Twilight of the Macroeconomic Nerds?
On Wednesday, Congress passed the American Rescue Plan, its third major coronavirus relief package in less than a year. According to my Washington Post colleague Adam Taylor, when one combines the Cares Act, the late December 2020 package and the ARP, federal pandemic relief spending will be equal to 28 percent of America’s 2019 GDP. This dwarfs the fiscal response to the 2008 financial crisis as well as the comparative fiscal response of every other major economy in 2020 except Japan.
The New York Times’ Neil Irwin concludes that this is an ideational inflection point in his latest column: “Leaders of both parties have become willing to act directly to extract the nation from economic crisis, taking that role back from the central bank.” That framing does seem to capture Irwin’s thesis — that the recent fiscal expansion represents a waxing of fiscal policy and a waning of monetary policy