Edward Conard

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  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
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  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Friday, October 2, 2020

AI Summary. The article argues that under the Obama-Biden administration labor force participation fell from 65.7% to 62.8% and job openings never exceeded the number of unemployed, while under Trump deregulation and the Tax Cuts and Jobs Act saw openings surpass unemployed for 24 months before the pandemic, participation rise to 63.4%, and wage growth top 3%.

Andy Puzder New York Post
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Under Obama-Biden, labor force participation fell from 65.7% to 62.8% & job openings never exceeded unemployed numbers. Under Trump, job openings surpassed unemployed numbers for 24 months, LFP rose to 63.4% & wage growth exceeded 3% for 20 months.

Did deregulation and tax cuts produce stronger labor market gains?

Core argument: Labor force participation fell from 65.7% to 62.8% under the Obama-Biden administration, and by January 2017 there were 1.9m more unemployed people than job openings, with openings never exceeding unemployment.

During the Obama-Biden administration, the labor force participation rate [LFP] fell from 65.7% to 62.8%, with job openings never exceeding the number of unemployed individuals. By January 2017, there were 1.9m more unemployed people than job openings. In contrast, under Trump, regulatory changes and the Tax Cuts and Jobs Act led to a reversal by March 2018, with job openings surpassing unemployed numbers for the first time since 2000, maintaining this trend for 24 months pre-pandemic. The LFP rose to 63.4%, and wage growth exceeded 3% year-over-year for 20 consecutive months, a feat not achieved during the Obama years. This environment encouraged individuals outside the labor force to re-enter, with 74.2% of new hires in Q4 2019 coming from outside the labor force, the highest since 1990. These shifts highlight significant differences in economic trends and labor market dynamics between the two administrations.

Takeaways by Macro Roundup® AI

  1. Labor force participation fell from 65.7% to 62.8% under the Obama-Biden administration, and by January 2017 there were 1.9m more unemployed people than job openings, with openings never exceeding unemployment.
  2. The author credits regulatory changes and the Tax Cuts and Jobs Act with job openings surpassing the number of unemployed by March 2018 for the first time since 2000, a trend sustained for 24 months before the pandemic.
  3. Under Trump, labor force participation rose to 63.4% and wage growth exceeded 3% year-over-year for 20 consecutive months, while 74.2% of fourth-quarter 2019 new hires came from outside the labor force, the highest since 1990.

Andy Puzder on the impact of the high pressure economy, attached is an excel sheet (of our own calculations) of the following series showing the last three years of Obama’s second term (December 2013-December 2016), versus Trump’s prior to pandemic (January 2017-January 2020)

Job Openings Total Nonfarm (Seasonally Adjusted)

Unemployment Level (Seasonally Adjusted)

Ratio Of Job Openings To Unemployment

Working Age Population 25-54

Working Age Population 55-64

Working Age Population 25-64

All Employees Total (Nonfarm, Seasonally Adjusted)

Ratio Employment Growth To Population Growth

Average Hourly Earnings (All Employees, Total Private)

Labor Force Participation (Seasonally Adjusted)

Real Private Fixed Investment (Billions 2012$ Seasonally Adjusted)

Real GDP (Billions 2012$, Seasonally Adjusted Annual Rate)

Ratio Private Fixed Investment To Real GDP

Real Private Fixed Investment As a Percentage Of Real GDP

Total Construction Spending Residential (Millions, Seasonally Adjusted)

Total Construction Spending Commercial (Millions, Seasonally Adjusted)

University Of Michigan Consumer Sentiment (December 2013 =100)

Real Net Fixed Investment: Non Residential Consumption Of Fixed Capital (Billions 2009$)

Puzder job openings never exceeded number of people employed for 8 years of Obama

“…For the eight years of the Obama-Biden administration,there wasn’t a single month when job openings exceeded the number of people unemployed. Zero.In fact, when Obama and Biden left office in January 2017, there were 1.9 million more people unemployed than there were job openings. So there was an abundance of people looking for work, but too few jobs opportunities open to them….”

Trump’s term (pre pandemic)“…A little more than a year later, in March 2018, that situation had reversed. Following Trump’s regulatory overhaul and passage of the Tax Cuts and Jobs Act,employment openings exceeded the number of people unemployed for the first time on records going back to 2000.Astoundingly, that remained the case for 24 consecutive months — until the pandemic — with over 1 million more job openings than people unemployed for 17 of those months….”

