From the Congressional Budget Office
To read the entire report Download 11-30-ARRA
Estimating the law’s overall effects on employment requires a more comprehensive analysis than the recipients’ reports provide. Therefore, looking at the actual amounts spent so far (where identifiable) and 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 how previous similar policies have affected the economy and various mathematical models that represent the workings of the economy. On that basis, CBO estimates that in the third quarter of calendar year 2009, an additional 600,000 to 1.6 million people were employed in the United States, and real (inflation-adjusted) gross domestic product (GDP) was 1.2 percent to 3.2 percent higher, than would have been the case in the absence of ARRA. Those ranges are intended to encompass most economists’ views and to reflect the uncertainty involved in such estimates.
CBO’s current estimates differ only slightly from those CBO prepared in March 2009. At that time, CBO projected that in the third quarter of 2009, U.S. employment would be higher by 600,000 to 1.5 million people with ARRA than it would be without the law, and real GDP would be 1.1 percent to 3.0 percent higher. CBO’s new estimates reflect small revisions to earlier projections of the timing and magnitude of changes to spending and revenues under ARRA. On the one hand, tax cuts through September are now estimated to be roughly $10 billion larger than originally projected (mainly because certain tax changes were carried out more quickly than anticipated); on the other hand, the net change in federal spending as a result of the legislation has turned out to be slightly smaller than CBO initially estimated.
CBO’s current estimates do not reflect any change in the agency’s assessment of the effect that each dollar of spending increase or revenue decrease has on output and employment. Since March, CBO has continued to examine new research on the relationships between changes in government policy and changes in output and employment. To date, that examination has generated no significant change in CBO’s assessment of those relationships. CBO has also examined incoming data on output and employment during the period since ARRA’s enactment. However, those data are not as helpful in determining ARRA’s economic effects as might be supposed, because isolating the effects would require knowing what path the economy would have taken in the absence of the law. Because that path cannot be observed, the new data add only limited information about ARRA’s impact. Economic output and employment in the spring and summer of 2009 were lower than CBO had projected at the beginning of the year. But in CBO’s judgment, that outcome reflects greater-than-projected weakness in the underlying economy rather than lower-than-expected effects of ARRA.