It would seem it comes down to the government expenditure multiplier. If the "fiscal QE" is for a government spending initiative with a positive multiplier, real growth will improve.
At these levels of debt (130%+ of GDP) is there anything that has a positive multiplier?
We have many studies that cut against gov spending at these levels of debt. The Ricardian equivalence works against debt-funded tax cuts in the long run
Based on the research, fiscal QE won't raise the trend rate of real GDP per cap because the gov multiplier is too negative
So we have gov spending at about 20% of GDP pre-COVID. Up to 35%+ during peak stimulus. We simply have to ask ourselves what level of spending we want to gov to have? What is optimal? If gov spending increased to 50%+ of GDP, would we have better or worse results?
So does fiscal QE solve the decline in trend real GDP growth per capita?
The evidence is thin.
WWII spending would be the exception but that was a confluence of unusual circumstances that are quite different today IMO.
As @GeorgeSelgin points out, the current monetary framework makes the Fed vulnerable to go along with the policy of fiscal QE (floor vs. corridor).
Will it work to raise real GDP growth per capita, the determinant of the standard of living?
Remains to be seen...
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Initial jobless claims remain extremely tame on a non-seasonally adjusted basis.
The 2024 path is tracking almost exactly along the average of 2023, 2019, 2018, and 2017.
1/4
The 52-week average of jobless claims edged higher this week and is higher than the cycle low-point in February 2023 but has trended down most of 2024.
The insured unemployment rate, however, while low, continues to edge higher slowly.
2/4
Layoffs remain low, but hiring is very weak, which is consistent with the initial increase in unemployment.
The 52wk average of initial claims is 3.9% off the cycle low.
Plotting the change in Federal Reserve interest rate policy before and after a trigger of the Sahm Rule.
Thread.
1/9
The Sahm rule was triggered in the July Employment Situation Report.
Historically, the Sahm rule has been a slightly lagging indicator, meaning the trigger dates occur after a recession has already started.
2/9
In this thread, we won’t address whether a recession has started or not but rather look at historical changes in the Federal Reserve's interest rate policy around historical Sahm rule trigger dates.
3/9
Q2 GDP was boosted by equipment investment, specifically transportation equipment.
We've previously discussed how important these cyclical sectors are in driving the ebbs and flows of the overall Business Cycle.
Auto equipment investment has fallen out of sync with the other cyclical sectors, a unique feature of this cycle as the auto sector was the most badly impacted by supply chain issues in 2021 and 2022.
The "Duncan Leading Index" was created from the idea that changes in the economy stem from a few sectors.
The pandemic roiled many of these sectors, and we can still see the impact.
Let's check on the momentum of these sectors and what it says about the economy today.
1/17
Generally speaking, the economy has four primary categories: private consumption, private investment, net exports, and government spending.
2/17
The Duncan Leading Index involves tracking three narrow segments of the economy: durable goods consumption, residential investment, and non-residential investment.