Allow me to illustrate my point with a few numbers. The multiplier on transfer payments is estimated to be c. 0.85, i.e. the impact on GDP for each $1 of transfer payments is about $0.851. Meanwhile, the multiplier on infrastructure spending can be as high as 3:1 or even 4:1. Say for argument’s sake that our government decides to build a new airport. For every $1 spent by the government, the private sector usually invests $2 or even $3 alongside the government, meaning that as much as $4 will be pumped into the economy for every $1 of public spending, creating many more jobs than the $1 of transfer payments does. Yet the buffoons running the asylum don’t seem to get it. Look at chart 1 below as to what has happened to U.S. infrastructure spending on Obama’s watch. Sadly, the U.K. story isn’t much different. Chart 1: U.S. public construction spending (% of GDP) Source: Joe Weisenthal, Businessinsider Central bankers are getting annoyed
Posted on: Tue, 09 Jul 2013 00:46:15 +0000
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