Wednesday, June 22, 2011

Samwick gives half the equation

Andrew Samwick, a former chief economist on President Bush's Council of Economic Advisers, told The Lookout. When the economy suffers from a lack of demand, as it does now, Samwick explained, most economists think increasing spending is the more effective way to generate that demand and get things moving again. Capital Games and Gains
The opposite is when the economy suffers lack of supply then extra spending by Congress reduces GDP.  Unfortunately, we have had three "lacks of supply" since 2008, three times energy shortages reared, three times that government spending reduced GDP.

We have little space for central government to oscillate its multiplier around one.  Not enough bandwidth in Congress to track the multiplier.

No comments: