Contrary to many standard assertions, it looks as if increased gubmnt deficits in the US have had (and would have had) any stimulus effect. It would be nice if standard Keynesian models could be dropped from intro texts and from political speeches. [h/t Gabriel]. Here's the abstract from this paper:
This paper asks whether increases in government spending stimulateprivate activity. The ﬁrst part of the paper studies private spending.Using a variety of identiﬁcation methods and samples, I ﬁnd that inmost cases private spending falls signiﬁcantly in response to anincrease in government spending. These results imply that theaverage GDP multiplier lies below unity. In order to determinewhether concurrent increases in tax rates dampen the spendingmultiplier, I use two different methods to adjust for tax effects.Neither method suggests signiﬁcant effects of current tax ratechanges on the spending multiplier. In the second part of the paper,I explore the effects of government spending on labor markets.I ﬁnd that increases in government spending lower unemployment.Most speciﬁcations and samples imply, however, that virtually allof the effect is through an increase in government employment,not private employment. I thus conclude that on balancegovernment spending does not appear to stimulate private activity.