Why massive Democrat payoffs to their constituencies at taxpayer expense aren’t stimulative.
9 thoughts on “The Myth Of The Multiplier”
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Why massive Democrat payoffs to their constituencies at taxpayer expense aren’t stimulative.
Comments are closed.
Christine Romer is still defending that fantasy multiplier? And someone thinks that multiplier should be 4? That’s absurd. Currently, we’re a bit shy of 15 trillion in GDP for this year (according to the US Bureau of Economic Analysis) and the US government (ignoring the spending by state and local governments on top of this) has spent somewhere around 3.9 trillion dollars. A naive multiplication by 4 gives almost 16 trillion dollars, plus whatever state and local governments contribute.
Ah, but no one said anything about the sign of the multiplier, Karl!
The multiplier of deficit spending is a well-established fact. It’s value lies in the range of 0<= multiplier < 1.
Hardly, M. Removing tongue from cheek for a moment, there are excellent reasons to think that at least certain kinds of government spending can depress the GDP below what it would be had governmen spent zero. The only way to account for that is a negative multiplier.
The only possible way to manage a multiplier larger than one is to tackle major infrastructure improvements. That is: the spending has to provide strong economic benefits to people other than the workers.
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If you’re in a country with no rail system, constructing one will have benefits. Or major road improvements.
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But we already have a decent rail system and a decent road system – and the small amount of spending that went to “strict infrastructure” type things wasn’t evaluated on as infrastructure. “Just build it!” is the mantra – not “Well, which of these things is most useful.” Even the “infrastructure” spending was spent under the theory that any spending is good spending. Bridges to nowhere aren’t infrastructure.
Not true, you can also account for it with a multiplier < 1.
Another problem mentioned is the rationalization that the Stimulus (which committed somewhere around $600 billion) “saves or creates” jobs. Spending $171k per imaginary job “saved or created” is folly.
Oh it’s far worse than that, Karl. Remember where that $600 billion came from! It was extracted from companies with profitable years, or people with extra cash they could have used to buy stock, or start a company, or even just spend on consumer goods — all things that would have “created or saved” jobs.
In other words, there is no doubt that government taking that $600 billion cost jobs. The question is, did the government then spend it so wisely — so much more wisely than those who’d earned it would have spent it — that the number of jobs created exceeds the number lost?
Given even the government’s own numbers, I would say the answer to that is a big clear NO WAY. Which means this was in every sense of the word a negative “stimulus,” something that helped contract the economy and make worse the job market.
Good job, Obama! Good job, Democrats! Way to put out a fire with gasoline!