There have been other studies hinting at the same thing, but this one by John Cogan and John Taylor of the Hoover Institution appears to be pretty solid. In September 2009, we reported on this page empirical research showing that the temporary tax rebates and transfer payments in the Bush and Obama administration's stimulus programs were ineffective. Here we consider new data on the impact of increases in government purchases, which were heralded as a major stimulating factor in the Obama package.The key tenet of Keynesian economics is that government purchases of goods and services stimulate additional economic activity beyond the amount of the purchase itself. The impact on GDP of the stimulus depends both on the dollar volume of additional government purchases and on the size of the government purchases multiplier, i.e., the effect of a change in government purchases on real GDP.Although the policy debate has mainly focused on the multiplier's size, data covering the first year and...(Read Full Post)