The legendary economist Robert Barro explains in the Wall Street Journal why the stimulus package will not work. (Via the Corner.)
One interesting bit that I did not know is Barro’s estimates of the Keynes multiplier. For a peacetime stimulus, the multiplier is “insignificantly different from zero.” That means that the “stimulus” does not stimulate the economy, and serves only to shift production away from consumption and investment. Even during World War 2, when it supposedly worked, the “multiplier” was just 0.8, meaning that the economy grew less than the amount of stimulus. The Obama Administration is reportedly assuming a multiplier of 1.5.
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