Money For Nothing

So far, the stimulus program has spent $385 billion. The legislation was sold as an engine to "create sustainable economic growth for the future."

In the first quarter of 2010, GDP grew at an impressive 3.2 percent annual rate. So, how much did the stimulus package contribute to that growth? Answer: nothing. Most of the increase was do to rising personal consumption, inventories and gross private domestic investment (see Table 2). Expenditures and investment by state/local and Federal governments actually fell by an annual -0.37 percent over the same period (and most of the positive effects were from national defense spending, not stimulus funds).

Then why the massive stimulus spending?, asks Larry Kudlow:

[O]ver the last three quarters of a mild V-shaped recovery, with an average quarterly rebound of 3.7 percent, government spending actually exerted a small net drag (-0.03%) on growth.

I guess it’s time to ask our Keynesian friends in and out of government what exactly happened to those vaunted multiplier effects they so loudly proclaimed. So far, there is zilch effect.

Turns out that all those entitlement transfers of income borrowed and taxed from Peter to pay Paul have made no direct contribution to the nation’s production of goods and services.

Agreed. Which Obama's National Economic Council Director Lawrence Summers -- a former Treasury Secretary -- once knew, until he didn't.