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STUDY: Every $1 Of Infrastructure Spending Boosts The Economy By $2, except for during a recession... December 1, 2012 12:32 am BuckGalaxy

In which case the multiplier is roughly four times.

Sylvain Leduc and Daniel Wilson studied the effect of unexpected infrastructure grants on state GDPs (GSPs) since 1990 and found that, on average, each dollar of infrastructure spending increases the GSP by at least two dollars. Valerie Ramey, Professor of Economics at UC San Diego and member of the National Bureau of Economic Research, reports that the typical fiscal multiplier is between 0.5 and 1.5.

Leduc and Wilson note that their results serve as a validation of Keynesian economics:

We find that unanticipated increases in highway spending have positive but temporary effects on GSP, both in the short and medium run. The short-run effect is consistent with a traditional Keynesian channel in which output increases because of a rise in aggregate demand, combined with slow-to-adjust prices. In contrast, the positive response of GSP over the medium run is in line with a supply-side effect due to an increase in the economy’s productive capacity.

What’s more, their study showed that the multiplier increases during a downturn. Leduc and Wilson found that the multiplier in the wake of the 2009 stimulus was “roughly four times” more than average. That means infrastructure investments offer more value during busts than booms, which should encourage policymakers attempting to counteract high unemployment in the construction sector by increasing spending on highways, roads, and bridges.

Keynes put it in such clear perspective, but of course, this really has been known for thousands of years. You build a road and it will pay for itself many times over. How do you think early civilization began? Caesar was truly a road builder.

It’s a fascinating and depressing reality that so many leaders from early human history were so much smarter than today’s teatard leaders.

  • What Conservatives don't realize is that it's spent with companies owned by Conservatives! by bowser 2012-12-01 19:17:13
    • A party who has boiled every complex issue down to a one sentence slogan. by BuckGalaxy 2012-12-02 01:29:59
      • Who benefits from "entitlements"? by bowser 2012-12-02 13:20:50
    • Funny by RobVG 2012-12-01 11:22:24
      • Amazing people can't grasp that the data shows by BuckGalaxy 2012-12-01 14:23:20
        • Well I guess if all you're concerned with is the short term, fine. n/t by RobVG 2012-12-01 16:07:17
          • We're talking about two different things by BuckGalaxy 2012-12-01 21:53:26
            • Some times a great depression/recession/financial meltdown is in your short term. by alcaray 2012-12-01 17:33:03
              • That's a move too far for TB's thinking by BuckGalaxy 2012-12-01 23:22:10
              • Remember... by TB 2012-12-01 16:47:50
                • Now I'm slipping into the twilight zone! by BuckGalaxy 2012-12-02 01:27:56
                  • I ain't gonna work on Maggie's farm no more. by ER 2012-12-02 05:53:19
            • Nobody ever asks where that first dollar comes from. by TB 2012-12-01 11:31:25
            • Infrastructure costs money, which means higher taxes. by ER 2012-12-01 06:04:31

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