By Cliff Montgomery – Sept. 6th, 2011
As of June 2011, up to 2.9 million employed people owed their jobs to the economic stimulus package,according to a new Congressional Budget Office (CBO) study.
The “Congressional Budget Office update of the nation’s budget and economic outlook,” recently stated TheCenter on Budget and Policy Priorities (CBPP), a top fiscal budget think-tank, “reinforces…that policymakersshould not let legitimate concerns about [the federal] debt in coming decades prevent them from pursuingpolicies to boost economic growth and increase jobs.”
“It also puts the lie to claims that the only way to reduce deficits…is with big new spending cuts,” added theCBPP.
The Congressional Budget Office report was a central focus of a recent statement from the CBPP. Below, TheAmerican Spark quotes that short CBPP statement:
“A new Congressional Budget Office (CBO) report estimates that the American Recovery and ReinvestmentAct (ARRA) increased the number of people employed by between 1.0 million and 2.9 million jobs as of June.In other words, between 1.0 million and 2.9 million people employed in June owed their jobs to the RecoveryAct.
“This estimate, by Congress’ non-partisan economic and budget analysts, is more comprehensive than the550,000 jobs that ARRA recipients reported in July, CBO explains.
“While the report focuses primarily on the second quarter of 2011, CBO also includes new projections of theRecovery Act’s jobs impact through 2012. It finds that in the current quarter (the third quarter of 2011), thereare 0.8 million to 2.5 million more people employed because of ARRA.
“The CBO report indicates that ARRA succeeded in its primary goal of protecting the economy during theworst of the recession. As the economy recovers, ARRA’s effects will continue to decrease. CBO estimatesthat ARRA’s impact on employment peaked in the third quarter of 2010, when between 1.4 million and 3.6million people owed their jobs to the Recovery Act.
ARRA Also Boosted Worker Hours, CBO Finds
“In addition to saving and creating jobs, ARRA has increased the number of hours worked, CBO hasconcluded. That is, without ARRA, many full-time workers would have been reduced to part-time status andfewer would have worked overtime. The combination of the increase in jobs and the increase in hours meansthat ARRA boosted the number of full-time-equivalent jobs by between 1.4 million and 4.0 million as of June,the report estimates.
“CBO finds that this figure peaked in the third quarter of 2010, and stands at up to 3.4 million full-timeequivalent jobs in the current quarter.
“Among ARRA’s most effective provisions for saving and creating jobs, according to CBO’s estimates, aredirect purchases of goods and services by the federal government, transfer payments to states (such as extraMedicaid funding), and transfer payments to individuals (such as increased food stamp benefits and additionalweeks of unemployment benefits). CBO’s estimates indicate that tax cuts are less effective job producers, andtax cuts for higher-income people have very low bang for the buck.
CBO’s Jobs Estimates More Comprehensive than Earlier Recipient Reports
“In July, the Recovery Accountability and Transparency Board released new jobs figures based on reports byrecipients of most ARRA grants, loans, and contracts. Recipients reported that ARRA funds preserved orcreated 550,000 full-time-equivalent jobs as of the second quarter of 2011. As the new CBO report explains,however, the recipient reports, ‘do not provide a comprehensive estimate of [ARRA’s] impact on U.S.employment.’
“Specifically, the recipient reports covered only about one in five ARRA dollars spent during the second quarterof 2011 and did not include some of ARRA’s most effective job-creating provisions, such as increasedMedicaid support for states and additional support for unemployed workers and food stamp recipients. Thereports also did not include the jobs that ARRA grants, loans, and contracts generated indirectly by increasingoverall economic activity. On the other hand, CBO notes, some of the jobs that recipients reported may haveexisted without ARRA.
“CBO emphasizes that its estimate of 1.0 million to 2.9 million more people employed as of June addresses thelimitations of using recipient reports to estimate ARRA’s impact on jobs. CBO’s estimate, which is based ondata about how similar policies have affected output and employment in the past, is similar to those of otherleading economic forecasters.
“For example: Mark Zandi of Moody’s Economy.com, Macro-economic Advisers, and IHS/Global Insight allestimate that ARRA added about 2.4 million jobs in the first quarter of 2011, according to a survey by theCouncil of Economic Advisers.
“A minority of economists have questioned whether ARRA has in fact boosted the economy. CBO says that itcontinues to look at new research on the economic relationships between changes in government policy andchanges in output and employment, but that its examination of that research has not significantly altered CBO’s assessment of ARRA’s economic impact.
Conclusion
“CBO’s analysis finds that ARRA has significantly boosted both the number of people employed and thenumber of hours worked. Without ARRA, millions more workers would be either unemployed or struggling toget by on less income.”
