Wonkblog: The third quarter did spike, but it was mostly the result of inventories, which, as Yglesias says, is probably bad news. Even more interesting, there wasn’t any additional government austerity in this quarter. Government spending actually increased slightly as state and local spending increased, which more than canceled out declining federal spending.
Yes, a great discovery. Austerity in DC likely causes more efficient local government. Notice the trend was associated with stronger growth as it unfolded in the third quarter. Not likely the main cause of expanded growth, oil fracking seems like a bigger constituent of recent growth. But I think Mike finds multipliers less than one in DC.
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