Is There A Multiplier Effect?

The Rabbi

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Lots of posts here defend this or that spending program by the administration by arguing that in provides a "multiplier effect" to the economy: when government spends $1 it creates more than one dollar in overall economic benefit. Like a lot of things that sounds logical but in the real world it isn't so.
It isn't just USMB posts either. Politicians (of both parties) have supported this idea in favor of greater spending.
Is it true? No. It isnt. In fact the effect of gov't spending one dollar seems to be the opposite: it produces less than a dollar benefit, a net loss to the economy.
That would certainly explain why the biggest stimulus we've seen has resulted in one of the worst economic performances in post war US history. But equally Japan passed stimulus after stimulus for 20 years with nothing but debt to show for it.
Can we lay this canard to rest once and for all?
Does government spending really promote economic growth? - CSMonitor.com
 

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