of infrastructure, it is just that most of it is front loaded on fast track projects.
Title IX: School construction $10.6 bn by FY 2011 year end out of $14 bn total authorized
Title X: Military construction and veterans $4.8 bn out of $7 bn authorized
Title XII: Housing $4.9 bn out of $8 bn authorized

So if the premise is that the bill is simply laden up with spending on condoms and that too little is targeted at spending that will provide real stimulus, well that just doesn’t survive encounter with the numbers. Near as I can see the spending is projected to be converted into infrastructure and hence jobs in about as fast as practicality allows. Where they can spend quick (schools, military bases, housing) the spend quick, where the nature of the project requires extended build out (clean energy, water projects, clean water, highways, mass transit) they project that it will be spent as fast as reasonably possible

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A Brief Obama Watch

Obama Watch

His Economic Outlook:

“We begin this year and this Administration in the midst of an unprecedented crisis that calls for unprecedented action. Just this week, we saw more people file for unemployment than at any time in the last twenty-six years, and experts agree that if nothing is done, the unemployment rate could reach double digits. Our economy could fall $1 trillion short of its full capacity, which translates into more than $12,000 in lost income for a family of four. And we could lose a generation of potential, as more young Americans are forced to forgo college dreams or the chance to train for the jobs of the future. In short, if we do not act boldly and swiftly, a bad situation could become dramatically worse.”

Military and Terrorism

Gitmo and Airstrikes in Pakistan

Two remote U.S. missile strikes that killed at least 20 people at suspected terrorist hideouts in northwestern Pakistan yesterday offered the first tangible sign of President Obama’s commitment to sustained military pressure on the terrorist groups there, even though Pakistanis broadly oppose such unilateral U.S. actions.

Issued executive orders to shutter the Guantánamo Bay, Cuba, detention camp within a year, close the CIA’s network of secret overseas prisons and end the agency’s use of interrogation techniques that critics describe as torture.


Aside from roads and weatherizing homes, build a smart electrical grid.

“One of, I [Obama] think, the most important infrastructure projects that we need is a whole new electricity grid. Because if we’re going to be serious about renewable energy, I want to be able to get wind power from North Dakota to population centers, like Chicago. And we’re going to have to have a smart grid if we want to use plug-in hybrids then we want to be able to have ordinary consumers sell back the electricity that’s generated from those car batteries, back into the grid. That can create 5 million new jobs, just in new energy.

But, it’s huge projects that generally speaking, you’re not going to have private enterprise would want to take all those risks. And we’re going to have to be involved in that process.”

Fuel and emission standards:

Obama “will direct federal regulators on Monday to move swiftly on an application by California and 13 other states to set strict automobile emission and fuel efficiency standards, two administration officials said Sunday

Banking system: Nationalization?

“I’m not talking about total ownership,” she [Pelosi] quickly cautioned — stopping herself by posing a question: “Would we have ever thought we would see the day when we’d be using that terminology? ‘Nationalization of the banks?’ ”
So far, President Obama’s top aides have steered clear of the word entirely, and they are still actively discussing other alternatives, including creating a “bad bank” that would nationalize the worst nonperforming loans by taking them off the hands of financial institutions without actually taking ownership of the banks. Others talk of de facto nationalization, in which the government owns a sizeable chunk of the banks but not a majority, with all that connotes.
That has already happened; taxpayers are now the biggest shareholders in Bank of America, with about 6 percent of the stock, and in Citigroup, with 7.8 percent. But the government’s influence is far larger than those numbers suggest, because it has guaranteed to absorb the losses of some of the two banks’ most toxic assets, a figure that could run into the hundreds of billions of dollars.
Many believe this form of hybrid ownership — part government, part private, with the responsibilities of ownership unclear — will not prove workable.
“The case for full nationalization is far stronger now than it was a few months ago,” said Adam S. Posen, the deputy director of the Peterson Institute for International Economics. “If you don’t own the majority, you don’t get to fire the management, to wipe out the shareholders, to declare that you are just going to take the losses and start over. It’s the mistake the Japanese made in the ’90s.”

The stimulus package:

For a more complete outline of the package see here.

Of all the stimulus proposals so far, the “smart electrical grid” may be the most far-reaching, changing the very landscape of America. How far we will go in health care and banking remains to be seen.