Andy Puzder, "Unpacking Joe Biden’s lies about the Trump job-creation miracle,"New York Post, October 1, 2020, https://nypost.com/2020/10/01/unpacking-joe-bidens-lies-about-the-trump-job-creation-miracle/

2009-2017 comp, “…By contrast, under the Obama-Biden administration, people fled the labor force, discouraged by limited opportunities and stagnant wages. During Biden’s eight years in office, the labor force participation rate — the share of people working or actively looking for work — dropped from 65.7 to 62.8 percent. During Trump’s first three pre-pandemic years, it rose back up to 63.4 percent, as people rejoined the labor force….”

Impact on LFP and wage growth, “….This unprecedented competition for workers had extremely positive consequences. It lowered the unemployment rate, which consistently hit 50-year lows, and as a result, employers began competing for workers and raising wages. In August 2018, year-over-year wage growth exceeded 3 percent for the first time in nearly a decade and stayed at or above 3 percent for 20 consecutive months until the pandemic. By comparison, under Team Obama-Biden there wasn’t a single post-recession month when wage growth exceeded 3 percent. Again, zero. With wages rising, people started coming out of the woodwork to fill those abundant good-paying job openings. In the fourth quarter of 2019, 74.2 percent of workers who took jobs came from outside the labor force rather than the ranks of the unemployed. That was the highest percentage since 1990, when the government began reporting such data…”

AI Summary. Combined federal and state education spending amounted to $1,013 more per poor student than per non-poor student, or $10.4bn in excess funding. Because non-poor students far outnumber poor students (43.4m versus 10.2m), total spending on non-poor students exceeded spending on poor students by $219.9bn.

Matthew Chingos and Kristin Blagg Urban Institute
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In 2015, federal and state educational spending revealed a $1,013 per-student disparity favoring poor students, totaling $10.4bn. Despite targeted funding of $67.8bn for poor students, the larger non-poor demographic led to $219.9bn more spending on them.

Do poor students receive more education funding per student than non-poor students?

Core argument: Combined federal and state education spending in 2015 exceeded per-student funding for poor students by $1,013 relative to non-poor students, an excess totaling $10.4bn.

In 2015, federal and state educational spending highlighted a significant disparity in per-student funding between poor and non-poor students, with an excess of $1,013 per poor student, totaling $10.4bn. State governments allocated $327.7bn, with $67.8bn directed towards poor students and $259.9bn towards non-poor students. The federal government contributed $54.9bn, of which $13.6bn was for poor students and $41.3bn for non-poor students. Despite the higher per-student spending on poor students, the larger number of non-poor students (43.4m compared to 10.2m poor students) resulted in total spending on non-poor students being $219.9bn greater than on poor students. This spending pattern underscores the complexity of educational funding, where aggregate spending favors non-poor students despite targeted efforts to support poorer demographics.

Takeaways by Macro Roundup® AI

  1. Combined federal and state education spending in 2015 exceeded per-student funding for poor students by $1,013 relative to non-poor students, an excess totaling $10.4bn.
  2. State governments spent $327.7bn on education in 2015, with $67.8bn directed to poor students and $259.9bn to non-poor students, while the federal government contributed $54.9bn, split $13.6bn and $41.3bn.
  3. Total 2015 education spending on non-poor students exceeded spending on poor students by $219.9bn, as non-poor students numbered 43.4m versus 10.2m poor students despite higher per-student spending on poor students.

Population Data: “Education Data At Your Fingertips,” Education Data Explorer, Urban Institute, Accessed October 2, 2020, https://educationdata.urban.org/data-explorer/

Funding Data: Matthew Chingos and Kristin Blagg, “How Has Educational Funding Changed Over Time?” Urban Institute, Accessed October 2, 2020, https://apps.urban.org/features/education-funding-trends/

Just one note, neither Hawaii and DC had state level poor/nonpoor. To check my work I used a simplifying assumption of 1:1. The numbers are small and therefore wont overly impact the work (but slightly contribute to any ever the small difference vs Urban’s USA numbers.) See crosscheck at bottom.

