November 2, 2009
In February 2009, CBO issued its estimate of spending from the American Recovery and Reinvestment Act (ARRA)commonly referred to as the stimulus package. At that time, CBO expected that federal agencies would spend about $120 billion over the remaining months of fiscal year 2009. That figure included $14 billion in payments for health insurance premiums of unemployed workers, but those payments were ultimately recorded as a reduction to federal revenues (instead of as federal outlays, as CBO initially assumed) because the payments were conveyed by reducing the amount of withholding taxes that businesses remit, and requiring them to pass those savings on to their employees by charging lower premiums. Setting aside those payments, the estimate of roughly $106 billion in outlays proved to be quite accurate: At the close of fiscal year 2009, agencies reported spending a little under $108 billion in ARRA fundsabout 1 percent higher than CBOs initial estimate (see the table below). In a few cases, agencies that received stimulus funds for certain programs spent less than CBO expected from their regular appropriations for those programs, so the net change in outlays that can be attributed to the stimulus package was actually a bit less that CBO initially estimated.
ARRA also included provisions that reduced taxes, and the Joint Committee on Taxation estimated that the legislation would reduce federal revenues by about $65 billion in 2009. Adjusting for the reclassification of payments for health insurance premiums, that total would be $79 billion. It is not possible to determine how closely the 2009 revenue effects of ARRA were to the initial estimates because detailed data on 2009 tax collections are not yet available.
Half of the 2009 stimulus spending is attributable to two programs: $32 billion for Medicaid and $22 billion for unemployment insurance. A one-time payment to Social Security beneficiaries added another $13 billion; spending for financial assistance to states (from the new State Stabilization Fund) added $12 billion; and direct assistance to college students (mostly for Pell grants) added $7 billion. Together, those five programs account for almost 80 percent of stimulus spending in fiscal year 2009.
As shown in the following table, outlays by individual agencies differed from CBOs estimates in both size and direction. Here are a few key points:
- Outlays for Medicaid, in the form of increased federal payments to states, were within $0.5 billion of CBOs estimate. Outlays for other activities of the Department of Health and Human Services (such as health research) came in several billion dollars lower than CBOs estimate.
- A few agencies spent more than CBO expected from amounts authorized in the stimulus package for some programs and less than CBO expected from regular appropriations for those same programs. For example, stimulus spending by the Department of Education for Pell grants was about $6 billion more than CBOs original estimatebut those higher-than-expected outlays were partially offset by lower-than-expected spending from funds provided through the annual appropriation process.
- CBO underestimated the costs of providing additional unemployment benefits under ARRA. The agencys original estimate of such benefits was about $17 billion for 2009, but the total for the year came in about $6 billion higher.
- Infrastructure-related spending fell short of CBO estimates. For example, spending by the Departments of Transportation, Energy, and Commerce totaled just over $5 billion, compared with CBOs original estimates of about $8 billion for those three agencies.
- Funding for a broad range of other federal agencies has been spent considerably more slowly than originally estimated. The last line in the following table shows outlays of about $6 billion in 2009 for a group of agencies that received over $60 billion in stimulus funding.
CBO's Estimates and Actual Spending from ARRA through September 2009
|$ in Billions||Estimated
|Health and Human Services||38.7||33.0||-5.7||-15%|
|Social Security Administration||13.7||13.2||-0.5||-4%|
|All Other Agencies||12.7||6.2||-6.5||-51%|
- CBOs March baseline estimates, which were identical to those provided in the February 13, 2009, cost estimate for the conference agreement for H.R. 1, the American Recovery and Reinvestment Act of 2009.
- Actual outlays are based on agency reports posted on www.recovery.gov, through September 30, 2009. CBO made adjustments for some of the loan-related cash flows that were reported as outlays of the Small Business Administration ($3.4 billion) and the Department of Agriculture ($0.2 billion), because the federal budget records as outlays the estimated subsidy costs of such loans rather than the annual cash flows for loan disbursements and repayments. CBO also adjusted the reported outlays of the Department of Labor to reflect transfers between federal government funds that were recorded as outlays but not spent ($2.8 billion).
- CBOs original estimate of outlays for the Department of Labor included $13.8 billion for payments of health insurance premiums for unemployed workers under COBRA (the Consolidated Omnibus Budget Reconciliation Act of 1985). Those payments ended up being classified as reductions in revenues as opposed to outlays (as CBO initially expected). The numbers shown in the table for the Department of Labor reflect an adjustment for that change in classification.