Stimulus Is Now $75 billion More Expensive
The Congressional Budget Office hiked its forecast Tuesday for how much the stimulus bill will add to the nation's deficit, raising its estimate by $75 billion to $862 billion.
The American Recovery and Reinvestment Act, passed in February 2009, was initially believed to have a price tag of $787 billion. With the glaring exception of skyrocketing unemployment compensation costs, the CBO said the Recovery Act's effects on government spending and revenues have closely followed its initial estimate for 2009 and 2010.
The vast majority of the increased deficit impact is linked to anticipated spending in 2011 to 2019. It now appears to the Budget Office that stimulus will have a larger impact on the deficit in the years to come based on changing economic factors since the bill was signed into law 11 months ago.
Unemployment Compensation:
In CBO's initial estimate for the Recovery Act, the unemployment rate was expected to cap at 9%, but the rate rose above 9% in May and soared above 10% in October.
As a result, the CBO said unemployment compensation in 2009 and 2010 will cost $58 billion. That's $21 billion more than initially expected.
Food stamps: Nearly half of the additional $75 billion comes from more spending on food stamp benefits than originally anticipated. CBO said in its February 2009 estimate that the government would spend $20 billion on increased food stamp benefits through 2019, but it now believes that amount will be closer to $54 billion.
Food stamp benefits are adjusted incrementally every year as inflation rises but the maximum food stamp benefit for a family of four was jacked up by 13.6% to $668 per month as part of the Recovery Act. That maximum benefit was to remain at $668 per month until inflation caught up, at which point the normal incremental adjustments would begin again.
Last February, CBO had a much higher inflation projection than it does now. It believed that inflation would catch up with the $668 benefit by 2013. "But CBO now believes inflation won't catch up with the benefit until 2019, which means the Recovery Act's food stamp benefit increases will add $34 billion more to the deficit than initially anticipated.
Build America Bonds:
The rest of the $75 billion comes from the Build America Bonds initiative. The popular stimulus program allocates federal money to pay state and local governments for 35% of their interest costs on taxable government bonds issued in 2009 and 2010 to finance capital spending.
CBO said that more than $60 billion in new bonds have been issued since the program began in April, which is "significantly higher" than original estimates. As a result, CBO added $26 billion to its projection for the cost of the program, which grew to a total of $30 billion. That's more than seven times higher than the initial estimate.
Lower projections:
The CBO report also included several lower projections from its original forecast.
The largest decrease in cost was for the Medicaid match program, in which the government helps states pay for Medicaid expenses. The CBO now estimates that the program will cost $3 billion less than originally thought.
Stimulus Is Last Chance For U.S. Cities
In 2001, I came to Braddock, the poorest town in Western Pennsylvania, to serve the community's severely disenfranchised young people by starting an employment and GED program. Their lives were the embodiment of what happened to Braddock and this region: chaos through abandonment.
However, tough times and severe hardship are nothing new. It's been this way for decades.
Once one of the most important steel manufacturing centers in the world, Braddock -- what's left of it -- solemnly affirms one of the great economic maxims of our society: socialism for the rich, and capitalism for the poor.
Since the massive banking bailout of 2008, I have often wondered what Braddock would be today, if 35 years ago, the U.S. government also channeled hundreds of billions of dollars (and trillions in guarantees) to save the steel industry, the hundreds of thousands of manufacturing jobs it produced and the families it sustained.
Instead, places like Braddock were allowed to descend into decades of disorder, poverty and desertion. Braddock went from a prosperous community of 20,000 residents, to a shattered town of fewer than 3,000 today. Braddock looks every bit the deserted battlefield it truly is: 90 percent of our town's people, buildings, businesses, and homes are gone and what remains, bears witness to the torment.
In 2005, those same young people I was privileged to work for helped elect me mayor. Senseless homicides long lost their ability to shock, so I began to tattoo the dates of the killings on my arm as a living document of our collective loss.
Upon taking office, we set out to help reinvent Braddock through diverse solutions ranging from effective policing and the arts, to urban agriculture and youth employment. Today, buildings have been saved and repurposed. We farm for organic produce from formerly overgrown land, and can offer full summer employment for our youth. Perhaps most importantly, no dates have been added to my forearm in over 20 months.
However, at the start of my second term as mayor, we have decades of work ahead and we'll never come close to replacing what's been taken. As the saying goes, we're not looking for a hand out, but a hand up and the chance to ameliorate three decades of socioeconomic unraveling.
Towards those ends, the stimulus, known as American Recovery and Reinvestment Act of 2009, has been a true fiscal balm, especially since our community's hospital, and largest employer, University of Pittsburgh Medical Center announced it would be shutting Braddock Hospital later this month, taking jobs along with our residents' access to health care.
Braddock received $250,000 in stimulus funding for the EPA compliance upgrade of our sewer system and $30,000 that enabled us to hire an additional 30 young people this past summer who would have otherwise been unemployed.
Without question, these stimulus funds were a needed infusion of resources. However, I believe the greatest promise of the American Recovery and Reinvestment Act of 2009 remains untapped and now represents an unprecedented opportunity for growth and renewal.
In Braddock and in the surrounding areas, we have an abundance of quality, shovel-ready projects that range in complexity and scope from small-scale urban farming, and retrofitting a now-vacant 300,000 square foot hospital, to a $300 million-dollar repurposing of a former steel mill site into a green enterprise zone of economic redevelopment.
Investments like these will not only help reinvent communities like Braddock, but will also foster a boom in job creation and long-term growth. These and similar projects across the country represent but a tiny fraction of the resources spent to save feckless bankers and Wall Street from their own unchecked greed and hubris.
Perhaps equally important, I believe this kind of investment will help restore a sense of social justice that is completely absent in today's public debates. Consider the absurd juxtaposition of rescued banking executives defending multi-million-dollar bonuses, to our community at over 30 percent unemployment, widespread abandonment, and pervasive poverty while losing the area's only hospital and access to medical care.
The explanation of this circumstance is as simple as the contrast is stark: one got capitalism and the other, socialism.
Basic fairness and equity demand that the color of your collar should not dictate if you receive a bail-out or get bailed on. For Americans living in places like Braddock, I believe the American Recovery and Reinvestment Act is perhaps the last, best chance to help overcome the injustice and harm that the decades steeped in a laissez-faire orthodoxy have wrought.
Sources: CNN, Recovery.gov
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