Chart from Brad DeLong titled “The Need for More Expansionary Policies: Fiscal, Monetary, Banking, Whatever”. The Bernanke-Obama approach to macroeconomic stabilization appears to have returned us to the trend growth rate but has left us far below the trend growth level and we seem as likely to undershoot the trend rate in the future as to overshoot it.
The great failure of the Obama administration, on domestic policy, has been an inability to communicate at either a mass or an elite level what its diagnosis of the situation is. Are there things that should be done but that Congress or the FOMC won’t agree to? Have they turned Austrian and think we need to suffer 3-4 years of post-trough elevated unemployment as punishment for our sins? Smart observers can construct plausible theories, but there’s no substitute for having the people in charge say what it is they think the problem is.