The When the deficits run big the

The Trump Tax show a total break with the normal principle of fiscal policy. When the deficits run big the economy is weak, smaller deficits or surpluses when it is strong. But now the deficit is soaring even in the face of low unemployment. The fiscal policy has been off the rails since 2010, not because of the national debt, but because of what it done with macroeconomic. Fiscal policy should support demand when the economy is weak and opposite when the economy is strong it should pull back the support. Using the fiscal impact measure calculated by Hutchins Center point that how much fiscal policy at all levels of government adds to or subtracts from short-term economic growth. The chart plots that the unemployment rate sice 2000 can be break it up into two periods, 2000 to end of 2009 and 2010 till now. You can see that the blue line in the first period is high unemployment was met with fiscal expansion.

From this point of view show that the Obama stimulus was a normal policy. But then fiscal policy went off track, that shows as the big red clockwise loop. It got much worse after the G.O.P gained blockade power, forcing significant austerity even unemployment remain high.

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Meanwhole the Fed can not cut interest rate because they were already zero, so fiscal austerity surely slow growth and delay the economy recovery.


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