Valerie Ramey of the University of California, San Diego … finds a multiplier between .8 and 1.2. (A multiplier of 1 means that GDP goes up by the amount of spending–there is neither stimulus nor crowding out.) She also discusses a survey looking at a wide range of estimates by others and finds that the estimates range from .5 to 2.0.
If the multiplier is 2.0, then there’s no argument; let’s get cracking on stimulus. If the multiplier is below 1.0, there’s no argument’ let’s avoid stimulus like the plague. If it’s 1.1, 1.2, 1.3? Then I suppose we’re in the range of, “sure it’s an effective policy, just not wildly effective; maybe there’s something better?”
But when we don’t actually know with certainty, then we don’t know if we would actually help or harm the economy with stimulus. I’m not a fan of the precautionary principle myself, but most of my liberal friends have warm feelings for it. So why aren’t they more conflicted about stimulus?