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Monday, August 31, 2009
11:22 AM EDT
Tim Andrews

Economic Growth and Fiscal Policy

Since embarking on the reckless spending spree laughably called a 'stimulus', the Administration has constantly been telling us how we're going to spend our way out of a recession.

But what does the data show? John Humphries, from the Centre for Independent Studies, has put together this handy guide comparing the size of discretionary fiscal policy  in 2008/2009 - ie the size of the 'stimulus packages' - around the world to projected 2009 economic growth.

 

 

 

 

 

 

 

 

 

 

 

 

 

The result? "There is almost no correlation between discretionary fiscal policy and economic growth (correlation coefficient = 0.0651, p-value 0.825, not statistically significant)."

As John concludes, "On it’s own, this does not prove anything. The performance of different economies is caused by many different factors which cannot be captured by looking at a simple correlation. But if people want to take a simple look at the “stimulus-growth” correlation, they should consider the whole world... and the evidence fro m the whole world seems to back up what all good economists already know — that active fiscal policy doesn’t work."

We have morgaged our entire next generation on a policy that will make no short term improvement whatsoever, yet cause a lot of harm in the long term.

(Reproduced with permission from John Humphries)

Posted by Tim Andrews on Monday, August 31, 2009 11:22 AM EDT
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