The Effectiveness Of Stimulus

"One of the biggest economic myths since the Great Depression is that governments can ameliorate or counteract the ebbs and flows of free markets. Government spending has never worked as a trigger for sustained and vibrant economic growth. Ever. Scholarship has demonstrated that the New Deal perpetuated the Depression rather than cured it. On the eve of the Depression the U.S. had the lowest unemployment rate among developed nations. But a decade later, despite six years of FDR's New Deal, our unemployment rate was one of the highest among developed economies. Japan's serial stimulus programs over the past two decades have repeatedly underscored this truth."

Steve Forbes, Forbes Magazine, March 1 2010 p. 11 (link found here)

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I have written extensively about interventions, which includes stimulus spending. Stimulus spending and interventions are widely (and wildly) misunderstood.

I think it is very important to have a full understanding of how the ARRA, a very large stimulus, is performing. As I wrote in a July 9 2009 blog post in which I discussed the ARRA, "Even if one were unabashedly pro-stimulus, one would find some serious faults with the $787 Billion stimulus plan, as enacted." As such, it should be of little surprise that the ARRA has been, at best, such a poor performer when analyzed in a variety of manners.

Here is a recent article from Alan Reynolds concerning the effectiveness of the ARRA. Although I don't necessarily agree with some of his conclusions, he does present some interesting statistics and views with regard to how the ARRA has performed.



SPX at 1102.34 as this post is written