Barro 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.


Blogger Wayne said...

Go to Paul Krugman's blog for a reply, Matt.


www. waynelively.com

January 22, 2009 at 2:46 PM  
Blogger LAToxDoc said...

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.

January 22, 2009 at 5:07 PM  

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