The View From 1776
Friday, August 06, 2010
Further Light On The Mythical Keynesian Multiplier Effect
An article of Keynesian socialistic faith is the so-called multiplier effect. Every $1 of deficit spending by the government theoretically creates $1.50 to $2.00 of new GDP. Experience proves that the multiplier effect, if it ever existed, no longer works.
The multiplier effect of Obama’s $800+ billion stimulus plan was forecast to reduce unemployment to 8% and to jump start economic recovery. It has done neither.
That is hardly surprising. What magical quality could government confer upon the process of taking money from constituents who are out of favor and giving it to favored groups?
Many studies by American economists have discredited the multiplier effect. Now even socialist Europe’s official institutions agree. Back to summary...