When the Congressional Budget Office first scored President Obama's first stimulus program, they predicted it would cost $787 billion through 2019. But while $733 billion of Obama's stimulus was spent through 2011, the law set in motion billions more in spending for years to come.
Last week, when the CBO released it's annual Budget and Economic Outlook, it upped the final cost of the stimulus to $831 billion through 2019. In an earlier blog post, the CBO explained why the final stimulus price tag has risen by almost $60 billion.
The spending resulting from ARRA was greater than estimated because of two developments on the economic front: Unemployment was greater and food prices were lower than CBO anticipated at the time.
Spending on unemployment-related benefits provided by the Department of Labor was higher because more people were unemployed than CBO originally projected, and because, after losing their jobs, many workers remained unemployed much longer than at any other time in recent history; those longer durations meant that people collected more benefits.
ARRA spending by the Department of Agriculture also significantly exceeded the original estimates. Almost all of that difference occurred in the Supplemental Nutrition and Assistance Program (SNAP, formerly called Food Stamps) and resulted mostly from smaller-than-expected increases in food prices. ARRA temporarily raised the maximum benefit in 2009 and required that it stay at that higher level until routine inflation adjustments that would have otherwise been applied to the benefit exceeded that level. (Subsequent legislation eliminated that increase after October 31, 2013.)
In 2010 and 2011, food prices rose less than we had expected at the time ARRA was under consideration; thus, there was a larger difference than anticipated between the maximum benefit amount set by ARRA and what that amount would have been based on the routine inflation adjustments reflecting actual prices. Consequently, the additional expenditures resulting from the higher maximum benefit set by ARRA were greater than CBO had estimated.
