« Something is fundamentally wrong with this process | Main | Not acting the way we should ... or the way you want? Keep your hands off my kids and the schools. »

Views on the economic stimulus package: is it effective?

Excerpts from Stimulus Spending Doesn't Work

Wall Street Journal of Oct. 1, 2009, 12:54 P.M. ET by Robert J. Barro and Charles Redlick

"The global recession and financial crisis have refocused attention on government stimulus packages. These packages typically emphasize spending, predicated on the view that the expenditure "multipliers" are greater than one—so that gross domestic product expands by more than government spending itself. Stimulus packages typically also feature tax reductions, designed partly to boost consumer demand (by raising disposable income) and partly to stimulate work effort, production, and investment (by lowering rates)….

The existing empirical evidence on the response of real gross domestic product to added government spending and tax changes is thin. In ongoing research, we use long-term U.S. macroeconomic data to contribute to the evidence. The results mostly favor tax rate reductions over increases in government spending as a means to increase GDP…

The available empirical evidence does not support the idea that spending multipliers typically exceed one, and thus spending stimulus programs will likely raise GDP by less than the increase in government spending. Defense-spending multipliers exceeding one likely apply only at very high unemployment rates, and nondefense multipliers are probably smaller…"


I would very much like to hear Mr. Barro address the very important question,"So what, what does this mean?"

Many citizens will need help to connect explicitly the dots.  What are the consequences of the massive stimulus package if the multiplier is significantly less than 1? 

The answer is, we fear, a declining standard of living for our children.

Reader Comments

There are no comments for this journal entry. To create a new comment, use the form below.

PostPost a New Comment

Enter your information below to add a new comment.

My response is on my own website »
Author Email (optional):
Author URL (optional):
All HTML will be escaped. Hyperlinks will be created for URLs automatically.