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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