Barro and Redlick on ‘stimulus’

[Skip to the end]

Thanks, at least he’s off most of his prior ‘Ricardian equivalence’ nonsense:

Stimulus Spending Doesn’t Work

The bottom line is this: The available empirical evidence does not support the idea that spending multipliers typically exceed one, and thus spending stimulus programs will likely raise GDP by less than the increase in government spending.

That’s a good thing. It means we can have taxes be that much lower for a given level of spending.

That’s a ‘good thing’ in my book!

Defense-spending multipliers exceeding one likely apply only at very high unemployment rates, and nondefense multipliers are probably smaller. However, there is empirical support for the proposition that tax rate reductions will increase real GDP.

Not to mention a payroll tax holiday. And federal revenue sharing. And funding an $8/hr job for anyone willing and able to work.

Mr. Barro is a professor of economics at Harvard and a senior fellow at Stanford University’s Hoover Institution. Mr. Redlick is a recent Harvard graduate. This op-ed is based on a working paper issued by the National Bureau of Economic Research in September.

Please forward this to Mr. Barro and Mr. Redlick, thanks!