CBO forecasts tell an interesting tale.

The comments are coming in from the President hat if the Congressional stimulus package is not passed there will be a catastrophe. There is a significant focus on the packages as if there is no other solution and this is the only way out of the crisis. Is fiscal policy needed to help at this time? Absolutely. There needs to be a change in investor and consumer behavior, and the use of government spending and tax changes can help when there is a fall-off in private spending; nevertheless, the type of policy and size will matter deeply.

The Congressional Budget Office is a nonpartisan group which advises Congress on fiscal and economic matters. It serves as an economic consultants to the Congress to provide independent insight on the economic impact of legislation and budget matters.

The CBO has provided extensive analysis of the economic impact of HR1 but there is a question whether anyone is reading this work, or if anyone is going to take their comments to heart. If the CBO is a doctor giving advice on a sick economy and what is necessary to get healthy, the patient is not listening. The American people may not enough know of the CBO findings.

By CBO estimates of the $850 billion in the House Bill only $132 billion will be used in the remainder of fiscal 2009. $242 billion in 2010 and $145 billion in 2011 in new spending. This will total over $600 billion in new spending over the next to years. There will be a decrease in revenues of over $200 billion in the nex ten years from chnages in the tax code. This will not have an immediate impact on the economy. The guarantes and changes in TARP may have a more immediate impact. So if anyone thinks we are front loading the expenditures, the answer is no. Congress knows this. Does the American people?

The CBO forecasts that the House plan will have a long-term negative effect on the economy. No plan could be better than this plan in the longer run. Congress knows that, but do the people? Now in the long-run we are all dead, so who cares but if you care about the next generation or “the children” then there has to be more careful analysis. The CBO states that the impact of crowding out of private investment from higher interest rates will have a significant negative impact. Now they provide a lot of assumptions and caveats but does not this require more discussion?

We are already seeing what the bond markets think, and it is not positive. Yields are rising and it is not because the economy is doing better.