Various non Keynesians have argued that the pattern of public spending and GDP in the USA during the current recovery (that is since June 2009) undermines the Keynesian hypothesis that the Government spending multiplier is positive. In particular JOhn Cochrane and Tyler Cowen argue that, if Keynesians were right, sequestration should have caused at least a decline in GDP growth rates.
This shows they haven't been FREDing. The Keynesian story refers to government spending, not US Federal Government spending. A substantial fraction of Government consumption plus investment (G) is done by state and local governments. An economist may not ignore the “50 little Hoovers” (P Krugman 2009) just because political reporters focuse inside the beltway (hey I've recently been inside the beltway for about one minute !).
As I note, sequestration did not have a noticible effect on G — it was anticipated (says my FedGov employed dad) and was a shift in Fiscal 2013 budgets which governed spending for the following 7 months. It didn't cause a jump in Federal spending. It is impossible to guess when Sequestration occured from the time series of US real G.
In fact, during the recovery, percent growth of real G and real GDP are clearly positively correlated. This is exactly the evidence cited by anti-Keynesians. They are a few data points which form a very clear pattern (with an outlier 2014q1 due to weather).
Clearly the percent change in real G and real GDP are positively correlated.
Here is a scatter graph with a regression line
For what it's worth (not much) STATA is convinced that the null of zero correlation is rejected by the data
. reg grgdp grg if qtr>2009.5
Number of obs = 19
R-squared = 0.2432
grgdp | Coef. Std. Err. t
grg | .3387477 .1449474 2.34
_cons | .6951767 .1133052 6.14
19 data points can't prove anything, but the few data support the Keynesian hypothesis about as strongly as could be imagined. I am impressed by the unreliability of casual empiricism conducted by idealogues. Some people look at this period and see the opposite of what I see. Even now, I am shocked that economists didn't bother to look up the data on FRED before making nonsensical claims of fact.
