American Recovery and Reinvestment Act -- Sufficient Stimulus?

In today’s economy and for the short run, Davis estimates an in-between multiplier of considerably less than one but greater than zero.

• The psychological factor of consumers and investors believing something positive has been accomplished, and returning to more normal behavior.

“My educated guess is that the package may add around 0.5 percent to GDP in the second half of this year and the first half of next year, or about $75 billion over the 12 months from mid-2009 to mid-2010,” Davis remarks. “My numbers are more conservative than the Congressional Budget Office estimates (and much more conservative than the President’s advisors), but I believe they are overestimating both the multiplier impact and speed of the spending.