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Set it and forget it policy initiatives…Guantanamo


WAPO reports on Guantanamo:

President Obama’s plans to expeditiously determine the fates of about 245 terrorism suspects held at Guantanamo Bay, Cuba, and quickly close the military prison there were set back last week when incoming legal and national security officials — barred until the inauguration from examining classified material on the detainees — discovered that there were no comprehensive case files on many of them.

Instead, they found that information on individual prisoners is “scattered throughout the executive branch,” a senior administration official said. The executive order Obama signed Thursday orders the prison closed within one year, and a Cabinet-level panel named to review each case separately will have to spend its initial weeks and perhaps months scouring the corners of the federal government in search of relevant material.

Having had a vague notion that the military commissions might have had a notion of how to proceed to justice, but were going badly, I might become disabused of this notion if the report is accurate. Like many within the commissions process stated, there is nothing resembling a coherent prosecution after so many years.

We can only watch to see if the Obama team can be upfront on this mess.

Update: hilzoy at Obsidian Wings hits a bullseye here.

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BOEHNER…God help us and our honest memories


Steve Bennen notes in the Washington Monthly:

BOEHNER…. In the first weekly Republican radio address under the new administration, House Minority Leader John Boehner (R-Ohio) touted the GOP’s vision for an economic recovery.

“Our plan is rooted in the philosophy that we cannot borrow and spend our way back to prosperity,” Boehner stated.

The minority leader said the package authored by congressional Democrats was “chock-full of government programs and projects,” noting a Congressional Budget Office report that projected less than half of the $355 billion that House Democrats would spend to create jobs through infrastructure programs and other efforts is likely to be used before the end of fiscal 2010.

Let’s see, where to start. First, the CBO report Boehner is so fond of doesn’t really exist. Second, Boehner has supported nothing but “borrow and spend” policies since the moment he arrived in Congress, which helps explain his votes in support of budgets that produced the largest deficits in American history.

Third, if the administration and the congressional majority listened to Boehner and relied on weak-stimulus tax cuts to improve the economy, isn’t that necessarily a “borrow and spend” policy? And if tax cuts were the magic bullet, and Bush and Boehner cut taxes over the last eight years, shouldn’t the economy be in great shape? (Indeed, it’s this thinking that led the National Republican Congressional Committee to argue, as recently as yesterday, “Thanks to Republican economic policies, the U.S. economy is robust and job creation is strong.”)

And fourth, of course the Democratic plan is “chock-full of government programs and projects.” That’s the point.

I made a round of patriotic sites today, and this plays. Also the chatter on Social Security has picked up.

Update: I realized I did not include a link to an interview this morning.

JB and NBC

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Senate Stimulus Package: Tax Cuts, Social Security & SSI

A reader in comments asked why the Bears had not posted on Obama’s stimulus plan.

Well, speaking for myself, that was mostly because we didn’t have a plan and still don’t. What we have is the shifting outline of a plan subject to negotiation between the Admin and the Congress, leaving no solid starting point for analysis. But the two Houses have now produced fairly detailed individual plans that do provide such a starting point. In this post I want to examine the Senate’s proposed individual tax cuts. First outlining the plans and then posing a series of questions.

The tax cuts come in two forms. For workers we have a proposal for a $500 tax cut per worker, $1000 per couple for 2 years, to be delivered via a payroll tax holiday on the first $8100 for each worker. This represents the employee share of the tax (6.2% x $8100 = $496), so it would seem that the employer still pays his full share. Unemployed workers would get this in the form of a refundable tax cut delivered via the IRS. The total cost of this plan is $142 billion or $71 bn per year with probably 90% of that delivered via SSA and the remainder via IRS. But it also seems to assume a two-earner household.

Then the Senate added a one time $300 bonus for seniors, the disabled, and people receiving SSI. The AP article I am using doesn’t score this out but given that just under 50 million people were receiving Social Security retirement of disability in 2007 this should work out to $15 billion on the OASDI side plus some more for the SSI people.

Seems simple enough? Well not from where I am sitting, I see all kinds of red flags. Details below the fold.

