…and concludes that fiscal expansion has no effect on GDP.
Think it can't be that silly? It is:
Ramesh Ponnuru: Joe Weisenthal Digs a Ditch: [M]y article with David Beckworth on why we need to cut federal spending and adopt a new rule to stabilize monetary policy…. Against our claim that monetary policy nullifies the effect of fiscal policy, Weisenthal counters that Bernanke has called for fiscal activism. But there is no contradiction here. Of course Bernanke would prefer that Congress and the president do more and he do less—it’s much easier on him….
Weisenthal says that it’s “just plain weird” to suppose that fiscal stimulus merely shifts economic activity around rather than adds to it. “If the government hires someone to, say, dig a ditch . . . then that person is gaining income without any ‘subtraction’ from another part of the income.” That’s true under certain assumptions. It’s false under the assumption we believe is realistic: that the government’s spending of this money causes the Fed to run a tighter monetary policy than it would have done without the federal spending…
Ben Bernanke says that that is not the policy he is following.
Ben Bernanke says that the economy needs more expansionary policies by other branches of the government to boost employment and production. He does not say that the economy is right-side up as far as aggregate demand is concerned. He does not say that he will respond to any expansionary fiscal policy moves by offsetting them with more contractionary monetary policy:
Bernanke news conference on Fed policy: With respect to the current economy we are currently continuing our accommodative monetary policy. We are trying to do our best to support economic growth and job creation. It would be helpful if we could get assistance from some other parts of the government to work with us to help create more jobs. But certainly we are doing our part to create more jobs, more opportunities in America…
If Ponnuru has any reason to believe that Bernanke is lying, I would like to see the evidence. If not, he should not claim that Federal Reserve policy is different from what Bernanke says it is.
My interpretation: playing for Team Republican simply rots your brain, and leaves you with no ability to think coherently at all.