The Homa Files

Excerpted from WSJ, “Old Europe Is Right on Stimulus”, March 12, 2009

A recent study by a trans-Atlantic team of four economists subjected the Administration’s stimulus to the most recent Keynesian scholarship.

The White House estimates of 3.6 million new jobs is based on an “Old Keynesian” model on the impact of government spending, while the new models adjust for the rational behavioral response to the stimulus by businesses and consumers.

What the four economists found is that the Administration’s estimates for stimulus growth were six times as high as they could produce under a modern Keynesian simulation. By their estimates, the stimulus would produce, at most, 600,000 jobs and add perhaps 0.6% to GDP at its peak.

For those keeping score at home, that’s $1.3 million in spending per job … and pushes the US deficit over 60% of GDP

The Administration is already worried that its stimulus will come up short … and the outside intellectual godfathers of the Obama plan are denying paternity.

Full article:
http://online.wsj.com/article/SB123681403239101741.html

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This entry was posted on March 16, 2009 at 7:59 am and is filed under Financial Crisis, Obama Administration, Stimulus Plan. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.