Despite what anyone might claim, a figure of 5x-10x is the economic equivalent of a perpetual motion machine claim in physics
The claim that it will always provide a 5X-10X multiplier, not matter how much "pumping" you do, is the equivalent of the perpetual motion machine claims. The claim that you can get that multiplier reliably to a certain point, would be much less extreme but wouldn't be a claim I'd support.
You can look at the dollars that your spending in order to multiply, and yes the people who get them after you spend them will put them back in to the economy, and then the next group will put them back in to the economy and so forth. But this happens even if the government doesn't spend the money. Someone else will spend it or invest it, its not like its kept under a mattress.
Also to the extent that you really do get an increase in the multiplier effect (and I think borrowing and spending often does give a short term increase) its equivalent to effectively increasing the money supply. It can be a short term stimulus but it can't be continued, you'll just cause inflation. It isn't a way to grow the economy over time, and even as an attempt to give a short term kickstart, it often winds up being mistimed (by the time the stimulus is debated, passed, put in to effect, and then becomes effective, it might not longer be needed, if it ever was). I'm not totally against the idea for all situations, but it isn't reliably a good thing. |
