Repost: Stimulus Didn’t Work

In our previous post, we left off the chart. (Amazingly, a dozen people commented without noticing the omission.) We’ve added the chart below.

This is University of Chicago economics professor Casey B. Mulligan writing at The New York Times economics blog:

I have illustrated the Keynesian-multiplier-1.5 as a red line in the chart below, and the actual results as blue squares. The blue square at the end of the red line is the data for the fourth quarter of 2009. If the multiplier of 1.5 held up, all of the data for the subsequent quarters should have appeared on the red line. (The quarters represented by the squares are not in chronological order.)

Instead, actual G.D.P. growth ended up below the red line and, more important, the quarters with more government spending growth tend to be those with less G.D.P. growth.

The blue squares showing actual results for our economy do not fit anywhere in the cone formed by the two Keynesian hypotheticals, suggesting that, contrary to the Keynesian promises, the stimulus law did not noticeably increase G.D.P. and might even decrease it.

Comments (6)

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  1. Paul H. says:

    Thanks for the data points.

  2. Madeline says:

    I already knew the stimulus wasn’t working.

  3. Joe Barnett says:

    The economy grew at a 5 percent rate for the 4th quarter 2009. The third quarter of 2009, it grew at less than 2 percent. See this BEA chart

  4. Jeff says:

    I second Madeline’s comment.

  5. Brian Williams. says:

    Taking money from the economy and injecting it back into the economy only stimulates the government, which it has.

  6. Erik says:

    As I said the first time. This is hogwash.