Reviewing the stimulus of 2009

The red line is extra federal spending designed to get total economic growth up, the American Recovery act. The green line is the total federal expenditures, percent change.   But we slowed down federal spending in mid 2009 and total federal spending stayed at that spending level for the subsequent years.  There was no real simulus at all, except for the first half of 2009.

What happened to federal spending? Likely Lower interest expenses; but I have to go back and review the budgets. Looking at this graph we see interest expenses dropped from 14% of the budget to 10% of the budget, eliminating the stimulus effect. In effect, we had a short six months of stimulus spending.

The real stimulus was a drop in interest costs, courtesy of low growth, and then the Fed, the effect was to grant Congress a free increase of 4% in spending, which is now ending. Menzie misses that effect in his post on multipliers. There little plotting by expert economists, this was Congress simply taking advantage of lower interest costs.