Study of 34 Countries Shows that Stimulus Efforts Failed Everywhere


In a study by Arthur Laffer on the effects of the stimulus plans concocted and implemented in 34 industrialized nations, the clear conclusion is that increasing the government spending as a percentage of GDP (stimulus) has not had the intended consequences anywhere. Furthermore the raw data shows that the more a country stimulated the more damage was done and that the lower the stimulus package the less damage was done. The four nations—Estonia, Ireland, the Slovak Republic and Finland—with the biggest stimulus programs had the steepest declines in growth.

It is largely proven that when government spending is at or near 18% that growth is maximized. When government spending deviates from 18% either direction economic growth is blunted. American government spending as a share of GDP rose to a high of 27.3% in 2009 from 21.4% in late 2007. This increase is virtually all stimulus spending, including add-ons to the agricultural and housing bills in 2007, the $600 per capita tax rebate in 2008, the TARP and Fannie Mae and Freddie Mac bailouts, “cash for clunkers,” additional mortgage relief subsidies and, of course, President Obama’s $860 billion stimulus plan that promised to deliver unemployment rates below 6% by now. Our GDP growth as a result of this increase in government spending was -8.4%.

Link to article and data.


  1. Of course stimulus fails everywhere, because no matter where you are, the principle is the same: government cannot spend a country’s way into prosperity. Whatever government spends, it had to first acquire it from productive members of society, or print the money and place the burden upon its citizens through inflation.

    This is an old tactic that central economic planners have been trying since the invention of Fractional Reserve Banking.

  2. Yeah Borrowing at 4% and investing it in something that makes more than 4% is impossible. Jim Couch historian from the University Northern Alabama is considered the authority on the WPA wrote and documented that nearly every community in America has a park, road, street, school, hospital, or firehouse, built by the WPA that was still in use.

    Burdette Park was built by the WPA and so was the middles school I attended and it is also still being used.

    The Erie Canal, transcontinental railway, Panama canal, WPA, CCC, TVA, Hoover Dam, Golden Gate Bridge, National highway system, GI Bill, NASA, weather satellites, GPS, and yesterday’s Mar rover all say you’re dead wrong.

    OH and BTW in the 1990’s the Danes and the Swedes connected their countries with one of the greatest engineering feats ever, the Oresund Bridge tunnel. 100% financed, built, ran and administrated by the two governments on time and under budget and it’s profitable. It spurred huge econmic growth in the private sector in both countries too. But NO we can’t do anything like that in this country because that might be so, so, so, socialism, even though by definition it isn’t.

    • Oh for the nostalgia of 30’s, 40’s, 50’s, and 60’s. With the exception of the WWII years federal government spending averaged more than 50% LESS than it is now. We could afford it then. Due to entitlements that were essentially nothing then, and debt, we can’t afford much of anything now. Read it and be amazed.

      • Yeah notice how the list of worthy projects falls off significantly after 1980 and the reign of Saint Ronnie and his diciples. Before RR our infrastructure, health care, schools, and technology were the envy of the world. Now we watch other countries pass us by on nearly every measure. Thanks Ronnie! (NOT)

        • You mean like the GPS and the Mars Rover you wrote about earlier? I must be older than you cause I remember bad roads, terrible phone connections, and dirty health departments back in the 60’s and 70’s. Life was good in the USA until that rotten Lyndon Johnson made us into a nanny state with the Great Society. If you want to blame someone for today’s economic malaise, blame Johnson. He started all of the welfare and other entitlement programs. It took 40 years to sink in and now we are borrowing money to give to bums who think they deserve it.

    • Having something still around that was built with government dollars is NOT a measure of it’s efficiency or the prudence of its government-funded origins.

      The Great Depression Federal spending on TVA and other grand projects were the “stimulus” of its day. Most of those programs got underway in the early part of the 1930s, and the Depression dragged on until after the War was over.

      You actually just helped make my point.

    • …and the debates we had on the CCO a couple weeks back delved into the funding origins of the Transcontinental Railroad already. The railroad was largely funded with sales of bonds to private investors. Much of the land was stolen by the government from Indian tribes.

