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Real Cost of Stimulus Plan? Almost $1.2 Trillion

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January 29, 2009 – Comments (1)

Taxpayers will pay much more for the fiscal stimulus than previously revealed – over $1.17 trillion according to the Congressional Budget Office (CBO).

Most sources have assessed the cost of the stimulus package at approximately $825 billion. But the CBO reports those estimates do not include the cost of the money that must be borrowed to pay for the plan. [Editor's Note: To view the CBO letter reporting on the total cost of the stimulus plan, go here now.]

Rep. Paul Ryan, R-Wisc., asked the CBO - the research arm of Congress - to calculate the “money cost” of borrowing the funds needed to fulfill the stimulus projects being sought by congressional Democrats and President Obama. Like every other borrower, the government must pay back borrowed principal plus the interest on its debt.

The CBO responded with a Jan. 27 letter from CBO Director Douglas W. Elmendorf estimating the cost of borrowing the money would be $347.1 billion – or about 42 percent of the cost of the projects. That would push the total cost of the stimulus package to over $1.17 trillion.

“Such [interest] costs … are not counted for congressional scorekeeping purposes for such legislation,” Elmendorf stated in his letter to Rep. Ryan.

The true cost may climb even higher, however, because the CBO’S calculations are all based on its low-end estimate that the base cost of the stimulus package will be just $815.9 billion, compared to the $825 figure commonly used. Congressional Republicans told Newsmax on Tuesday the actual base cost of the still-evolving stimulus package is about $836 billion.

The higher the cost, the more expensive the program is to finance, and the greater the total debt burden on future taxpayers.

Ryan has been an outspoken critic of the stimulus plan. In a recent Wall Street Journal commentary he warned: “The last several months are a foreshadowing of a new era of government activism, rather than an unfortunate but necessary (and anomalous) emergency action. We will soon shift from a market-based economy to a political one in which the government picks winners and losers and extends its reach and power in unprecedented ways.”

© 2009 Newsmax. All rights reserved.

1 Comments – Post Your Own

#1) On January 29, 2009 at 12:35 PM, devoish (98.56) wrote:

Here is a paste of the letter sent by the CBO, and here is alink to the original:  http://www.cbo.gov/ftpdocs/99xx/doc9970/1-27-RyanLetter-09stimulus.pdf

CONGRESSIONAL BUDGET OFFICE

U.S. Congress

Washington, DC 20515

January 27, 2009

Honorable Paul Ryan

Ranking Member

Committee on the Budget

U.S. House of Representatives

Washington, DC 20515

Dear Congressman:

As you requested, the Congressional Budget Office has estimated the costs

of additional debt service that would result from enacting H.R. 1, the

American Recovery and Reinvestment Act of 2009. Such costs are not

included in CBO’s cost estimates for individual pieces of legislation and

are not counted for Congressional scorekeeping purposes for such

legislation.

Under CBO’s current economic assumptions and assuming that none of the

direct budgetary effects of H.R. 1 are offset by future legislation, CBO

estimates that the government’s interest costs would increase by

$0.7 billion in fiscal year 2009 and by a total of $347 billion over the 2009-

2019 period (see enclosed table).

If you would like any additional information, we would be happy to

provide it. The CBO staff contact is Eric Schatten.

Sincerely,

Douglas W. Elmendorf

Director

Enclosure

cc: Honorable John M. Spratt Jr.

Chairman

January 27, 2009

(Billions of Dollars, by Fiscal Year)

2009-

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2019

Estimated increase in the

deficit (before debt service)

2009, 2010,    11,   12,    13, 14, 2015, 16,  17, 18, 19 Total

 169.5 356.0 173.9 48.5 25.3 23.9 11.0 0.1 1.3 2.9 3.4 815.9

Debt service

2009, 10, 11,   12   2013,   14   2015, 16,   17,     18,    19,

 0.7, 4.1, 11.1, 22.0, 31.9, 37.5, 42.1, 45.4, 48.1, 50.6, 53.6,

Total 347.1

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