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Saturday, June 05, 2010

"Stimulus? What stimulus?"

This is an update to the post below this one on falling state and local government employment due to budget problems brought about by the recession:

Stimulus? What stimulus?, by Stephen Gordon: ... There has been much talk of the size of the US federal stimulus, and much debate about whether or not it has been an effective counter-cyclical policy instrument.
But it's important to remember that the proper measure for fiscal stimulus is not spending by the federal government; it is spending by all levels of government. And when you look at the contributions to US GDP growth (Table 1.1.2 at the BEA site), total government spending has been a drag on growth over the past two quarters. The increases at the federal level have not been enough to compensate for the spending cuts at the local and state levels.
I suppose that this could be interpreted as good news: despite a contractionary fiscal stance, the US economy is in recovery. But it raises the question of how much better it could be doing if it had an expansionary fiscal policy.

    Posted by on Saturday, June 5, 2010 at 11:52 AM in Economics, Fiscal Policy | Permalink  Comments (54)



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