Shocking new economic research has shown that receiving large gifts from the federal government is actually beneficial to states.

That is not such a shock, is it? Another non-shock is that pro-stimulus journalists have misinterpreted studies to use them as evidence for national stimulus benefits.

The studies are econometrically sophisticated, but stem from a simple idea: If we compare states that received greater federal transfers to states that received smaller transfers, we can estimate the benefit of transfers.

Evaluating a national policy by comparing state-level benefits cannot capture national-level costs. Who will bear the burden of paying back the higher debt? Which private-sector investments will be crowded out by greater federal stimulus? Which political interest groups will gain power over the electorate from steering more money to their constituents? State-to-state comparisons make no attempt to answer these questions.


Research Review: What Can Be Learned from Local Multiplier Estimates?