Should-Read: Jared Bernstein: The new asymmetric risk

Should-Read: I think the estimable Jared Bernstein is just wrong here, for reasons he knows—and in fact sets out in the “caveat” section of his post: Jared Bernstein: The new asymmetric risk: “Given that we cannot confidently assert that we are at full employment or full capacity… this hyper-Keynesian experiment is worth undertaking…

…Caveat time, and there are good ones which I take seriously…. This particular fiscal stimulus has lousy multipliers. Some of the spending in the budget deal may end up supporting useful infrastructure projects and providing much needed disaster relief—worthy expenditures that could help tighten the job market in places where it’s still slack. But the regressive tax cut is terribly targeted, and any fiscal stimulus is less potent when the Fed is pushing in the other direction, albeit slowly…. The bang-for-the-buck here is sure to be weak…

Fiscal space should be used, but it should be used and used up only for good policies that do the job, not for pointless regressive tax cuts.

February 10, 2018


Brad DeLong
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