Niels Veldhuis and Charles Lammam From the National Post on "Harpernomics"

I should start reading the National Post more. This Full Comment completely destroys the theory that $47.2 billion Harper's government borrowed on our behalf will do (and has done) anything to boost our economy.

Here's an excerpt:

A vast body of academic research casts serious doubt on the ability of government stimulus spending to boost economic activity. Worse still, our government’s estimates of the impact of the Economic Action Plan on employment and economic growth are based on discredited assumptions that have no empirical basis.

Let’s first review some recent and important independent academic studies on the effects of government stimulus.

Last October, internationally renowned fiscal policy expert and Harvard University professor Alberto Alesina and his colleague Silvia Ardagna conducted a comprehensive analysis of stimulus initiatives in Canada and 20 other industrialized countries from 1970 to 2007. Their study “Large Changes in Fiscal Policy: Taxes Versus Spending” identified 91 instances where governments tried to stimulate the economy and found that unsuccessful stimulus initiatives relied on government spending. Alesina noted that “a one percentage point higher increase in the current [government] spending to GDP ratio is associated with a 0.75 percentage point lower growth.” In plain English, increased government spending reduces, not increases, economic growth.

Professor Alesina’s study also found that successful stimulus initiatives — those that increase economic growth — focus on tax cuts. However, only 13% of the federal government’s $47.2-billion Economic Action Plan was dedicated to tax relief.

In another 2009 study published in the prestigious American Economic Review, Stanford University professor John Taylor reviewed the evidence over the past decade on fiscal stimulus and concluded “there is little reliable empirical evidence that government spending is a way to end a recession or accelerate a recovery.”

A 2008 study, “What are the Effects of Fiscal Policy Shocks?” by University of London professor Andrew Mountford and University of Chicago professor Harald Uhlig, assessed and compared the economic impact of various cases of deficit-financed spending, deficit-financed tax cuts and tax-financed spending from 1955 to 2000. They found that spending related measures are the weakest ways to stimulate the economy and that both deficit-financed and tax-financed spending have the effect of discouraging private investment.

The International Monetary Fund (IMF), which Prime Minister Harper has cited as an authority, recently surveyed fiscal stimulus initiatives in advanced and emerging economies and concluded that the average effect of discretionary fiscal policy “does not provide strong evidence of countercyclical effects.” Simply put, the IMF concluded that fiscal stimulus is generally not an effective way to combat recessions.

Unfortunately, the Prime Minister’s Office and Department of Finance are not aware, or worse still, chose to ignore these and dozens of other reputable studies that contradict their rhetoric.