The latest from the non-partisan CBO shows that the stimulus continued to positively impact the economy in 2010:
“In an updated report on the American Recovery and Reinvestment Act of 2009, the CBO said that the legislation will increase the budget deficit by $814 billion from 2009-2019, compared with an original estimate of $787 billion. “By CBO’s estimate, close to half of that impact occurred in fiscal year 2010, and about 70% of ARRA’s budgetary impact was realized by the close of that fiscal year,” the report said.
The CBO estimates that the expenditures had a big impact on the economy, though the benefits have likely peaked. For the third quarter it says the stimulus added between 1.4 and 4.1 percentage points to growth and reduced the unemployment rate by between 0.8 and two percentage points. The benefits from the stimulus are expected to wane for the rest of this year and through 2011 and 2012.
CBO slightly lowered some of its estimates of the impact of the stimulus from a previous report prepared in August. That was mostly due to the timing of expenditures and no amount changed by more than 0.1.”
Some excellent charts from the Center on Budget and Policy Reform puts this all in perspective:
- increased the number of people employed by between 1.4 million and 3.6 million,
- increased real GDP by between 1.4 percent and 4.1 percent (see chart below),
- reduced the unemployment rate by between 0.8 percentage points and 2.0 percentage points
- boosted the number of “full-time-equivalent” jobs by between 2.0 million and 5.2 million, both by saving jobs and by boosting the number of hours worked. (Without the Recovery Act, many full-time workers would have been reduced to part-time status and fewer would have worked overtime.)
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.