State governments spent $327,700,785,688$67,753,564,064on the poor and$259,947,221,624on the non-poor.

The Federal government spent $54,900,691,984 in total,$13,602,028,879was spent on the poor and$41,298,663,105was spent on non-poor.

That breaks down as follows.

In total Federal/State educational spending was$382,601,477,672.

Despite that difference in per person funding as there are so many more non-poor students than poor students -10,233,557 poor students versus 43,429,294 non-poor students-Federal/State spending on non-poor is greater than spending on poor to the tune of $219,890,291,786.So total non-poor spending of $301,245,884,729 and poor spending of 81,355,592,943 even though the we spend “more” on the poor compared to their non-poor peers.

On a per student basis Federal/State spending was $7,950 onpoor studentsand $6,936 onnon-poor studentsa Δ of$1,013, that implies a total excess spending of almost$10.4 Billion. ($1,013*10,233,557 poor students = $10,370,857,792.) The $10.4B breaks as follows, the states contribute $6,500,330,026and the Fed’s $3,870,527,766.

Ed Comment: Ed Comment:Why wouldn’t “Education For Disadvantaged-Grants To Local Educational Agencies” not be aid to the poor? is the counted in your state and federal $10B? if so, that’s $16 billion from the feds alone.

Steve Comment: “Education For Disadvantaged-Grants To Local Educational Agencies” is Title 1 spending, Urban says their Federal number (so the 10.4 excess spending) includes that spending but they didn’t have a specific line item for the spending, because CRS 2018 number is greater than Urban’s I went with that over Urban’s 2015 Federal number as to avoid double counting. I can move that title one spending from “non poor” to “poor < 65.” (that’s where Urban’s state “excess” poor spending is filed.) Re: Medicaid Currently have both State and Federal Medicaid spending filled under “poor” < 65, outside of the amountCBOargued was spent on elderly, can move the whole thing to poor < 65 if you prefer. “..Medicaid provides benefits to low-income people of all ages, but roughly 15­ percent of federal spending for that program goes to nursing-home care and other services for people who are age 65­or older, CBO estimates…”*Steve Note in final spreadsheet Title 1 spending was moved to poor < 65

Steve Comment: “Education For Disadvantaged-Grants To Local Educational Agencies” is Title 1 spending, Urban says their Federal number (so the 10.4 excess spending) includes that spending but they didn’t have a specific line item for the spending, because CRS 2018 number is greater than Urban’s I went with that over Urban’s 2015 Federal number as to avoid double counting. I can move that title one spending from “non poor” to “poor < 65.” (that’s where Urban’s state “excess” poor spending is filed.) Re: Medicaid Currently have both State and Federal Medicaid spending filled under “poor” < 65, outside of the amountCBOargued was spent on elderly, can move the whole thing to poor < 65 if you prefer. “..Medicaid provides benefits to low-income people of all ages, but roughly 15­ percent of federal spending for that program goes to nursing-home care and other services for people who are age 65 ­or older, CBO estimates…”*Steve Note in final spreadsheet Title 1 spending was moved to poor < 65

Monday, October 5, 2020

AI Summary. Megaprojects, defined as ventures costing $1bn or more, account for 8% of global GDP with annual spending estimated at $6–9tn, yet 90% run over budget, often by more than 50% in real terms. The author argues these overruns persist across public and private sectors without improvement over time or geography, alongside benefit shortfalls of up to 50%.

Bent Flyvbjerg Oxford University
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Megaprojects account for 8% of global GDP, with 90% experiencing cost overruns, often exceeding 50% in real terms.

Why do most billion-dollar projects run over budget and under-deliver?

Core argument: Megaprojects, defined as ventures costing $1bn or more, account for 8% of global GDP, with annual spending estimated at $6–9tn.

Megaprojects, defined as large-scale ventures costing $1bn or more, account for 8% of global GDP, with annual spending estimated at $6-9tn. Despite their economic significance, 90% of these projects experience cost overruns, often exceeding 50% in real terms. Notable examples include the Channel Tunnel with an 80% overrun and the Sydney Opera House at 1,400%. These overruns persist across both public and private sectors and show no improvement over time or geography. The "iron law of megaprojects" highlights this persistent issue, suggesting systemic inefficiencies in project management. Additionally, benefit shortfalls of up to 50% are common, further questioning the viability of such investments. The scale and frequency of megaprojects are driven by political, technological, economic, and aesthetic factors, yet the traditional management approaches face increasing scrutiny and calls for reform.

