February 1, 2013

MEGAN MCARDLE: What If Stimulus Works, But Only In Theory: “After almost five years, real per-capita GDP is still well below its pre-crisis level. And this is not a distributional issue, where the median is dropping because the rich are hoarding too much. The amount of money available per person has actually fallen. . . . Since the financial crisis hit, we have borrowed and spent $5.7 trillion, or 41% of 2008 GDP (7.8% of total GDP over the period). That is an enormous sum. Presumably, it has raised output somewhat higher than it otherwise would have been–just as an accounting identity, it would almost have to–and yet it has left us with unemployment in the range of 8%, and per-capita GDP that is still below the pre-crisis trend.”

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