One Times X is X

by Don Boudreaux on October 1, 2009

in Myths and Fallacies, Seen and Unseen, Stimulus, Taxes

Here’s Robert Barro and Charles Redlick reporting, in today’s Wall Street Journal, on their recent research that finds the alleged Keynesian multiplier to be largely mythical.

Closing paragraph:

The bottom line is this: 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.


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