Stimulus plans don't work

Contributed by: filbert Thursday, October 01 2009 @ 01:57 PM CST

That's what two Harvard economists, Robert J. Barro and Charles J. Redlick report in the Wall Street Journal.[*1]

The bottom line is this: The available empirical evidence does not support the idea that spending multipliers typically exceed one, and thus spending stimulus programs will likely raise GDP by less than the increase in government spending. Defense-spending multipliers exceeding one likely apply only at very high unemployment rates, and nondefense multipliers are probably smaller. However, there is empirical support for the proposition that tax rate reductions will increase real GDP.

In other words, in the real world, tax cuts are the correct policy response to an economic slowdown. Non-defense "stimulus" spending doesn't work. Defense-related stimulus spending works, but only when the unemployment rate is "very high."

Obama and the Democrats have wasted our time and money. Bigtime.

John Stossel[*2] piles on:

In January, the administration's economic models warned that unemployment would hit 9 percent next year if its $787 billion "stimulus" wasn't passed. Passing it would keep the jobless rate under 8 percent before it begins to fall.

Well, the packaged passed-and unemployment in August rose to 9.7 percent.

Oops.

OK, economic forecasters make mistakes. Fair enough. But neither the administration experts nor President Obama will acknowledge that their models and strategy are flawed. Instead, they spin the numbers and proclaim success, insisting that the plan is working even though unemployment is higher than they said it would be.

The Democrats: Dead wrong on the economy. What else are they dead wrong about?

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Medary.com - Stimulus plans don't work
http://www.medary.com/article.php/20091001125758786

[*1] http://online.wsj.com/article/SB10001424052748704471504574440723298786310.html
[*2] http://reason.com/archives/2009/10/01/success-no-matter-what