Legal Commentary

Does Government Spending Stimulate?

By Jonathan H. Adler

Robert Barro and Charles Redlick argue there is little evidence that government “stimulus” does much to stimulate the economy.  They conclude:

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. 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.

Full post as published by The Volokh Conspiracy on October 01, 2009 (boomark / email).