CBO Report Discusses ARRA Effect on Jobs, GDP Growth

The Congressional Budget Office has come out with a report estimating the impact of the American Recovery and Reinvestment Act on employment and economic output. The report estimated the federal stimulus package, in the third quarter, raised GDP by somewhere between 1.2 and 3.2 percentage points higher

than it would have been without the program (the range reflects the uncertainty of estimating the effects of fiscal stimulus).

Additionally, CBO Director Douglas Elmendorf said that about 640,000 jobs were either created or retained through September of this year directly due to ARRA funding. He did note, however, that the impact could be higher or lower for several reasons:

  • It is “impossible to determine how many of the reported jobs would have existed in the absence of the stimulus package.”
  • The recipient reported job figures measure only the jobs created by employers who received ARRA funds.
  • The job reports do not measure indirectly created or saved jobs as a result of increased demand from recipients and their employees.
  • The job reports only cover certain provisions under ARRA, encompassing around one-quarter of the total amount spent through spending and tax breaks (the reports do not measure the effects of tax cuts and transfer payments).

In March of 2009, a report by the CBO had estimated that in the third quarter of 2009, we would see employment increase by 600,000 to 1.5 million more people with ARRA than otherwise in the absense of the stimulus, and real GDP would be 1.1 percent to 3.0 percent higher.

The report includes a table portraying the estimated output multipliers and budgetary costs of the major provisions within ARRA. That information can be seen below.

Type of Activity Low Estimate Output Multiplier High Estimate Output Multiplier Total 10-year Budgetary Cost
 Purchases of Goods and Services by the Federal Government  1.0  2.5  $88 billion
 Transfer of Payments to State and Local Governments for Infrastructure  1.0  2.5  $44 billion
 Transfer of Payments to State and Local Governments for Other Purposes  0.7  1.9  $215 billion
 Transfer of Payments to Individuals  0.8  2.2  $100 billion
 One-Time Payments to Retirees  0.2  1.2  $18 billion
 Two-Year Tax Cuts for Low and Middle Income Earners  0.5  1.7  $168 billion
 One-Year Tax Cut for High Income Earners  0.1  0.5  $70 billion
 Extension of First Time Homebuyer Credit  0.2  1.0  $7 billion
 Corporate Tax Provisions  0  0.4  $21 billion