American Recovery Act and stimulus program has a multiplier of more than 2: hence it was a very effective program

There have been a lot of false claims made about the ineffectiveness of the American Recovery act and the stimulus that it administered. But if one actually examines the data and calculates the rise in the GDP over the years since the GDP bottomed out in 2009 in chained 2005 dollars we discover that the rise in the GDP since then as of the fourth quarter  of 2012 again,  calculated in chained 2005 dollars, is more than twice as large as the stimulus. The precise value of the multiplier is 2.18 Given that state and local authorities and even the federal government were also cutting some expenditures during this period the number is a solid demonstration of the value of stimulus.

According to the official data as of Jan 2013 a total of 493.6 billion has been spent so far under the authority of the Act. Once we adjust that for the average of 2008 chained dollars and 2013 chained dollars its value is 434.4 billion. Similarly the rise in GDP in chained dollars from the first quarter of 2009 -the Recovery act was signed into law on Feb. 17, 2009- is 946 billion. So the multiplier is 946 divided by 434 = 2.18.

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About haroldchorneyeconomist

I am Professor of political economy at Concordia university in Montréal, Québec, Canada. I received my B.A.Hons (econ.&poli sci) from the University of Manitoba. I also completed my M.A. degree in economics there. Went on to spend two years at the London School of Economics as a Ph.D. student in economics and then completed my Ph.D. in political economy at the University of Toronto. Was named a John W.Dafoe fellow, a CMHC fellow and a Canada Council fellow. I also was named a Woodrow Wilson fellow in 1968 after completing my first class honours undergraduate degree. Worked as an economist in the area of education, labour economics and as the senior economist with the Manitoba Housing and Renewal Corporation for the Government of Manitoba from 1972 to 1978. I also have worked as an economic consultant for MDT socio-economic consultants and have been consulted on urban planning, health policy, linguistic duality and public sector finance questions by the governments of Manitoba, Saskatchewan,the cities of Regina and Saskatoon, Ontario and the Federal government of Canada. I have also been consulted by senior leaders of the British Labour party, MPs from the Progressive Conservative party, the Liberal party and the New Democrats on economic policy questions. Members of the Government of France under the Presidency of Francois Mitterand discussed my work on public sector deficits. I have also run for elected office at the municipal level. I first began to write about quantitative easing as a useful policy option during the early 1980s.
This entry was posted in business cycles, deficit hysteria, fiscal policy, Keynesian multiplier, treasury view, U.S., Uncategorized, unemployment and tagged , . Bookmark the permalink.

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