In Lew of Geithner and more

Yep the chances for a fiscal expansion, already a difficult proposition with a GOP dominated House and a reluctant and fiscal conservative Obama, are now even more unlikely with the eminent nomination of Jack Lew as the new Treasury Secretary in lieu of Geithner, even though some tend to think he is too liberal (see here). Yet ass noted by Mike Norman: "Lew is an avowed deficit hawk and has been very vocal about reducing the government's deficit and supporting the president's push for a "Grand Bargain." This means that Lew will almost certainly be pushing for more austerity."

Meanwhile Olivier Blanchard at the IMF has admitted that the IMF was wrong on austerity. In a recent paper he says:
We find that, in advanced economies, stronger planned fiscal consolidation has been associated with lower growth than expected, with the relation being particularly strong, both statistically and economically, early in the crisis. A natural interpretation is that fiscal multipliers were substantially higher than implicitly assumed by forecasters.
This is a case in which I could say "I've told you so." By the way, by fiscal consolidation, Blanchard means austerity.


  1. Gah! As much as I like to think Obama has learned from his past mistakes, there are some that he just won't stop repeating. That we've often been protected from his bad instincts by the Democratic leadership in the house and senate -- and by the Tea Party's extremism -- is hardly reassuring.


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