Takeaways by Macro Roundup® AI

  1. Megaprojects, defined as ventures costing $1bn or more, account for 8% of global GDP, with annual spending estimated at $6–9tn.
  2. Some 90% of megaprojects experience cost overruns that often exceed 50% in real terms, with the Channel Tunnel at 80% and the Sydney Opera House at 1,400%.
  3. Cost overruns persist across public and private sectors with no improvement over time or geography — the "iron law of megaprojects" — and benefit shortfalls of up to 50% are common.

The Oxford study on major infrastructure projects you asked about, in the study they define “Megaprojects” beyond what we classically think of infrastructure, “…Megaprojects are large-scale, complex ventures that typically cost a billion dollars or more, take many years to develop and build, involve multiple public and private stakeholders, are transformational, and impact millions of people…Examples of megaprojects are high-speed rail lines, airports, seaports, motorways, hospitals, national health or pension ICT systems, national broadband, the Olympics, large-scale signature architecture, dams, wind farms, offshore oil and gas extraction, aluminum smelters, the development of new aircrafts, the largest container and cruise ships, high-energy particle accelerators, and the logistics systems used to run large supply-chain-based companies like Amazon and Maersk. Below we will see just how big megaprojects and the megaprojects business are. We will also understand what drives scale…”

Bent Flyvbjerg, “What You Should Know About Megaprojects, and Why: An Overview,” Oxford University, 2014, https://arxiv.org/ftp/arxiv/papers/1409/1409.0003.pdf

Table of selected projects

The overall conclusions, “First, it answers the question of how large megaprojects are by measuring them in the units mega, giga, and tera, concluding we are presently entering a new "tera era" of trillion-dollar projects. Second, total global megaproject spending is assessed, at USD 6-9 trillion annually, or 8 percent of total global GDP, which denotes the biggest investment boom in human history. Third, four "sublimes" - political, technological, economic, and aesthetic - are identified to explain the increased size and frequency of megaprojects. Fourth, the "iron law of megaprojects" is laid out and documented: Over budget, over time, over and over again.Moreover, the "break-fix model" of megaproject management is introduced as an explanation of the iron law. Fifth, Albert O. Hirschman's theory of the Hiding Hand is revisited and critiqued as unfounded and corrupting for megaproject thinking in both the academy and policy. Sixth, it is shown how megaprojects are systematically subject to "survival of the unfittest," explaining why the worst projects get built instead of the best. Finally, it is argued that the conventional way of managing megaprojects has reached a "tension point," where tradition is challenged and reform is emerging…”

Sadly he does not offer an overall ROI for such projects however he does offer an “Iron Law” that applies to both public and private “Megaprojects”“…The Iron Law of Megaprojects Performance data for megaprojects speak their own language. Nine out of ten such projects have cost overruns. Overruns of up to 50 percent in real terms are common, over 50 percent not uncommon. Cost overrun for the Channel tunnel, the longest underwater rail tunnel in Europe, connecting the UK and France, was 80 percent in real terms. For Denver International Airport, 200 percent. Boston's Big Dig, 220 percent. The UK National Health Service IT system, 400-700 percent. The Sydney Opera House, 1,400 percent (see more examples in Table 2). Overrun is a problem in private as well as public sector projects, and things are not improving; overruns have stayed high and constant for the 70-year period for which comparable data exist. Geography also does not seem to matter; all countries and continents for which data are available suffer from overrun. Similarly, benefit shortfalls of up to 50 percent are also common, and above 50 percent not uncommon, again with no signs of improvements over time and geography..”

That definition captures 8% of global GDP“….The McKinsey Global Institute (2013) estimates global infrastructure spending at USD 3.4 trillion per year 2013-2030, or approximately four percent of total global gross domestic product…Measured by value, the size of infrastructure projects has grown by 1.5 to 2.5 percent annually in real terms over the past century, which is equivalent to a doubling in project size two to three times per century…If we include the many other fields where megaprojects are a main delivery model - oil and gas, mining, aerospace, defense, ICT, supply chains, mega events, etc. -then a conservative estimate for the global megaproject market is USD 6-9 trillion per year, or approximately eight percent of total global gross domestic product….”