Update: (rdan… Barkley Rosser notes Jamie Galbaith’s interview on entitlements at Econospeak and also see

Currently payroll taxes got to pay for Social Security and Medicare Part A with any cash surpluses credited to the Trust Funds where in turn they draw interest against the time when the Trust Funds need to start being tapped. Which under Intermediate Cost assumptions is 2017. In 2008 the cash surplus for Social Security was right around $80 billion. Given current unemployment numbers we can expect 2009 to come in below that, perhaps $20-30 billion less. If that is right this proposal would more than wipe out the first year surplus ($57 bn plus $15 bn) and likely wipe out the 2010 as well ($57 bn). Unless the Trust Funds are somehow made whole you have blown a big hole in Social Security, because not only will it have lost the cash surplus, it also will lose out on all accrued interest on that, which with compounding adds up to a pretty big total hit to a program whose ‘crisis’ is marked by a gap between projected revenue and projected costs after 2017.

This doesn’t bode well for the financial summit next month. Because it would seem that the initial response to ‘crisis’ is to choke off revenue which in turn brings Trust Fund shortfall closer and deeper. Which would seem to grease the slide for a benefit cut based ‘solution’. Was Social Security a ‘Phony Crisis’ as Dean Baker insisted in 1999? Well in certainly was and that was still mostly true in 2008. But it looks like someone is trying to make it real through the back door.

Now it is possible that the proposal does aim to make Social Security whole. But this raises some issues of its own. Social Security as currently configured has no way to hold cash, so a direct transfer from the Treasury is out of the question. The program could be changed in a way that allowed the Treasury to use cash to purchase outside assets and so credit those to the Trust Funds but this would require opening up Social Security itself to all kinds of malicious tinkering, and so probably should be avoided. Which leaves the standard option of Treasury simply crediting the TF with Special Treasuries in the amount of the diverted payroll tax. On paper this would make the TFs whole and avoid the loss of those years of interest. While less than ideal this would be for me an acceptable resolution to the problem created by the dollar diversion to stimulus. I just wish we were not going down this path at all.

Because we have gone from a situation where we had two big pools of revenue and cost that were legally separate. Under current law if Social Security ends up being overfunded going forward its choice would be between sweetening benefits or cutting taxes. If it turns out to be underfunded compared to the schedule it is legally on its own, under IC projections that means considering some package of tax increases/benefit cuts starting in around 2030. And from the perspective of workers that is a pretty reasonable bargain, Social Security not drawing on capital (except in the form of collecting interest on money lent to the General Fund) and so not owing anything to capital. Under this proposal that breaks down. Instead we have lower income workers having much to most of their federal tax burden eliminated for at least a two year period. Which is good for them in that sense, but ends up validating the Right talking point that poor people don’t pay taxes. In reality poor people pay all kinds of taxes directly and indirectly from sales taxes to property taxes funded via their rent payments. And until this proposal came along in the form of FICA payroll taxes to fund a combined insurance/pension plan. Now it looks like that dignity of largely paying for your own retirement is at least temporarily stripped away. I doubt many minimum wage workers would care, under current circumstances they are likely to need that $500 or $1000. And I for one wouldn’t expect them to resist the whole plan on principle. But generally speaking when I hear the words ‘payroll tax holiday’ I am tempted to reach for my pistol. Because history shows that more often than not proposals that use that mechanism have a not-so-hidden agenda of undermining traditional Social Security simply for the sake of doing so.

But this isn’t the only issue. Who counts as unemployed under this proposal? What happens with one earner households? What if one earner in a two-earner household makes less than $8100? If every adult not currently in the work force is included than most of the administrative difficulties go away. On the other hand you have also given out free cash to every rich college student and to every poor drug addict and for that matter every rich college student Amsterdam hash and coke addict. But if you start drawing eligibility lines you could end up with an administrative and/or enforcement nightmare. For example what do you do with the stay-at-home spouse? The proposal suggests that each couple should get $1000 so clearly the intent is to include them in. Which suggests two possible solutions. One you could exempt FICA on the first $16,200 of income for the earner. Which would mean that employers were tasked with tracking employment status for all employee spouses so they would know when to start and stop the exemption. Oops. HR and accounting are not going to like that, you have added substantial compliance costs. Or you could just handle this on a mixed basis, with the earner’s $500 coming from FICA exemptions and the non-earner’s from a refundable credit. Which shifts the compliance costs over to the IRS.

I understand the attraction of payroll tax holidays. They directly reward work. Which is good. And they seem simple and easy to administer. Well everything is simple if you ignore the complexities. I want to hear more detail about how this works operationally before I buy in. Color me skeptical.

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