Sunday, May 8, 2016

Norm Mogil — Fiscal Policy to the Rescue?


It's the multipliers, stupid.
Not all fiscal stimuli act with the same degree of potency. Chart 2 separates the type of stimulus between " investment" and "tax" measures. The governments obtain the greatest bang for the buck when undertaking infrastructure projects, both for their immediate impact on jobs and income as well as for their longer term benefits in adding to productive capacity (e.g. urban transportation systems). Next in importance are stimulus programs generated by increasing government consumption of goods and services (i.e. day-to-day expenses associated with government operations).
Tax measures, on the other hand, have not proven to be anywhere nearly as effective in promoting growth. The impact of reductions in personal or corporate tax cuts are de minimis. Since some portion of a tax cut is usually saved rather than entering the spending stream, tax multipliers are lower than government spending multipliers.
Thus, economists have long urged governments to look to stepping up their capital investment activities as the primary driver of fiscal stimulus policy.
Sober Look
Fiscal Policy to the Rescue?
Norm Mogil

7 comments:

Ralph Musgrave said...

"Bang per buck" is completely irrelevant, and for the simple reason that stimulus costs nothing in real terms: e.g. in the case of helicopter drops, printing $100 bills costs virtually nothing.

Ryan Harris said...

Multipliers are dependent on real factors. If they build a highway and import the cement from Mexico, Steel from Malaysia (smuggled from China to avoid tariffs), Tractors from Germany, aggregates from Canada and guest labor From El Salvador, then the "multiplier" is probably less than if they used domestic union steel workers, with steel produced in the US with US ore and US workers, etc... The devil is in the details of the procurement contracts and procurement contract details are determined by trade deals. So skip the high minded talk about multipliers and talk in plain english, and the crappy trade deals that they've negotiated. Which isn't politically correct because it might encourage the riff raff to become protectionist, against their own interests. The masses can never remember that all imports are always a benefit, they are getting that highway for free now, no one 'domestic' has to work to produce it. But isn't the whole idea to get people working? oh wait, well the benefits are more abstract, lets talk about multipliers again shall we?

Y'all feeling the richness of it?

Matt Franko said...

"Which isn't politically correct because it might encourage the riff raff to become protectionist,"

No Ryan that is what the left calls the "xenophobia!"...

What youve outlined is probably exactly what is happening... almost all fiscal is going to foreigners... very little domestic impact... but the SPs can still make a ton of munnie and the stock market can go up with this type of economy no problemo....

Matt Franko said...

Ryan here:

http://www.dailykos.com/story/2014/6/10/1305808/-California-discovers-hidden-price-tag-of-outsourcing-Bay-Bridge-to-China

State of California buys Chinese steel and directly hires Chinese coolie labor to install it.... to "save money!"...

Daily Kook people probably also would term someone who would advocate against this type of domestic policy a "xenophobia!" person at the same time... left > insane

Simsalablunder said...

" that is what the left calls the "xenophobia!"..."

Nope. It's you once again ascribing it to the "left" and looking for support for it.

Bob said...

For the umpteenth time, 'xenophobia' was ascribed to Trump and like-minded supporters. This is separate from protectionism.

Ryan Harris said...
This comment has been removed by the author.