Stimulus vs. Austerity

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According to David Brooks, the returns are in: during the first half of this year the U.S. spent more on stimulus than Germany, and the German economy is doing great. Score: Austerity 1, Stimulus 0.

Needless to say, this didn’t sound quite right to me. Why look only at the first half of this year? It takes a while for stimulus spending to have an effect, after all. So what about 2009? Here’s the Wall Street Journal on March 12, 2009:

According to IMF figures, Germany’s 2009 emergency spending is 1.5% of gross domestic product, compared with 2% for the U.S. But Germany’s automatic stabilizers will narrow the gap, contributing an additional 1.7%, for a total of 3.2% of GDP. The U.S. stabilizers add 1.5% for a total of 3.5%.

Look: these numbers don’t really prove anything either. The German economy is different from the American economy in several important ways, and in any case the global economy is so intertwined that stimulus in an importing country like the U.S. has knock-on effects on an exporting economy like Germany. Still, Brooks’s column is the dumbest kind of cherry picking. Last year stimulus spending was nearly identical in both countries. Both countries adopted robust Keynesian policies, and if you can draw any conclusions from that at all, it’s only that it apparently had a bigger effect on Germany than it did on us. That means only that they no longer need stimulus and we do. What’s so hard about that?

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