Back in the early spring, we were told that without fiscal stimulus we would have an economic disaster. In fact, Congress produced by far the largest peacetime fiscal stimulus in history; indeed nothing else even comes close. And this was followed by what was by far the worst quarterly collapse in GDP ever.
In fairness, it’s quite possible that the Q2 collapse in GDP would have been even worse without the stimulus, although I suspect that some elements of the stimulus such as giving $2400 to upper middle class families that were terrified to go out shopping were mostly “wasted ammunition”.
In recent weeks there has been a drumbeat of hysteria on the internet claiming that without another massive fiscal package by August 1st, the economy will falter. So here’s my question. What is the conventional wisdom of Keynesian macroeconomists? What exactly are they predicting will happen if Congress doesn’t pass another package this month?
Here’s the latest data on new unemployment claims, which began edging upward in July with the second wave of Covid-19, but fell sharply below expectations in the week of August 8:
Too soon to draw any conclusions (and other data is weaker), but not too soon for Keynesians to make their predictions. It might also be fun to revisit 2014, when Keynesians predicted a slowdown in job growth after the end of extended unemployment compensation, and job growth actually accelerated by 700,000 (from 2.3 million to 3 million).
Matt Yglesias has a cute tweet showing the silliness of claims that Trump produced a great economy, but missed an opportunity to highlight the 2014 acceleration in employment, or the non-recession of 2013 after major fiscal austerity.
PS. Speaking of Yglesias, he also directed me to a article exposing that fact that the sexual witch hunt in Amherst had was motivated by political considerations. So does that mean I was wrong about stupidity in my recent post? No, because the bigger problem isn’t that there are a few nuts at Tulane and Amherst, it’s that they now control the universities. That means the administrators are stupid. And if they are controlled by trustees, then the trustees are stupid. The point is that someone is stupid. (And not just me.)
As an aside, I vaguely recall reading that the Salem witch hunt also had a hidden political agenda. Is that right?
PPS. By the way, I’m going to recommend Yglesias’s new book “One Billion Americans”. I have not actually read the book, but I know it’s good. How do I know? Because Yglesias is a very smart progressive who wrote a book with enormous appeal to national greatness conservatives (more people than China by 2100!), libertarians (Yimby! plus mass immigration) and religious conservatives (more babies!) How can such a book not be interesting? It’s as if Scott Alexander wrote a book on psychiatry or Tyler Cowen on the sociology of intellectuals in the 21st century. It literally cannot be bad.