Wednesday, January 28, 2009

Stimulus Spending will not be immediate

Despite the $845 billion, now closer to $900 billion with the Republican-proposed AMT exemptions, price tag on the stimulus only about $340 billion will be spend in the 2009 fiscal year. The stimulus plan includes two sections.
Division A
Provides for new discretionary spending. This spending is likely to take some time to spend. In it's scoring earlier this week the Congressional Budget Office (CBO) presented estimates of how soon the funds would be spent by category.
Table 1 below provides this information:

The figure shows a long time frame for many of these projects, including estimates for Agriculture and Rural Development, Energy and Water, and Financial Services that extend to 2013. Now some of these projects, like laying broadband wire in rural areas may still have value in 2013 but more as development projects than as stimulus.

Division B:

Includes tax cuts and funding for pre-existing programs like Medicare, Social Security, and food stamps. The difference between the two divisions is the speed they can be delivered.

The figure shows, by Division (sorry labeled section) and total, the percentage of total expected outlays that are spent by the end of each fiscal year. As we can see, CBO expects that 25.9 percent of Division B outlays will be spent in the coming fiscal year whereas only 8.1 percent of Division A in the same time. By the end of 2011, 91.4 percent of Division B will be spent it will take until the end of 2013 for Division A (at 92.7 percent to catch up to that). This makes sense with the "shovel-ready" phrase being thrown about. Tax cuts and money to current programs is faster than money to new programs.

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