Laffer’s Case for Fiscal Ineffectiveness

Laffer writes:

If you believe, as I do, that the macro economy is the sum total of all of its micro parts, then stimulus spending really doesn't make much sense. In essence, it's when government takes additional resources beyond what it would otherwise take from one group of people (usually the people who produced the resources) and then gives those resources to another group of people (often to non-workers and non-producers).

Brad DeLong does a nice rebuttal on the logic here so let me take up Laffer’s “evidence”, which includes a table and this discussion:

It worked miserably, as indicated by the table nearby, which shows increases in government spending from 2007 to 2009 and subsequent changes in GDP growth rates. Of the 34 Organization for Economic Cooperation and Development nations, those with the largest spending spurts from 2007 to 2009 saw the least growth in GDP rates before and after the stimulus. The four nations—Estonia, Ireland, the Slovak Republic and Finland—with the biggest stimulus programs had the steepest declines in growth.

Most economists who have examined the correlation between fiscal stimulus and real GDP growth show precisely the opposite of what Laffer claims here. For example, Estonia and Ireland were supposed to be examples of how austerity was supposed to be expansionary according to the right wing camp that Laffer belongs to. Of course, the 1st column Laffer’s table (government spending/GDP) is a horrible measure of fiscal stimulus. For example, the rise in this ratio for the U.S. was more from the recession itself and not fiscal stimulus.