UB suggests that it has a multiplier of 5. If they did, this would be like the goose that laid the golden egg. My gosh, all they'd have to do is appropriate $140B to UB, and they could pay for the whole $700 Federal bailout ... A more telling multiplier is the economic impact divided by the whole UB budget of $832M, to get a multiplier of 1.8. I think that seems a lot more reasonable than 5 to 1.
A multiplier of 1.8? That is what Dani Rodrik comes up with if we keep our international markets open but:
The size of this multiplier depends in turn on three things in particular, the marginal propensity to consume (c), the marginal tax rate (t), and the marginal propensity to import (m). If c=0.8, t=0.2, and m=0.2, the Keynesian multiplier is 1.8 (=1/(1-c(1-t)+m)). A $1 trillion fiscal stimulus would increase GDP by $1.8 trillion. Now suppose that we had a way to raise the multiplier by more than half, from 1.8 to 2.8. The same fiscal stimulus would now produce an increase in GDP of $2.8 trillion--quite a difference. Nice deal if you can get it. In fact you can. It is pretty easy to increase the multiplier; just raise import tariffs by enough so that the marginal propensity to import out of income is reduced substantially (to zero if you want the multiplier to go all the way to 2.8). Yes, yes, import protection is inefficient and not a very neighborly thing to do--but should we really care if the alternative is significantly lower growth and higher unemployment? More to the point, will Obama and his advisers care?
Maybe SUNY-Buffalo has figured out a way to make sure that its extra spending does not leak out into the surrounding communities – which would mean a multiplier larger than what David Tufte considers reasonable!