The economy slowed down in the second quarter, growing at an annualized rate of 2.4 percent after hitting 3.7 percent in the first quarter (January to March) and 5 percent in the final three months of 2009.
Feel stimulated yet?
We’ve heard a lot about the vaunted “Keynesian multiplier.” We keep seeing reports telling us the economy is soooooo much better off because of the stimulus spending, based on some economists’ faith in their own modeling of the multiplier.
This is the economic version of the willing suspension of disbelief: Disregard what you see around you in the world, and accept the notion that the Obama-Pelosi-Reid spending binge has been working — because the same models that predicted success for the stimulus beforehand now proclaim the stimulus a success after the fact. And, what’s more, that it’s worked so well we need to do it again.
Here’s the question that ought to be on everyone’s minds in light of today’s economic data: If the multiplier really multiplies, why is its effect petering out instead of growing? Why hasn’t any real — that is, sustainable — growth been stimulated?