11 July 2011

Government Spending Stimulates The Economy

Econometric analysis over a wide range of circumstances shows that government spending and investment generally produce somewhat more economic benefits to the economy than the amount of the spending itself (which is called a "multiplier effect"), although the benefits are fairly modest and rarely as much of a full dollar of economic gain in addition to the government spent dollar.

Critics of government spending restraint during bad economic times, of the kind prevailing at the moment, compare this policy to the policies of Herbert Hoover, whose lack of leadership contributed to the Great Depression and compare this approach unfavorably to the Keynesian economic policies of FDR. They note, for example, that weak job growth at the moment is substantially due to government layoffs.

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