http://petermartin.blogspot.com/2009/06/abs-nails-new-urban-myth.html

http://www.abs.gov.au/websitedbs/d3310114.nsf/4a256353001af3ed4b2562bb00121564/023fd221b674319aca2575cc0001b775!OpenDocument

This post, or the Australisn experience, does seem to me to be evidence for Neo-Keynesianism, as I understand N-K. My impression was that temporary tax cuts or transfer payments had low multipliers and were relatively poor stimulus because consumers, knowing the measures were temporary, would save a larger proportion or repair balance sheets. This would be as compared to say infrastructure projects or measures like BI or ELR that would create changes in the MPC.

My most basic premise, and one I thought contradicted the N-K consensus, was the gov’t institutions, overt and permanent, provided the basic security and confidence needed for economic growth. A gov’t that taxed and then handed the checks to Goldman-Sachs, or taxed and passed the money to consumers. or cut taxes, would not really reduce perceived private risk and uncertainty.

But even if the recession ends by mid-2009, as is suggested by some optimistic forecasters, crucial elements of the Great Moderation hypothesis have already been refuted. Over the period of the Great moderation, all the major components of aggregate output (consumption, investment and public spending) became more stable. By contrast, if a deep recession is avoided in 2009, this will be the result of a massive fiscal stimulus, with a huge increase in public expenditure (net of taxes) offsetting large reductions in private sector demand.

That still leaves open much weaker versions, like that of notsneaky. I’ll respond a bit more on that later.

Kenny, I think the stimulus last year had some effect – it dampened a recession that was already under way, but it had pretty much been exhausted by October 08, and then there was nothing for quite a while.