“The macroeconomy is a garden, not an army.”
From John Cochrane at the symposium I mentioned yesterday. At the link note, particularly, the disconnect pointed out between the problems we actually have and the solutions that are being proposed (and implemented!):
(i) “Jobs” bill. Do we really have 9% unemployment because we stopped building roads and schools?
(ii) Raising the capital gains tax rate. Do we have high unemployment because the marginal tax rates on capital gains are too low?
(iii) Re QE3 or QE5, “I’ve lost track.” Do we really have 3% mortgages because we don’t have enough credit. [Hmmm. Here I’m wondering if he has taken account of the difference between nominal and real interest rates.]
On (I) IMO the administration thinks that jobs are much more substitutable than they actually are and is asking the multiplier to carry far too much freight.
Which multiplier?
The Keynesian multiplier, the difference in the increase in economic activity as a consequence of fiscal stimulus.