Jennifer Rubin in The Washington Post:
Last fall Chris Caldwell wrote in the Weekly Standard:
German policymakers do think the United States is misguided as a matter of economic reasoning. "We think they're wrong," says one top official. "We think you don't get the multiplier they say." The multiplier is the measure of how much economic activity results from emergency government spending. Discussions of the multiplier were at the center of the debates over the Obama stimulus plan. Christina Romer and the president's other economic advisers argued that the multiplier would be around 1.6--the government would create $1.60 worth of economic activity for every dollar it spent. At those rates, who can afford not to stimulate? "Our research says the multiplier is more like .60," says the German official. If he is correct, then a stimulus plan can actually deaden an economy rather than stimulate it. If he is correct, you might have been as well off to have taken the stimulus money and thrown it away.
What he calls "our research" does not mean studies commissioned by the German government. It means academic papers that are either skeptical about stimulus in general or question the long-reigning orthodoxy that stimulus plans based on government spending outperform stimulus plans based on tax cuts.
Facts are facts. The "stimulus" "multiplier" turns out to be a stultifying divider.
Frank Warner
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