The Gross Domestic Product, after the multi-trillion dollar "stimulus package", is growing. Just. But failing to keep pace with inflation and population growth - so GDP per capita continues to fall, whereas in every other recession since WWII, it had recovered by now.
Growth in gross domestic product – a measure of all goods and services produced within U.S. borders – rose at a 1.3 percent annual rate, the Commerce Department said. First-quarter output was sharply revised down to a 0.4 percent pace from 1.9 percent.Well, some did.
Economists had expected the economy to expand at a 1.8 percent rate in the second quarter.
During WW2 a huge bite of the unemployed were drafted, thereafter to live in awful conditions, and everything was rationed. Private savings went up very rapidly. Maybe we need rationing and war bonds? Precisely the opposite of what Keynes would recommend?
ReplyDeleteIn the U.S.A., WWII dramatically increased both government taxation and spending - most modern Keynesians consider the effects of WWII - not the New Deal - as what pulled us out of the slow growth after the Great Depression.
ReplyDeleteAs for the (much more recent) stimulus, from a macroeconomic perspective, it wasn't actually tried in the U.S.A. If you add the increase in federal spending with the decrease in local and state spending, you'll note that the total governmental spending in the U.S.A. since just before the stimulus has been pretty much flat.
Or to put it another way, the stimulus was so small that it did little other than offset the de-stimulative effects of most states having a decrease in income over that same time period.
I'm curious why you think that the stimulus package was "multi-Trillion" As far as I'm aware, it was less than 1 Trillion dollars.
ReplyDeleteA source: http://www.recovery.gov/Pages/default.aspx
Well, a big part of this sluggish recovery is that the 'multi-trillion dollar stimulus package' was only about 800 billion, half of which were tax cuts that had a multiplier of less than 1. (0.3 for corporate tax cuts.)
ReplyDeletePaul Krugman called for a stimulus roughly double the size and to be focused on infrastructure and anti-poverty measures, as the money people receive from those measures tend to be spent quickly and have multipliers in the 1.6 range. When that package didn't happen, he predicted the increase in unemployment we have now seen.
Keynesianism works just fine, when it's allowed to.