Quote:
Originally Posted by Laz
I would love to see a report on the effectiveness of the stimulus. If it worked, great, Obama can brag about it. If not it would be good to see the details so that future attempts to spend money on the things that did not work can be stopped...
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There have been plenty of reports on the effectiveness (or lack thereof) of the stimulus.
But I suspect that what you're suggesting you'd like to see is some sort of definitive final report with conclusions accepted by virtually everyone. You'll never find that. The main problem, to which I alluded in my previous post, is that this is not the sort of thing that can be mathematically modeled in any convincing way. Left-wing academic economists generally hold the view that fiscal multipliers are fairly high and support high levels of countercyclical government spending. Private sector economists who do macroeconomic modeling and other analysis for investment firms and private forecasting firms tend to disagree. The latter group has been winning the debate in recent years. For example, the European Central Bank commissioned what is called "robustness analysis" of some of these models, subjecting them to all kinds of variable ranges. The conclusion was that "multipliers" are far less than widely believed, and tend to be in the 0.5 vicinity or less. This comports with resaerch by Robert Barro and others in the U.S.
One thing to note is that very little of the stimulus package was devoted to needed infrastructure development or maintenance. Most of it was tax cuts, transfer payments, and aid to states so that they could put off tough decisions involving public sector unions and pension liabilities for a little bit longer.
I think that some of the best reports on the stimulus were offered by Stanford economist John B. Taylor. Here's one paper in which he and his co-author explain why so much of the spending was ineffective:
http://www.stanford.edu/~johntayl/Co...nd%2010-25.pdf
By the way, he's the guy who created the well-known "Taylor Rule" formula for monetary policy back in the 1990s.
Another point I would make is that one of the main claims made by stimulus supporters was that we needed to heal the economy by creating more aggregate demand. There's certainly something to be said for that
if you get U.S. factory floors humming and create sustained, altered patterns of production that can boost exports as well as domestic consumption. But if much of consumers' additional spending power is used to buy crap imported from Asia and sold by Walmart...well, not quite so much.
One ridiculous claim made by a few pundits is that the stimulus "worked" because we didn't collapse into a redux of the Great Depression. But the money had barely begun to be spent when the recession was "officially" over (NBER call) in June of 2009.
Throughout American history, we've had financial panics, booms and busts, asset bubble deflations, depressions, etc. But in each case, the economy recovered, in most cases quickly and robustly. Prior to the 1930s, no one had thought of the possibility that we needed massive government intervention involving huge spending increases or "stimulus packages."
Here's just one example:
http://articles.washingtonpost.com/2...-state-senator
The notion that a recession-wracked economy won't recover without big increases in government spending is simply ludicrous.
