What did the Congressional Budget Office Really Say About the Stimulus?

I got a reminder today about the importance of reading your news from a variety of perspectives. 

An example (not today's) is opinions about the underlying causes of the current economic crisis.  If you only pay attention to a certain set news outlets, blogs, and message boards you'll "know" that it's all the liberal's fault for creating the Community Reinvestment Act and forcing banks to make loans to people who couldn't afford them.  From another set of news sources,  blogs, and message boards you might learn that half the sub-prime loans came from institutions not covered by the CRA, that institutions that were covered by it did less (not more) of the risky lending, that it wasn't the debt itself but the selling of the debt (bad debt chopped up and marketed as mortgage-backed securities to financial institutions).  They'll tell you it was actually the inevitable consequence of the Rght's march to deregulate, deregulate, deregulate (for example, the 1999 repeal of the Depression-era Glass-Steagall Act, which separated commercial banks from Wall Street, is significant in this mess).  They probably won't tell you much about the Democrats' role in that deregulation.  Two claims in stark opposition.  Half of the population has been told and believes one; half believes the other.  Almost certainly the real truth is somewhere in between.  Even if it's not, you really need to hear both sides (someday I'll do something with this).

Today's example relates to interpreting the message of the non-partisan Congressional Budget Office's statement about the proposed stimulus package.  I Googled "cbo stimulus."  The first link is to a US News & World Report article.  The second is to a Washington Times article.  There third is to the actual letter written by the CBO.  The letter is here.  Read it for yourself and decide what you think it's key message is.

When Amanda Ruggeri read the letter, she got the message that the CBO was saying "Stimulus Bill Could Meet Obama's Job Creation Goal in Short Term" and wrote an article for US News & World Report saying so (here).

When Stephen Dinan of The Washington Times read the very same letter, he got the message that the CBO was saying that "Obama stimulus [will be] harmful over long haul" and wrote an article saying so (here).  The implication of the Washington Times piece is that the CBO thinks the stimulus package is a bad idea...and I saw that very statement echoed, for example, on a certain "Grace Centered" message board.

What do I think the CBO's real message is?  Well, it's partly that the stimulus will almost certainly have a positive effect in the short term (h/t Amanda).  It's also partly that taking on such massive debt will probably have some negative consequences in the long run (no duh!) (h/t Stephen).  However, I think it's a gross over-simplification to say that the CBO was saying that the stimulus is a bad idea.  Let me point out that the CBO letter the emphasizes that...

...many things that make people better off do not appear in GDP at all. For example, healthier children or shorter commute times can improve people’s welfare without necessarily increasing the nation’s measured output in the long run (though spending in those areas would still provide short-run stimulus). Even legislation explicitly intended to affect output may also seek to accomplish other goals and can be evaluated accordingly.

That's the key to my take on the CBO letter.  The CBO's predictions about short-term positive effects on jobs and long-term effects on GDP (the cold, hard financial facts) are interesting and important but only part of the story.  A friend pointed out that this situation can be seen as an example of the "old approach" of making easy choices, delivering immediate benefits and quick payoffs at the expense of "real change"...an approach Obama has often condemned.  OK, maybe...but sometimes the immediate benefits are worth some long-term difficulty.  Next time I have surgery, I could decline the anesthesia in order to avoid it's (relatively) long-term negative consequences...but I think I'll probably take the anesthesia so I'll be spared the agonizing pain of the knife cutting my flesh in exchange for feeling a bit woozy later.  Needless to say, I don't know enough about economics and our economy to have a strong opinion about what should be done about the crisis, but I don't think it's absurd to fear that there will be a whole heck of a lot of human suffering in the short-term if the the economy collapses and that a slightly lower GDP in 2019 might be worth it to mitigate that pain.  The CBO's predictions about GDP are important to consider, but it's not as simple as just that.

That's what I think.