 Eclectic thinking on politics, policy and more 1/22/09Barro Says No Free Lunch
Robert Barro in the WSJ argues that there's no multiplier effect from increased federal spending in terms of its impact on GDP -- if he's right the Obama folks would be overstating the potential impact from a spending side stimulus. I'd like to see the rebuttal from the Democratic economists.
UPDATE: Krugman responds to Barro here.
posted by Matt at 6:32 AM
About Me
Matt Miller is the author of The Tyranny of Dead Ideas: Letting Go Of The Old Ways Of Thinking To Unleash A New Prosperity, published by Times Books in January 2009. He is a contributing editor at Fortune and host of public radio's popular week in review program, "Left, Right & Center." Matt is also a senior fellow at the Center for American Progress, and served as an aide in the Clinton White House. His first book, The Two Percent Solution, was a Los Angeles Time bestseller. He lives with his family in Los Angeles. BooksPrevious Posts
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2 Comments:
Go to Paul Krugman's blog for a reply, Matt.
http://krugman.blogs.nytimes.com/
www. waynelively.com
Well, I hate to criticize a Harvard economist, but this article is just silly. The evidence for a multiplier effect is everywhere. Maybe it's 1.5. Maybe it's even higher in a very poor country with no capital resources, or under circumstances of even modest unemployment. The argument that stimulus spending somehow deprives other sectors of the economy of those resources is nuts. We now have vast quantities of untapped capital equipment and labor. Finally, to argue that the "stimulus" of arms spending during WWII somehow should have produced a higher multiple of the GDP overlooks the obvious fact that we were in a big damn war with rationing and stringent economic controls.
Let's put America back to work already, whether you call it a stimulus, or just sensible leadership.
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