Testifying before the Senate Budget Committee today, Congressional Budget Office director Douglas Elmendorf reiterated his initial assessment of President Obama’s $800 billion “stimulus” package — that while it may boost the country’s GDP in the short-term, in the long-term, the effect of such spending is a net negative on GDP growth. Here is Elmendorf responding to questions from Sen. Jeff Sessions (R., Ala.), the top Republican on the committee:
ELMENDORF: What we said was, [the stimulus bill] would be a big boost in the level of GDP in the first 3 or 4 years,*** and then, relative to what would have happened to GDP without that law… the level of GDP would be a little lower at the end. That is, a net negative effect on the growth of GDP over 10 years.
SESSIONS: And in the next 10 years, since you’re carrying that debt and paying interest on it and the stimulus value is long since gone, it would be a continual negative of some effect?
ELMENDORF: Yes, it would represent a drag on the level of GDP beyond that, if no other actions were taken.
Needless to say, Elmendorf’s assessment would also apply to the president’s most recent
jobs stimulus package, which would spend $450 billion over the next year, making it larger — in annual terms — than the first stimulus package, which spent $800 billion over two years.
*** It’s worth noting that earlier this year, the CBO predicted economic growth of 3.1 percent for 2011. In the first two quarters of the year, the economy actually experienced growth of 0.4 percent and 1.3 percent, respectively. In order meet the CBO’s target, the economy would need to grow by a fantastical 8.4 percent in the final quarter. (Not going to happen.) In other words, even the “big boost” to GDP growth Elmendorf predicted hasn’t exactly panned out.