AI Summary. The analysis argues that expanding Medicare Part D, the US prescription drug benefit for seniors, increased access to prescription drugs and thereby contributed to the opioid epidemic, with opioid-related deaths rising 345% over the period studied. The economic burden of the crisis is estimated to exceed $500bn annually, weighing on output and labor force participation.

John Cochrane The Grumpy Economist
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Medicare Part D expansion inadvertently fueled opioid epidemic by increasing access to prescription drugs, leading to a 345% rise in opioid-related deaths from 1999 to 2016.

Did expanding prescription drug coverage for seniors contribute to the opioid epidemic?

Core argument: Opioid-related deaths rose 345% from 1999 to 2016, a surge Casey Mulligan associates with the Medicare Part D expansion's increase in access to prescription drugs and resulting rise in opioid prescriptions.

Casey Mulligan's analysis highlights how the expansion of Medicare Part D inadvertently contributed to the opioid epidemic by increasing access to prescription drugs, which led to a rise in opioid prescriptions. The economic implications are significant, as the increased availability of opioids through Medicare Part D correlated with a surge in opioid-related deaths, which rose by 345% from 1999 to 2016. This expansion, while intended to improve healthcare access, inadvertently fueled a public health crisis, demonstrating the complex interplay between healthcare policy and economic outcomes. The data underscores the need for policymakers to consider unintended consequences when designing healthcare programs, as the economic burden of the opioid crisis has been estimated to exceed $500bn annually, impacting GDP and labor force participation.

Takeaways by Macro Roundup® AI

  1. Opioid-related deaths rose 345% from 1999 to 2016, a surge Casey Mulligan associates with the Medicare Part D expansion's increase in access to prescription drugs and resulting rise in opioid prescriptions.
  2. Casey Mulligan argues the Medicare Part D expansion, intended to improve healthcare access, inadvertently fueled the opioid epidemic, illustrating the unintended consequences policymakers should weigh when designing healthcare programs.
  3. The economic burden of the opioid crisis has been estimated to exceed $500bn annually, with effects on GDP and labor force participation.

John Cochrane, ""You're Hired" Mulligan Review,"The Grumpy Economist, September 26, 2020, https://johnhcochrane.blogspot.com/2020/09/youre-hired-mulligan-review.html

Cochrane reviews Casey Mulligan’s book, “..the book is really not that much about Trump. It is much more about how the CEA works, how policy is formed in the Trump administration, which is much more like other administrations than you'd think, and a record of some great successes of the Trump-era CEA. (Kevin Hassett, the CEA chair, really deserves more pride of place in this story.) Trump shows up to make the big decisions, but usually on issues the CEA has spearheaded…. On Trump, I think Casey is a bit too soft….However, on documenting the enormous uphill climb this administration faces against an implacably hostile media and federal workforce, this book is very useful. To understand how strong the bubble is, how it fails, and why populism might make some sense and outlive Trump, read on….”

Ed Comment: The "Samaritan's curse" that aid always leads to more of the misfortune"... Medicare part D.. reduced the annual cost of a... 0.75-gram daily habit from $39,420 to $2,677.Early Oxytocin's dealers... were seniors... 'it's like hitting the Lotto if your doctor will put you on OyxContin... people didn't even twice about selling.'...for a three-dollar Medicaid co-pay.. an addict got pills priced at a thousand dollars...In February 2018, CEA informed Federal agencies about the role of opioid prices. At least two agencies refused to allow the findings to be released to the public or be shared with President Trump. Secretary Azar refuses to even to consider that introduction of Medicare Part D might have helped fuel the opioid epidemic."

AI Summary. Infrastructure investment is not effective as short-term stimulus because time-to-build delays and the crowding out of private spending make short-run multipliers for government investment lower than for government consumption. Infrastructure spending often produces no change or a decline in employment in the initial years, even when interest rates are near zero.

Valerie Ramey National Bureau of Economic Research
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US infrastructure investment is not effective as short-term stimulus due to time delays & crowding out of private spending. Short-run multipliers are lower than for consumption, & long-run impact is limited by current public capital levels.

Is infrastructure investment an effective short-term economic stimulus?

