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Thursday, October 1, 2009
1:44 PM EDT
Benjamin Pacini

We Couldn't Have Said It Better Ourselves

Robert Barro, an economist at Harvard had an op-ed in today’s Wall Street Journal, entitled “Stimulus Spending Doesn’t Work.”  We couldn’t have said it better ourselves.

It is somewhat technical (or, in other words, thrilling for economists, somewhat incomprehensible to the rest of us) but here is the excellent conclusion.

 “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, Keynesian spending does not seem to boost GDP enough to make it worth it to take the money from taxpayers in the first place.  Tax rate cuts, on the other hand, seem to stimulate growth.

Well done, Dr. Barro.

Posted by Benjamin Pacini on Thursday, October 1, 2009 1:44 PM EDT
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