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Megan McArdle is not impressed by Obama’s claim that the stimulus saved the economy

February 17, 2010

I’m watching Obama claim that it is “largely thanks to the Recovery Act” that the recession didn’t become a depression. I supported the stimulus, and still do. But this claim is ludicrous.

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So the administration is claiming that by spending less than $300 billion, it managed to prevent more than $700 billion in economic decline–in other words, that the multiplier for their spending was higher than two. They’re saying that every dollar they spent increased GDP by more than $2.

That’s a pretty high estimate, especially when you compare it to the CBO’s estimates of multipliers for various components of ARRA. Even if you take the top end of the range they give for every one of those multipliers, you’d still fall short, because the bits that give you the most stimulative bang for your buck–the direct government spending–have so far disbursed the least money.

(source)

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