DeLong vs. Barro

The Stimulus Evidence One Year On – Robert Barro

Is Fiscal Stimulus Pointless? – DeLong

US Spending Multipliers

Accordingly with Robert Barro

[...] 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.

Is Stimulus Still Necessary?

"A boom not a slump is the right time for austerity at the Treasury" said Keynes

"Have stimulus packages brought the world’s traumatized economies back to life? Or have they set the scene for inflation and big future debt burdens? The answer is that they may have done both. The key question now concerns the order in which these outcomes occur."

"The theory behind the massive economic stimulus efforts that many governments have undertaken rests on the notion of the output gap' This is the difference between an economy’s actual output and its potential output. If actual output is below potential output, this means that total spending is insufficient to buy what the economy can produce."

"A stimulus is a government-engineered boost to total spending. Government can either spend more money itself, or try to stimulate private spending by cutting taxes or lowering interest rates. This will raise actual output to the level of potential output, thereby closing the output gap. "

Project-Syndicate, Skidelsky