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Keynesian Fiscal Stimulus: What Have We Learned From The Great Recession?

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Executive Summary

What have we learned from the Great Recession about Keynesian fiscal stimulus? This paper contains five sections that develop the following five points: there is confusion about what constitutes Keynesian fiscal stimulus; Economists are deeply divided about fiscal stimulus; A fundamental error has been committed by an influential economist in estimating the recession magnitude of the Keynesian multiplier; A fundamental error has been committed by two influential economists in their analysis of the impact of the 2008 tax rebate on consumption spending; Advocates of fiscal stimulus in recession should support keeping government debt low in prosperity.

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