Arnold Kling  

The Trickle-Down Stimulus

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Show Me Compassion: Throw Me i... It is Health Care Consumption...

A commenter here writes,


So the stimulus was the left's version of "trickle down economics"?

Well, Timothy Conley and Bill Dupor write,

We estimate the Act created/saved 450 thousand government-sector jobs and destroyed/forestalled one million private sector jobs.

Thanks to Tyler Cowen for the pointer.

In the future, I think this will be the big research issue concering the stimulus. It almost surely saved public sector jobs. The question is whether there was any trickle-down into the private sector. The authors suggest that there was more negative trickle-down than I would have expected.

If you follow the left-wing economist blogs, you will see that there could not have been any crowding out of the private sector, because interest rates are not high. That is what happens when you think of the economy as a set of equations drawn from textbooks, rather than thinking in terms of patterns of sustainable specialization and trade.


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CATEGORIES: Macroeconomics



COMMENTS (6 to date)
Cahal writes:

Their paper found no such thing!

http://noahpinionblog.blogspot.com/2011/05/did-stimulus-really-destroy-million.html

John V writes:

"If you follow the left-wing economist blogs, you will see that there could not have been any crowding out of the private sector, because interest rates are not high. That is what happens when you think of the economy as a set of equations drawn from textbooks, rather than thinking in terms of patterns of sustainable specialization and trade."


Amen.

Leggos...not Play Dough. And never a good answer to rebut it.

Lord writes:

It is pretty hard to see how cutting Medicaid spending would increase healthcare jobs. The public private distinction is almost nonexistent when it comes to health and education.

Methinks writes:

Well, Lord, off the top of my head I can imagine that without medicaid cost shifting, more people could afford out of pocket medical care and the demand for health care providers could rise.

And, no, medicaid patients can't pay out of pocket. Once they are accepted as medicaid patients, doctors can no longer legally take cash from them.

Lord writes:

But cutting Medicaid increases cost shifting by either cutting reimbursement rates or increasing charitable care, so cutting Medicaid would cut healthcare.

Methinks writes:

There are other ways to cut medicaid - reducing the number of people it covers, for instance. In fact, I think it should be completely overhauled as it's pretty crappy coverage for the poor and hurts rather than helps them in many cases, but that's a long story.

Charitable care doesn't necessarily increase because Medicaid is cut. Besides, does charitable care raise or shifts costs? I didn't think doctors who went abroad to perform surgery charged their patients more to pay for these charitable endeavors.

I'll concede that cutting medicaid could "cut health care" (although, I'm not certain what you mean by that), but not necessarily so. It all depends on those devilish details.

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