Politics driving fiscal space, populists winning in Europe, and the meaning of a crushing euro external balance

1 Big Thing: Politics are the driving force in fiscal debates
The conventional wisdom is that Donald Trump is irresponsible for running up trillion dollar deficits which will limit fiscal space in the next downturn. In a good piece on how a recession could take hold in 2020, Nouriel Roubini gave voice to this concern in passing.

My view as stated in the past: the politics are the only constraints here. Though I agree with Nouriel's conclusion and believe the zero lower bound constraint on monetary policy is real, I believe the fiscal constraints are self-imposed.

Here's how I put it in July:
So when the Fed cuts to zero, there won’t be a bevy of fiscal measures coming — irrespective of how government funds itself. On the fiscal front, the political obstacles are too high to overcome, esp...


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