New study shows zero impact of $800 billion stimulus

New study shows zero impact of $800 billion stimulus

Rick Moran


There have been other studies hinting at the same thing,
but this one by John
Cogan and John Taylor
of the Hoover Institution appears to be pretty

In September 2009, we reported on this page empirical research
showing that the temporary tax rebates and transfer payments in the Bush and
Obama administration’s stimulus programs were ineffective. Here we consider new
data on the impact of increases in government purchases, which were heralded as
a major stimulating factor in the Obama package.
The key tenet of Keynesian economics is that government purchases of goods
and services stimulate additional economic activity beyond the amount of the
purchase itself. The impact on GDP of the stimulus depends both on the dollar
volume of additional government purchases and on the size of the government
purchases multiplier, i.e., the effect of a change in government purchases on
real GDP.
Although the policy debate has mainly focused on the multiplier’s size, data
covering the first year and three quarters of the 2009 American Recovery and
Reinvestment Act (ARRA) show that, despite the large size of the program, the
dollar volume of additional government purchases that it has generated has been

“Negligible” as in perhaps a 3% difference. One thing that the stim bill
accomplished was bringing down state indebtedness – about $130 billion less was
borrowed. That’s not to say that the states didn’t spend that money. They just
didn’t need to borrow against tomorrow to do it.
This won’t stop liberal economists like Paul Krugman from ranting about more
and more stimulus. But it least it gives the opposition a little ammunition to
stop the madness before we are forced into

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at December 10, 2010 – 11:09:24 AM CST

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