Dan Braganca

One of the beauties of federalism is that different states can try individual approaches to problems and see which works the best. Since the recession two general policies have been advocated: some argue that we should increase spending, the other side thinks we should make cuts. In America, we generally get to observe a sample size of 50 – generating sufficient statistical power to make strong inferences on the correct approach.

The data is clear.

Adam Hersh of the Center for American Progress explains the findings:

Relative to national economic trends, states that increased spending enjoyed on average:

• 0.2 percentage point decrease in the unemployment rate

• 1.4 percent increase in private employment

• 0.5 percent real economic growth since the start of the recession

In contrast, states that cut spending saw on average

• 1 percentage point increase in the unemployment rate

• 2.1 percent loss of private employment

• 2.9 percent real economic contraction relative to the national economic trend