I highly recommend watching the CNBC debate between Casey Mulligan (against stimulus) and David Goodfriend (pro stimulus). Note that both Mulligan and Goodfriend claim to have evidence.
But let us look closer.
The debate revolves around the White House report saying that without the stimulus 161,000 jobes would be lost. The White House claims to have saved them at the cost of $ 100 billion.
Mulligan's logic is as follows:
- it is impossible to determine with precision any impact of the stimulus;
- but even if we take the claims of the White House report at face value, the cost per job (around $ 600,000) is staggering.
Goodfriend, however, says that he has evidence that 161,000 jobs were really saved by the stimulus. But he does not stop there. He then claims that he has evidence that had those jobs been lost, the US economy would have been in much worse shape than it is now (in that he is clearly confusing correlation (in this case better even to say the coincidence of the stimulus and the economic improvement) with causation).
I think Krugman and the like would have applauded Goodfriend's defense of the stimulus as quite logical. But if the magic multiplier effect (of which there is no evidence) is taken out, the whole logic collapses spectacularly and the defence of stimulus becomes what it is - an excercise in sophistry.