Author: J. Bradford DeLong

From Project Syndicate:

The Harvard economist Robert Barro, writing in The Wall Street Journal, recently made an intelligent argument against America’s fiscal stimulus. After wading through the drivel of ethics-free Republican hacks and knowledge-free academic hacks who claim, one way or another, that the basic principles of economics make it impossible for government spending decisions to alter the flow of economic activity, reading Barro comes as a great relief.

But I think that Barro misreads how his own evidence applies to our current situation. Barro writes that he “estimate[s] a spending multiplier of around 0.4 within the same year and about 0.6 over two years…. [T]he [tax] multiplier is around minus 1.1…. [Thus,] GDP would be higher than otherwise by $120 billion in 2009 and $180 billion in 2010…,” and by $60 billion in 2011.

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See Also:

• Here’s The Real Reason Schwarzenegger Is Beating Up Republicans Over Stimulus Attacks
• Here’s What Bush’s Stimulus Plan Would Have Looked Like
• CHART OF THE DAY: If You Thought The American Economy Was Juiced By Stimulus, You Haven’t Seen Anything Yet

From Brad DeLong’s semi-daily journal:

Alan Kling and Greg Mankiw do Tyler Cowen no good service in recommending that he read Keith Hennessey — who is in full spin entropy-maximization mode, striving to reduce the level of the debate. And Tyler does his readers no good service in reproducing Hennessey (see: graph).

Left out of Hennessey’s “analysis” i the reason that an 8.3% of GDP deficit is warranted: that the economy is very weak.

Left out of Hennessey’s “analysis” is the reason that President Obama projects bigger deficits this year than he did last year–that the economy is extremely weak, and is much weaker than we expected it to be, and when the economy is weak the deficit goes up as revenues fall and social-insurance spending rises: a year ago the administration expected the unemployment rate now to be 7.7%, but it’s 10.0%; a year ago the administration expected the unemployment rate at the start of fiscal 2011 to be 7.0%, but now it expects it to be 9.8%; a year ago the administration expected the unemployment rate at the start of fiscal 2012 to be 6.4%, but now it expects it to be 8.9%.

Read the rest at DeLong’s Blog –>

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See Also:

• How The %&$! Do You Spend $3.8 Trillion?
• Look At This Future-Generation Crushing Budget Obama Just Unveiled
• Here’s Why Attempts To Cut The Deficit Will Definitely Make The Nation Poorer