Yet what if additional federal spending for roads, bridges, schools, and work programs in states doesn’t redeem itself in jobs? Perhaps such spending actually impedes employment in the private sector.
. . .
That’s the conclusion of recent research by many economists, most notably Robert Barro, who has made the case that the multiplier is less than one, or that the economy is set back a bit for every public dollar spent.
For the past few years Price Fishback, a University of Arizona economist, and Valentina Kachanovskaya, a graduate student at the school, have been studying the effects of federal domestic spending from the point of view of individual states during the 1930s, a period of dramatic unemployment.
The authors’ findings, published in a National Bureau of Economic Research paper, suggest that the government will suppress private job creation, or possibly kill jobs, if fresh big spending becomes law.