Stimulus Projects May Be Slow to Jolt Economy, CBO Says

By Lori Montgomery
Washington Post Staff Writer
Wednesday, January 21, 2009

Less than half the money dedicated to highways, school construction and other infrastructure projects in a massive economic stimulus package unveiled by House Democrats is likely to be spent within the next two years, according to congressional budget analysts, meaning most of the spending would come too late to lift the nation out of recession.

A report by the Congressional Budget Office found that only about $136 billion of the $355 billion that House leaders want to allocate to infrastructure and other so-called discretionary programs would be spent by Oct. 1, 2010. The rest would come in future years, long after the CBO and other economists predict the recession will have ended.

The report does not analyze the entire $825 billion package assembled by House leaders and aides to President Obama. Parts of the legislation are scheduled to be considered today in the House Appropriations Committee. Other portions of the proposal -- including $275 billion in tax cuts and nearly $200 billion for jobless benefits, health care for the poor and other entitlement programs -- are expected to pour cash into the nation's faltering economy much more quickly.

But the CBO analysis appears to confirm the complaints of many Republicans and other critics, who have long argued that spending money on highway construction and other infrastructure projects is ineffective at quickly jolting a sluggish economy. The report was distributed to reporters yesterday by aides to Senate Minority Leader Mitch McConnell (R-Ky.)

The report also suggests that the House measure would violate Obama's rules for the stimulus package; Obama aides have said they want the bulk of the spending to occur before 2011. Obama has pledged that the measure would save or create at least 3 million jobs over the next two years.

House Democrats and administration officials said that by leaving out the tax cuts and spending on the poor, the CBO report focuses on the slowest-spending parts of the proposal. Even there, small changes to the measure could have a huge effect, they said. For instance, Democrats said that if states were given a different deadline for spending highway money, analysts predict the spend-out rate would be accelerated significantly.

"The new CBO report does not take into account the fastest spending provisions in the bill, leaving the false impression that the overall spend-out rates are slower than they actually are," said Brendan Daly, a spokesman for House Speaker Nancy Pelosi (D-Calif.). "These provisions will go out quickly to give the economy a jolt while others will represent down payments on crucial priorities for our economic future -- investments in clean energy, health care, education and repairing our nation's infrastructure."

Still, the report from the CBO, the nonpartisan arbiter of congressional spending measures, offers a stark assessment of some of the Democrats' top priorities. For example, of $30 billion in highway spending, less than $4 billion would occur over the next two years. Of $18.5 billion proposed for renewable energy, less than $3 billion would be spent by 2011. And of $14 billion for school construction, less than $7 billion would be spent in the first two years.

Obama and congressional Democrats have pledged to approve a stimulus package within the next few weeks, calling it a critical step to easing the effects of what economists predict is likely to be the longest, deepest and most dangerous recession since the Great Depression. Many economists -- including some prominent conservatives -- have called for spending significantly more than the $825 billion included in the House package.

That measure is expected to grow before it reaches Obama's desk. The Senate plans to add several provisions, including $70 billion to prevent millions of additional families from being subject to the alternative minimum tax in April 2010.

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