It Looks Like the Stimulus Worked After All

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Conservative economist Douglas Holtz-Eakin has a chart he’s fond of that demonstrates just how ineffective the 2009 stimulus was. Basically, it shows that the stimulus cost $260 billion and produced only an extra $268 billion in GDP. Personally, I’d take even that, but his point is that the stimulus produced no Keynesian multiplier effect at all. It was just a 1:1 replacement of revenue from one source to another.

But as you may recall, the US Bureau of Economic Analysis recently revised its GDP estimates from late 2008 and 2009, and it turns out the economy was doing much worse than we thought. And if you don’t recall this, Michael Linden wants to remind you about it today. He also wants to remind Douglas Holtz-Eakin about it. Because it turns out that when you redo Holtz-Eakin’s favorite chart using the corrected data, it suggests that the stimulus bill produced about $544 billion in extra GDP. In other words, a multiplier effect of about 2x.

I suppose there are two ways to respond to this. Holtz-Eakin could admit that he was wrong. Or he could invent a reason that his old chart is no good and then scurry back to his computer to produce a brand new chart using a different methodology that, once again, shows that the stimulus didn’t work. We’ll see which way he chooses.

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Fact:

In-depth journalism that investigates the powerful takes real money and is so damn important right now.But it doesn’t take a Mother Jones investigation to know that billionaires and corporations will never fund the type of reporting (like they do politicians) we do that exists to help bring about change. Instead, our mission-driven journalism is made possible by people power, and has been for 46 years now since our founding as a non-profit.

In “TITLE TK” Monica Bauerlein writes about the perilous moment we’re in, and why it’s so important that we raise $325,000 by the time November’s midterms are decided so we can be ready to throw everything we have at the big issues facing the nation no matter what happens. Please help MoJo’s people-powered journalism with a donation today.

$400,000 to go!

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