A bigger stimulus would not have helped

[Antiderivative]

Professor John Taylor argues that the stimulus had little to no affect and increasing the size would have had no effect.

Paul Krugman writes (citing Noah Smith) that he agrees with the empirical findings in my critique of the revival of Keynesian activism in the 2000s (the stimulus packages of 2001, 2008 and 2009). In particular, he writes that “it’s far from clear that the ARRA actually led to much of a rise in government spending, while the tax cuts that made up much of the stimulus were probably largely saved.”

But he then goes on to say that the stimulus was too small. That’s not what I found in my paper. As I stated in the paper, my “results do not lend support to” the view “that the stimulus was too small.” Rather the paper showed that “a larger stimulus package—with the proportions going to state and local grants, federal purchases, and transfers to individual the same as in ARRA—would show little change in government purchases or consumption.”

Now, I know that Krugman is trying to distinguish between good and bad Keynesian stimulus packages, and that he would like a stimulus package with higher proportions going to federal, state, and local government purchases than the 2009 stimulus, or, for that matter, the 2008 stimulus or the 2001 stimulus. But experiences from the 1970s raise serious doubts about the political and operational feasibility of such discretionary fiscal policy. So do recent experiences in many other countries, as shown by Hyun Seung Oh and Ricardo Reis.

Economics One: No, A Bigger Stimulus Would Not Have Worked Either

Predictions made in early 2009 about whether the stimulus package would work varied widely because the models used to make the predictions varied widely. Models used by Christy Romer and Jared Bernstein predicted large effects of the 2009 stimulus (ARRA), while models used by John Cogan, Tobias Cwik, Volker Wieland and me predicted small effects.

*snip*

The best way to way to deal with this problem is to look empirically at the direct effect of the stimulus using actual data, but without imposing a specific model structure like Model A or Model B. In a paper forthcoming in the Journal of Economic Literature I use this direct approach and find that the ARRA did not stimulate the economy

Economics One: How to Resolve the Stimulus Debate: Use Data Not the Same Models Over Again

 

[uscitizen]

We are in a much different situation now the old economic rules no longer apply in many cases.

 

[Charles_Main]

Professor John Taylor argues that the stimulus had little to no affect and increasing the size would have had no effect.

Paul Krugman writes (citing Noah Smith) that he agrees with the empirical findings in my critique of the revival of Keynesian activism in the 2000s (the stimulus packages of 2001, 2008 and 2009). In particular, he writes that “it’s far from clear that the ARRA actually led to much of a rise in government spending, while the tax cuts that made up much of the stimulus were probably largely saved.”

But he then goes on to say that the stimulus was too small. That’s not what I found in my paper. As I stated in the paper, my “results do not lend support to” the view “that the stimulus was too small.” Rather the paper showed that “a larger stimulus package—with the proportions going to state and local grants, federal purchases, and transfers to individual the same as in ARRA—would show little change in government purchases or consumption.”

Now, I know that Krugman is trying to distinguish between good and bad Keynesian stimulus packages, and that he would like a stimulus package with higher proportions going to federal, state, and local government purchases than the 2009 stimulus, or, for that matter, the 2008 stimulus or the 2001 stimulus. But experiences from the 1970s raise serious doubts about the political and operational feasibility of such discretionary fiscal policy. So do recent experiences in many other countries, as shown by Hyun Seung Oh and Ricardo Reis.

Economics One: No, A Bigger Stimulus Would Not Have Worked Either

Predictions made in early 2009 about whether the stimulus package would work varied widely because the models used to make the predictions varied widely. Models used by Christy Romer and Jared Bernstein predicted large effects of the 2009 stimulus (ARRA), while models used by John Cogan, Tobias Cwik, Volker Wieland and me predicted small effects.

*snip*

The best way to way to deal with this problem is to look empirically at the direct effect of the stimulus using actual data, but without imposing a specific model structure like Model A or Model B. In a paper forthcoming in the Journal of Economic Literature I use this direct approach and find that the ARRA did not stimulate the economy

Economics One: How to Resolve the Stimulus Debate: Use Data Not the Same Models Over Again

The Net from the Stimulus was not a help anyways. We might have gained a short term Blip in GDP, but it had little to no effect on Jobs, and was extremely inefficient with the ones it did "create". In the end all it did was make our Long term Debt Issues worse.

Spending more in that way would have just been more long term Debt issues, and very little short term Benefit.

Of Course I was just a racist asshole when I was saying this before the damn bill passed. Why else oppose the great Obama's attempts to fix things. Must be a racist huh.

No How about unlike MR Obama I am able to look beyond NOV 2012 when rendering judgement on the things they pass.

 

[Wiseacre]

We are in a much different situation now the old economic rules no longer apply in many cases.

Agreed, today's circumstances are unique from those in the past, I would say that strategies that worked before may not work now. A bigger stimulus may not work even if it's 2 or 3 trillion, we might end up with a temporary burst but the debt would be much higher. For sure we'd be paying higher interest rates on our debt cuz the ratings agenices would downgrade us. Bad gamble if you ask me.

 

[uscitizen]

We are in a much different situation now the old economic rules no longer apply in many cases.

Agreed, today's circumstances are unique from those in the past, I would say that strategies that worked before may not work now. A bigger stimulus may not work even if it's 2 or 3 trillion, we might end up with a temporary burst but the debt would be much higher. For sure we'd be paying higher interest rates on our debt cuz the ratings agenices would downgrade us. Bad gamble if you ask me.

Yep pumping more money into the economy is not the answer.
We need to make real decisions that will actually build back America.
Stimulus money is just sucked up by corporate interests with no long lasting results for the betterment of America.

Now this is not to say that we do not need to spend more to help people thru these trying times, but it needs to be well spent not just spent and rated on volume not quality.

 

[Soggy in NOLA]

We just need to monetize more debt... yep, that's the ticket.

 

[uscitizen]

We need to send more jobs to China.

All we need to do here is invest in the market and not actually produce any viable product at all.

 

[Soggy in NOLA]

I need more pizza.