Here’s a recent claim by Mike Konczal:
We rarely get to see a major, nationwide economic experiment at work, but so far 2013 has been one of those experiments — specifically, an experiment to try and do exactly what Beckworth and Ponnuru proposed. If you look at macroeconomic policy since last fall, there have been two big moves. The Federal Reserve has committed to much bolder action in adopting the Evans Rule and QE3. At the same time, the country has entered a period of fiscal austerity. Was the Fed action enough to offset the contraction? It’s still very early, and economists will probably debate this for a generation, but, especially after the stagnating GDP report yesterday, it looks as though fiscal policy is the winner.
I’m puzzled by this. The first quarter RGDP numbers show a growth rate of 2.5%, which is actually higher than the growth rate of 2012. NGDP growth is similar to 2012. How does that show fiscal policy is slowing the economy?
Perhaps fiscal policy is slowing the economy, but I just don’t see it in the data.
BTW, if fiscal austerity did slow the economy, the solution would not be fiscal stimulus, it would be monetary stimulus. If the Fed is unwilling, an employer-side payroll tax cut would be a good form of fiscal stimulus, much more effective than what they did in 2009.
And I can’t speak for Beckworth and Ponnuru, but I very much doubt the Fed did “exactly what Beckworth and Ponnuru proposed,” which was NGDPLT, if I’m not mistaken.
HT: Ramesh Ponnuru