Government Spending Stimulates the Economy
There are many who believe that including provisions for welfare programs in a stimulus package would not stimulate the economy. Not surprisingly, many economist, including Congressional Budget Office (CBO) director Douglas W. Elmendorf and Mark Zandi, the chief economist and co-founder of Moody’s Economy.com, who was reportedly a McCain campaign economic adviser — have stated that, in Zandi’s words, “aid to financially-pressed state governments” is an “economically potent stimulus.”
In testimony before the House Committee on Small Business, July 24, 2008, Zandi included with his written testimony the following chart:
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You can see that “General Aid to State Governments” would boost real GDP by $1.36 for every dollar spent, while “Extending UI [unemployment insurance] Benefits” and providing a “Temporary Increase in Food Stamps” would increase real GDP by $1.64 and $1.73 per dollar spent.
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kenne
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