Do the math
Much of the publically stated rationale for Obama’s plans to print a trillion dollars is the Keynesian predicted “multiplier effect” that government spending $1 increases the GDP by more than $1. Obama’s plan assumes a multiplier of “1.5”.
Trouble is… that multiplier is a fantasy. It is “voodoo” according to economist Robert Barro:
A much more plausible starting point is a multiplier of zero. In this case, the GDP is given, and a rise in government purchases requires an equal fall in the total of other parts of GDP — consumption, investment and net exports. In other words, the social cost of one unit of additional government purchases is one.
He then takes the time to crunch the data and comes up with a multiplier not “significantly different from zero”:
In any event, when I attempted to estimate directly the multiplier associated with peacetime government purchases, I got a number insignificantly different from zero.
There is a much more mundane calculus being done here. It revolves around 8 years. The only way for Obama to take “credit” for saving us, is to do something (anything) and hope things get better within 8 years. Also, in this vast spending is the setup for socialist control wanted by so many in the Democratic party.
This “trillion” has nothing to do with helping us… it is about politics and radical change of our nation’s fundamentals.
With a compliant press and mostly career politicians left in Republican ranks, I fear they will expand it to buy them off and pass it soon.
H/T Dad
Update: Interesting video of 3 Univ of Chicago economists talking about the stimulus plan.