The U.S. federal government responded to the financial crisis and recession that began in 2007–08 with unprecedented fiscal stimulus. Passed in February of 2009, the American Recovery and Reinvestment Act (ARRA) came with a price tag of $831 billion. Yet the economy has not returned to a path of robust economic growth and unemployment has stubbornly remained high; only in September of 2012 did it dip (barely) below 8 percent. This has not stopped the Obama administration from pushing for further fiscal stimulus.
Whether or not fiscal spending stimulus is effective hinges critically on the size of the spending multiplier, which is dependent on several factors. In particular, if individuals anticipate the future tax liabilities associated with deficit spending and/or are “crowded out” by the deficit spending, then the multiplier is likely to be less than one; that is, each dollar of stimulus increases total spending in the economy by less than one dollar. Ultimately, whether the government spending multiplier is less than or greater than one is an empirical question.
Read More at cato.org . By Andrew T. Young.
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I should get my Masters degree because I am only 5 classes away from having it! I have always been a true believer in Supply and Demand is a driver in what business does and does not do. I also believe that the Govt putting 800 billion with a B into the economy is a false front. It allows people to be sloppy in their decision making process and does not let the market control as it should. I would much rather that 800 Billion go to TAKING DOWN THE DEBT!
I wish it were a loaw that every President at least had to have Economics 1 and 2 to be eligible for the Office. ok ok, and a citizenship etc etc.