Beckworth responds (and confuses me)

David Beckworth links to my response to his graphs the other day which allegedly showed a problem for fiscal stimulus, which were widely criticized by people.

Recall I had presented a downward trend in total government spending. He responds by presenting the same downward trend in growth of federal government spending only (I'm not sure why just federal) and total federal dollars (again, I'm not sure why just federal).

So he's basically presenting the same data I did - the trends are the same. I guess he sees something different in it. He writes: "Daniel, on the other hand, thinks if we put the variables on the same scale all is well. No, here are total federal expenditures and NGDP in the same growth rate form and in dollar levels. In both cases, total federal expenditures have been trending down since 2010."

I don't understand what he thinks this demonstrates. NGDP has been stable because at the same time government spending has been decreasing, investment spending has been increasing. Of course we could be on trend and eliminate unemployment if both were increasing.

He seems to think the argument is that if government spending falls NGDP will wall no matter what. That's not the argument as far as I know. Think of the immediate post-war period, for example. The argument is that the fiscal multiplier is positive - that if you increase government spending NGDP will increase relative to what it would have been (at a time like this, of course).

Beckworth obviously hasn't shown such a thing.

If Beckworth wants to explain why the increase in investment that has helped keep NGDP stable was caused by the decline in government spending or would somehow be threatened by an increase in government spending then my claim would be in trouble. But I think that's a very hard argument to make right now.