It's the Magical Multiplier

I’ve always argued that the “multiplier effect” of government spending was a myth, and a stupid one at that. But then you read that the “stimulus” requires $111 million to create just 55 jobs in Los Angeles — and you’re forced to realize that government spending must have a “divisor effect.”


You can’t get rich flushing wealth down the toilet like that. You can’t stimulate with borrowed money. It’s very simple: Spending is the opposite of wealth creation. The creation must, by definition, come first — but we have an Administration loathe to get out of the way and let the economy do its thing, and ecstatic about the spending.

It’s failed New Deal thinking all over again, but at least in the 1930s, nobody knew any better. Today, we have no excuse.


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