CBO: ARRA Kept Unemployment from Climbing Even Higher

The Congressional Budget Office (CBO) recently released its latest analysis of the Amercian Recovery & Reinvestment Act:

CBO estimates that in the second quarter of calendar year 2010, ARRA’s policies:

• Raised the level of real (inflation-adjusted) gross domestic product (GDP) by between 1.7 percent and 4.5 percent,
• Lowered the unemployment rate by between 0.7 percentage points and 1.8 percentage points,
• Increased the number of people employed by between 1.4 million and 3.3 million, and
• Increased the number of full-time-equivalent (FTE) jobs by 2.0 million to 4.8 million compared with what those amounts would have been otherwise. (Increases in FTE jobs include shifts from part-time to full-time work or overtime and are thus generally larger than increases in the number of employed workers.)

Mark Zandi of Moody's Economy.com, thinks the CBO underestimated the Recovery Act's effect on employment:

"I think we'd be in a measurably worse place if not for the stimulus," Zandi said at the Christian Science Monitor breakfast this morning. "If we had not had the stimulus...we'd have fewer jobs today than we actually have."

Zandi was responding to Boehner's contention yesterday that stimulus spending "has gotten us nowhere." Asked whether he agreed with Boehner, Zandi said "no."

"Without the stimulus spending," Zandi insisted, "instead of a 9.5 percent unemployment rate, we'd have an 11.5 percent unemployment rate."

Zandi, you will recall, was an advisor to John McCain in the 2008 campaign. I have previously compared his "bang for the buck" estimates to the CBO's, and found them to correlate closely.