The GDP data chart below has been discussed by a number of pundits. It compares the what happend to the GDP of the United States, which had a stimulus (though not as big as some would like), with that of Britain, which went the way of austerity. The U.S. result is quite clearly better. Many attribute this to the stimulus. Andrew Sullivan noted that the U.S. dollar being a reserve currency is an advantage that we have over Britain, but... http://andrewsullivan.thedailybeast.com/2011/10/life-without-stimulus.html Below is Krugman's take, which also noted that "austerity success story" Latvia really isn't that successful: http://www.nytimes.com/2011/10/28/opinion/krugman-the-path-not-taken.html I think this at least raises substantial doubt on the "stimulus = failure" theory.
This analysis ignores monetary policy. I would bet monetary stimulus (QE1 and 2) deserves more of the credit than fiscal stimulus.
By monetary stimulus do you mean "treason"? http://slatest.slate.com/posts/2011...ke_calls_quantitative_easing_akin_to_tre.html
You mean the monetary stimulus/QE that the US did, or the one that Britain did? Not if you actually do the math, the dollar/sterling exchange rate has stayed pretty even since q1 2009, hovering between .61 and .65 -this is of course, way below what it was when the crisis struck in mid 2008, when the dollar was rather devalued and the sterling riding high... so how is this relevant again?
Just because real GDP increases doesn't mean that fiscal stimulus worked. In fact, you'd expect real GDP to increase if the state employs a policy of financial stimulus because government spending, a component of GDP, increases. I'd be more interested to see how monetary debasement affected the net export component of each nation's GDP, and how consumption changed due to fiscal stimulus. I believe those components are at least slightly more telling of the economic situation of each nation. Of course, what good does more consumption do when that consumption is only coming from a particular sector of the economy? In other words, consumption doesn't do the middle-class any good if most of it comes from banks and financial institutions robbing the middle and lower-classes of the assets they could no longer afford in light of economic recession.
Just because it works, doesn't mean it worked. Unless you have more gold doubloons you are poorer. Please amuse me some more. The US and Britain have been at effective monetary parity since 2009. Strike 2.
With QE3 happening in Britain, I'd say in truth, the Brits have the Americans beat on monetary policy attempts. They're probably going to push to stagflation because of it. (It's actually curious how Britain, of all countries, has that almost pure montarist bent---considering how they've been burned in the past with playing around with their Sorosed currency).
I didn't say the Americans beat the Brits in QE3, or that the Brits didn't do any, just that this analysis completely ignores monetary stimulus. Besides, the countries are very different. You can't just compare GDP paths of two different countries and attribute all of it to fiscal stimulus. That's silly.
Yes, I think the Republicans are nuts on this. Fiscal stimulus is generally hated because it appears to not work. Monetary stimulus is generally hated because it appears to cause inflation (which would mean it's actually working).
I guess GDP is at 2008 levels. Was the stimulus and bail out meant to accomplish this three year feat? Right now we are in a staglfated period. GDP has gone up but the stagflation growth from the DJI has remained failry flat since it plummetted in 2008. It's not like we are going to see the 1999-2002 growth.
I have to suggest the fact that in willing to isolate for monetary policy, even when both countries have similar monetary policies (and in fact Britain's may be more expansionary), there appears to be a complete contradiction to your secondary argument that GDP paths can't be largely or significantly attributed to one variable.
How was Britain's more expansionary? I said that I think monetary stimulus deserves more credit than fiscal stimulus, not that monetary stimulus is the ONLY factor determining the divergence in GDP paths.
The Internet boom was built on the delusion of stock pitchers, and the death throes of "irrational exuberance". It was "bubble up" according to the Fisher terminology. "Bubble down" led to Greenspan killing the Taylor Rule, and cheap capital flooding to inflate food prices beyond the incomes of the starving poor, and shoddy subprime mortgages that ultimately came close to destroying the economy in 2008. The 1999-2002 growth rates were a mirage that we all ended up paying for. Are you sure you want to wish for that again?
Well, you can go into the technical parlance, but suffice it to say that Britain is going onto the QE3 path the Fed dares not tread on. Maybe you can argue that the Fed is doing more per each round of QE and etc.---but the fact is, on monetary policy, the UK is following pretty tightly, and arguably surpassing the US. You seem fairly certain according to (intution? emotion? emprical evidence you have not revealed to us?) that monetary policy is more stimulative than fiscal policy. Fine, so be it, but you can't turn around and then say fiscal policy doesn't work because the study "fails to take into account monetary stimulus"---when in fact, if this was a difference-in-difference study, monetary policy would be taken into account by the simple fact that both the United States and the UK have followed very similar monetary paths.
Isn't the point of the austerity measures to reduce deficits, not to stimulate growth? The US budget deficit has widened over last year. The UK budget deficit has narrowed over last year. Austerity measures seem to be accomplishing their goals in the UK. US deficit widens linkage UK deficit narrows linkage
How was it less expansionary? Why don't you cite some evidence instead of an intuition? The fact that exchange rates between the two didn't move at all on a net basis, and probably actually reflected a slightly stronger dollar for most of the period, causes me to seriously question your theory that it was a weak dollar responsible for the extra growth. Let's look at it another way - the US bought, more or less, around $ 2 trillion in notes over 2 years or so up against a 14 trillion gdp. (.17) Britain's QE was about 275 billion against 1.4 trillion in gdp. (.2) Is there anything to back up your intuition at all? Cause the numbers are killing you.
Not according to mainstream rightwing economics - they have told us time, and time again, not just pundits, but dimwits repeating it on this message board, that cutting deficits creates a confidence fairy who magically causes growth - that in order increase spending you have to cut spending. That's what "HAHAHAHA KEYNSIANISM IS DEAD STIMULUS FAIL" pretty much necessarily implies - if you don't like it, maybe you should reevaluate your beliefs.