      To say that Federal funding of the Golden Gate Bridge and Hoover Dam was a great idea is like saying people from Kentucky and Indiana should be funding stuff a thousand miles away. I don’t buy it.

      NASA funding has been diminishing in returns for a long time now. The capability of private space travel is catching up. The whole genesis of NASA and the space race were a wrong course for America to take. A more admirable thing would have been to challenge private companies to launch satellites and put men in space. Instead, our leaders chose to combat Russian communism with, well, you see my point surely. As a “business”, NASA is a failure. It costs money to run and does not and has never paid for itself, like the Post Office at this point. Why? Because neither has ever had to. To call NASA a ‘success’ is to stretch the definition quite a bit. I’m as fascinated as the next guy about the wonders of the Universe, but there needs to be more in it for humanity than justifying the Federal grants of the scientists who study the data.

      The Panama Canal was a “success” if you call starting a Civil War in a sovereign nation, installing a puppet government there to help us steal their land, and setting the US on a lateral course of “American Exceptionalism” and intervention a “success”. The Panama Canal is a grand example of benefiting the wealthy few at the expense of the many poor, something an obvious neo-liberal like you should understand someone being against.

      The interstate highway system was an expansion of the powers under the Interstate Commerce Clause and should have been done, if at all, through State legislatures and with cooperative State funding. Arguably, they are not a success either considering they have promoted the automobile over the railroads as the major mover of freight. The last thing I would expect from a neo-liberal is defense of the gasoline powered automobile as a mover of freight. The interstate highway system also was the death knell for a great many small towns who found themselves off the new beaten paths of Federal favoritism.

      The GI Bill was actually the only thing on your list that made sense. The veterans affairs have always been a Constitutional responsibility of Congress. The GI Bill was merely giving vets what they deserved for their service.

      I could go on, but I’ll leave it there for now.

      Suffice it to say everything government does has unintended consequences. The problem is, government never gets duly punished for its failures. Private companies, if allowed to succeed and fail on their own merits without intervention, have a built-in incentive to go where market forces dictate. That ensures the most efficient use and distribution of limited resources.

      • Brad,
        Are you a ringer? You seem to have a lot of time during the day to write very lengthy posts. What is your occupation? Honestly, because you are on here so much, I find myself skipping your post. In fact I have found myself lately skipping all posts entirely and just reading the articles in the CCO. But then when I do that, I miss the corrections found in a few of the posts. Every once in a while someone will actually post a hard fact disproving the article’s content.

          • On the contrary, I love to read. I find it difficult to find enough time to read all I would like to. What I meant was that sometimes wading through the BS gets tiresome from all these bloggers when so much of what’s written is repeating that which was stated in prior posts. Everyone needs to give their minds a rest sometimes to recenter their thoughts. There is nothing wrong with reassessing one’s person beliefs in light of new information after it is determined what is in fact new information vs baloney. We all need to assimilate new learning and then figure out how that new information can be applied to do good.

  3. I’ll prefer the wisdom of Arthur Laffer over the rantings of an anonymous nobody any day.

  4. Will the CCO also be posting links to articles showing that the stiumuls did indeed work? Because for every former Republican administration economic adiviser (Mr. Laffer) who says it didn’t, there is a left-leaning economist who will tell us it’s the greatest thing since sliced bread and the only reason we’re not in a bonfa fide depression.

    Give me two Nobel Prize winning economists and I’ll give you two completely opposite and contradictory opinions on any particular economic matter. It’s maddening.

    • You’re right DeltaBravo. You can find supportive research and writing on both sides of every issue. Some “facts” are always suspect. But one thing is for sure; we always pick the one to read and promote that backs our personal point of view.

      • Kinda like how you ignored everything I wrote above?

        Ignoring the opposition entirely when they cut down your arguments is not a way to win a debate. It might make the ignorant feel better about themselves though.

  5. Indeed, Bakker. It’s called ‘confirmation bias’, and it’s rampant in what passes for discussion in our society.

Comments are closed.