Corporate Welfare

Big Stimulus Winners: New York, District of Columbia and…Vermont?

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An extra large head is a requirement for all members of the Council of Economic Advisors.

Economic Impact of the American Recovery And Reinvestment Act of 2009, the Council of Economic Advisors' first self-report card on President Obama's $750 billion stimulus package, is out [pdf], and it turns out the apparent effect of the stimulus is well below CEA's original projection. The council had expected ARRA to add 3.1 percent annualized to U.S. gross domestic product growth in the second quarter, and 3.6 percent in the third quarter. The CEA's estimate is now trending 2.3 percent and 2.7 percent respectively.

The apparent performance is also generally below predictions made by disinterested, fully private entities including Goldman Sachs, Moody's and JPMorgan Chase. The one organization whose guesstimate has so far hit center of mass is IHS/Global Insight which has ARRA pegged to add 2.3 percent to GDP growth in both quarters.

Because GDP growth has been and appears still to be negative, all of these numbers are fictional. A more deft switch occurs in the report's conclusion, where CEA opens its discussion of ARRA's impact on GDP growth by changing the subject:

In this context, it is useful to mention the Car Allowance Rebate System (CARS), the program commonly referred to as "Cash for Clunkers." Though not part of the original ARRA, the popular CARS program was funded largely with ARRA funds that were reallocated by supplemental legislation. As described in a separate report, the CEA has conducted an analysis of the evidence to date on the effects of the program. The surge in automobile sales in July and August was one of the largest two-month increases in history. Our estimates suggest that the program likely added between 0.1and 0.4 percentage points to real GDP growth in the third quarter of 2009. It is likely increasing employment relative to the baseline by roughly 40,000 to 120,000 in the second half of 2009.

Note that the U.S. continues to shed more than 200,000 net jobs a month. So in this case CEA switches one conjurer's number (not-GDP growth) for another (not-employment growth), slipping the admission of ARRA's anemic effect on GDP growth into the penultimate sentence, where the distracted audience misses it entirely.

Other highlights include a very interesting country-by-country chart of discretionary stimulus spending as a percentage of GDP. The U.S. is among the big spenders at 2 percent. France, Italy, Indonesia, Switzerland, and our former (and future?) colonial masters are all spending less as a portion of GDP. (This is discretionary spending, so in many cases the lower number may reflect constrictions caused by already high entitlement spending rather than fiscal caution.)

You may also enjoy the breakdown of stimulus spending by category, which reveals that most of the spending goes to "State Fiscal Relief," "Aid to Directly Impacted Individuals" and "Government Investment Outlays." (CEA counts alternative minimum tax relief and individual tax cuts as stimulus, but I don't for the same reason I don't think a thief makes me richer when he doesn't take everything.)

And definitely check out the state-by-state breakdown of Medicaid payouts, which explains how stimulus funds are awarded according to a derivative of the state's own spending on Medicaid (with the biggest spenders getting the biggest reward). You might expect that figure to correlate with each state's fiscal irresponsibility, but it doesn't, so California gets only slightly more than Texas. Washington D.C., meanwhile, gets more Medicaid money per capita than any U.S. state. Unreal city, I had not thought hypochondria had undone so many.

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  1. Oh, their predictions were inflated.

    Whodda thunk it.
    And here’s CARS again, saving the day.
    *shakes head*

    Oh and hate to go OT. But it demands a turn.
    Daley the 2nd, Chicago Czar is going off on guns again.
    http://newsblogs.chicagotribune.com/clout_st/2009/09/aldermen-approve-minimum-five-days-behind-bars-for-those-caught-with-illegal-guns.html
    “The Chicago City Council today without debate approved an ordinance to require some time behind bars for anyone convicted of illegally carrying a gun under city ordinances.
    Sponsoring Ald. Isaac Carothers (27th) said the ordinance is “a step in the right direction.”

    ‘Some’ time is 5 DAYS.

  2. Has that guy been drinking colloidal silver?

  3. So…. win?

  4. Um BTW, is the CEA link broken?

    I’m assuming IL has got to be ‘up’ there too.

  5. but I don’t for the same reason I don’t think a thief makes me richer when he doesn’t take everything.)

    That’s gold, Tim. Tell me that’s an original…

  6. “Because GDP growth has been and appears still to be negative, all of these numbers are fictional.”

    Could this be clarified please?

  7. So you don’t count tax relief as stimulus because you’re a petulant ideologue?

  8. I’m really surprised that Capital City gets more Medicaid money per capita than any U.S. state. Really, really surprised.

  9. Didn’t the guy in the picture run for president as a Libertarian?

  10. “disinterested, fully private entities including Goldman Sachs”

  11. So the argument is that if we hadn’t had the stimulus, the economy would have shrunk by an additional more than 1% in 2Q and 3Q 2009? (I.e., an annualized rate of just over 2%, for 2 quarters, should equal just over 1% overall).

    Is there some consensus that that might be true? Because if so, avoiding a 1% decline in GDP sounds pretty good to me.

  12. Didn’t the guy in the picture run for president as a Libertarian?

    Yes! The good news is that he won.
    The bad news is that he’s now the President of the planet Cleep.

  13. I already made that joke, Xeones, you fuck.

  14. Note that the U.S. continues to shed more than 200,000 net jobs a month.

    Its worse than that.

    The jobs that matter are private sector jobs, so subtract out the jobs the public sector continues to add.

    I continue to be astonished by the upward trend in the stock market. The news in the real economy is almost, although not quite, uniformly bad. I’m still in, but my stop losses are nice and tight.

  15. fully private entities including Goldman Sachs, Moody’s and JPMorgan Chase.

    You funny.

  16. Superman or Green Lantern ain’t got a-nothin’ on me
    I can make like a turtle and dive for your pearls in the sea, yeah!

  17. Quick comment on the stimulus.
    My stepfather runs a company that deals a lot with town and state jobs.
    Because they know money is coming from the stimulus, they have been canceling jobs.
    Why should the state pay for work when they can wait and get the Fed to pay?
    But I guess it was better than doing nothing. Even with the help most states have a huge deficit and are talking tax hikes.
    But no state worker will be laid off. Ever. No matter how many useless people they hire.

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