John Cochrane: More new-Keynesian paradoxes

Dont miss Cochrane's latest: More new-Keynesian paradoxes

….Furthermore, all the new-Keynesian models are “Ricardian.” They predict the same stimulus whether spending is financed by borrowing or by lump-sum taxes today. Good, we don't need to argue about “Ricardian equivalence,” but to believe their predictions for spending borrowed money, you have to believe that taxing you and me a trillion dollars and spending it on a trillion dollars of alien defenses will raise overall output by 2, 3, or 4 (you can get really big multipliers in these models) trillion dollars.