Core argument: Short-run stimulus multipliers for U.S. government investment are lower than those for government consumption, primarily because of time-to-build delays and a greater tendency to crowd out private spending.

Infrastructure investment in the U.S. is not effective as a short-term stimulus due to inherent time delays and the crowding out of private spending. Short-run stimulus multipliers for government investment are lower than those for government consumption, primarily because of time-to-build delays and a higher propensity to crowd out private spending. Quantitative models and empirical studies across OECD countries and U.S. states support these findings. While long-run multipliers depend on the production function elasticity of output to public capital, current levels of public capital relative to GDP are comparable to past high points, suggesting limited immediate impact. Additionally, infrastructure spending often leads to no change or a decline in employment in the initial years, even during periods when interest rates are constrained by the zero lower bound (ZLB).

Takeaways by Macro Roundup® AI

  1. Short-run stimulus multipliers for U.S. government investment are lower than those for government consumption, primarily because of time-to-build delays and a greater tendency to crowd out private spending.
  2. Infrastructure spending is associated with no change or a decline in employment in the initial years, even when interest rates are constrained by the zero lower bound.
  3. Long-run infrastructure multipliers depend on the production function elasticity of output to public capital, and U.S. public capital relative to GDP is comparable to past high points, suggesting limited immediate impact.

Though this might be of interest, new NBER from Valerie Ramey looks at the macro effects of government infrastructure investment and finds that it has limited short run effects versus other forms of government consumption due to time lag and crowding out, this is true even when some infrastructure investment has significant positive long runs effects,

On the short term stimulative effect“…First, even when government investment has significant long-run effects, the short run stimulus multipliers are less than those from government consumption in most situations. The two key reasons are (i) the effects of time-to-build delays and (ii) the propensity of government investment to crowd out private spending more than government consumption does.These results are supported by quantitative models, empirical panel studies across OECD countries, time series analysis in the U.S., and cross-state studies. The effects of time-to-spend and time-to-build delays, which appear to be inherent in infrastructure projects, work against the standard New Keynesian mechanisms and lower short-run multipliers. Second, the long-run multipliers on government investment depend critically on both the production function elasticity of output to public capital and on where the economy begins relative to the socially optimal level of public capital. Higher production function elasticity raises multipliers and starting far below the socially optimal level of public capital also raises multipliers….”

Valerie Ramey, “The Macroeconomic Consequences Of Infrastructure Investment,” National Bureau Of Economic Research, July 2020, https://www.nber.org/papers/w27625

Her figure 8 suggest current levels of public capital in terms of GDP are comparable to previous periods of higher investment, “…shows government capital as a percent of GDP from 1929 to 2018. The data are current-cost net stock data on government capital and nominal GDP from the BEA. The figure shows long-run trends for all government capital, nondefense government capital, and transportation capital relative to GDP. All show significant swings over time. The total government capital ratio hit peaks in the 1940s and the mid-1970s. Both the nondefense and transportation government capital ratios hit peaks in the 1930s, the mid-1970s, and in the early 2010s. The ratios have fallen only slight since the early 2010s. Thus, current levels of public capital are comparable to those of some of the past high points….”

Taking a longer view, “…Second, my review and small extension of the empirical literature on the long-run estimates suggests that theaggregate production function elasticity of output to public capital is probably between 0.065 and 0.12,…However, this elasticity is very stylized and does not take into account possible differences in the marginal products of different types of government capital. Some studies find higher estimates for core infrastructure, while others do not. Third, there is both theoretical support and some empirical support for the short-run multiplier on government investment being higher when interest rates are constrained by the zero lower bound (ZLB). The theoretical mechanisms that lead to this effect, however, also imply that at the zero lower financing government spending with distortionary income taxation rather than deficits leads to higher multipliers, a result contrary to most economists’ priors. Fourth, cross-section and panel evidence on U.S. states or counties that focuses on bridge, highway, and road infrastructure spending suggests that the spending leads to either no change or a decline in employment in the first several years, even during ZLB periods. There is no obvious explanation for these puzzling results, though the disruptive effects of construction on existing infrastructure might play a role. In sum, the macroeconomic approach to government investment provides strong support for the long-run benefits of infrastructure spending. However, the same approach raises questions about the suitability of investment in infrastructure and other public capital as a short-run stimulus….”