This shows they haven’t been FREDing. The Keynesian story refers to government spending, not US Federal Government spending. A substantial fraction of Government consumption plus investment (G) is done by state and local governments. An economist may not ignore the “50 little Hoovers” (P Krugman 2009) just because political reporters focuse inside the beltway. -Now the 50 states are not little Hoovers. They are four huge states, five including Illinois; and the economy comes from some 20 different large municipalities, none of them correlated with the size of state economies. Krugman's comment simply shows what an incompetent he is regarding data sets, but any way, lets go check total government spending.
These are changes in spending, and the Federal government (green) had the most volatile changes in spending over this series. Total government is in blue and includes the states. Right away we can tell that state spending goes down when Federal spending goes up. But the data, using either total of federal shows that government spending accelerated from 2006 up to and including the crash, and that includes the stimulus and that is a huge negative multiplier. Now I will go into state and local spending later. But I am doing other things at the moment.
Let's compare total state/local vs DC:
So the accelerate spending from 2006 through 2010 was dominated by DC. State and local spending chugged right along its trend before and up through the crash. Then leveled off, as the DC, finally.
Would more spending in California have helped our unemployment problem? Here is how we tax and spend out here:
And, I can post the unemployment data showing California is the worst managed state in the union, well possibly excepting New York. The California pension plan was a disaster in waiting, a product of a corrupt legislature. California taxes were tied to the stock market via the pension rules, about as stupid as any government can be. The recession started in California and we still have 7.3% unemployment, the worst in the nation and the pension plan has barely been fixed. California, the largest economy in the nation not only has negative multipliers, but they habitually crash the economy as bad as DC politicians.
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