Why Fiscal Stimulus Programs Fail, Volume 1

“Using sophisticated econometric techniques, Heim is able to achieve a dual result: to show that the Keynesian approach to economic stabilization is theoretically valid; but that its practical application in the past has proved quantitatively problematic.  It may well be that he is vindicated by the unprecedented measures applied in the last two downturns.” -Paul Hohenberg, 2007 President, Economic History Association

“Keynesian macro policy has been thought to fail because of crowding out… this book shows that Keynesian macro policy was not the failure, it was the accommodating monetary policies that failed;…Furthermore, it appears that the use of investment banks, rather than commercial and savings and loans banks, significantly obstructed the effectiveness of the accommodative policies.” -John Polimeni, Associate Professor of Economics, Albany College of Pharmacy.

"Why Fiscal Stimulus Fails (Vol. 1) succeeds in its quest to establish therelationship between government deficits, crowding out, and monetary policy. The treatise benefits further from Heim’s requirements that economic models be replicable… the thoroughness and clarity of Heim’s presentation makes the work accessible to anyone.”-Robert Jones, Rensselaer Polytechnic Institute 

This book offers a series of statistical tests to determine if the “crowd out” problem, known to hinder the effectiveness of Keynesian economic stimulus programs, can be overcome by monetary programs. It concludes there are programs that can do this, specifically “accommodative monetary policy.”  They were not used to any great extent prior to the Quantitative Easing program in 2008, causing the failure of many fiscal stimulus programs through no fault of their own. The book includes exhaustive statistical tests to prove this point.  There is also a policy analysis section of the book. It examines how effectively the Federal Reserve’s anti-crowd out programs have actually worked, to the extent they were undertaken at all. It finds statistical evidence that using commercial and savings banks instead of investment banks when implementing accommodating monetary policy would have markedly improved their effectiveness. This volume, with its companion volume Why Fiscal Stimulus Programs Fail, Volume 2: Statistical Tests Comparing Monetary Policy to Growth, provides 1000 separate statistical tests on the US economy to prove these assertions.