Econ Bloggers imply fiscal multiplier is only a theoretical concept

Econ Bloggers Survey for Q3 2011 is out. The pdf of survey findings is here.

In this survey, few bloggers are picked and asked to write a question which they think is interesting. This question is then attached to the survey for bloggers to respond.

In this edition, Mostly Economics was asked to frame a survey question. ME’s question and choices were (thanks to Tim Kane of Kaufman foundation for helping frame the q properly):

Did fiscal policy expansion in 2009, particularly ARRA (“the stimulus”), mitigate or alleviate the impact of the crisis?

Much less than 1
Less than 1
Equal to 1
Greater than 1
Much greater than 1

Ideally I would have liked the question to be even more specific and ask people separately whether tax cuts worked or government expenditure worked and so on. But you have limitations and need to stick to one question.

The answers surprised me for sure:

Much less than 1 — 19%
Less than 1 — 28%
Equal to 1 — 30%
Greater than 1 — 21%
Much greater than 1 — 2%

So just about 23% thought there was a multiplier. 77% think there was no multiplier effect from the fiscal stimulus. 30% think it is equal to 1 meaning govt support of 1 USD just led to creation of 1 USD which is not multiplier really. I was expecting many more to say greater than 1 if not much greater than 1. Based on consensus, it seems ARRA/US fiscal stimulus was a failure.

However, questions still remain. Some might think it was too small a package and hence not the desired impact. Then some might have issues with the design and would have wanted more of tax cuts or more of expenditure.

The survey says:

Assessment of the 2009 fiscal stimulus bill that was passed by a partisan majority of Democrats in the House and Senate and signed into law early in the Obama administration has proven controversial as the recovery was weaker than expected. However, defenders of stimulating aggregate demand argue that, absent the stimulus, the recession would have been worse or possibly tipped into an outright depression. Agrawal’s question frames the judgment on a technical description of the “multiplier,” which is the estimate of how much government spending trickles down into the economy. A multiplier “equal to one” means the spending added no boost to aggregate demand, but also did no harm, meaning it had a neutral effect. Seventy-seven percent of respondents believe the stimulus had a neutral or negative effect (a multiplier equal to or less than one), with most believing the multiplier was actually less than one (47 percent). Only 23 percent of respondents believe the multiplier was greater than one.

Barring this, there were some other interesting qs s well:

  • Nick Schulz (Enterprise Blog) asked and many bloggers answered: What is a realistic long-run growth rate for annual real per capita GDP in the United States?
  • Ryan Avent (Free Exchange) asked: Over the next decade, what share of the U.S. fiscal consolidation should be accomplished through revenue increase?
  • Chris Masse (Midas Oracle) asked: Have Robin Hanson, Justin Wolfers, and James Surowiecki been exaggerating the usefulness of the prediction markets?
  • Craig Newmark (Newmark’s Door) asked: There is widespread speculation that the U.S. government will attempt to break up or attempt to regulate Google. What will happen? What should happen?  Will the FTC file suit against Google?
  • Menzie Chinn (EconBrowser) asked: Do you agree with the following statements about the advent of bloggers relative to the period when newspaper columnists dominated?



Read the survey for answers..

Then obviously there were qs on US economy.

  • Uncertain, weak and Vulnerable remain the most used adjectives.
  • 44% feel US economy doing worse than what official numbers show
  • 61% feel Fed Govt too involved in US
  • Lending to businesses etc is fair

Read it for more detailed findings….



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