Which “austerity”? Fiscal or monetary?

Matt O´Brien has gone over to the “dark side” writing “Why is the recovery so weak? It’s the austerity, stupid.”:

Welcome to Austerity U.S.A., where the deficit is back below 3 percent of GDP and growth is still disappointing—which aren’t unrelated facts.

It started when the stimulus ran out. Then state and local governments had to balance their budgets amidst a still-weak economy. And finally, there was the debt ceiling deal with its staggered $2.1 trillion of cuts over the next decade. Add it all up, and there’s been a big fiscal tightening the past few years, something like 4 percent of potential GDP. Indeed, as Paul Krugman points out, real government spending per capita has been falling faster now than any time since the Korean War demobilization.

And, as you can see above, all this austerity has been hurting GDP growth since 2011. It shows the Hutchins Center’s new “fiscal impact measure,” which looks at how much total government tax-and-spending decisions have helped or harmed growth. The dark blue line is what policy has actually done, and the light blue one is what a neutral policy would have done. So, in other words, if the dark blue line is below the light blue one, like it has the last three years, then policy has subtracted from growth.

The chart shown:

Interestingly, all the fiscal expansion during the recession (07/12-06/09) did not help. Real output growth tumbled and that´s because monetary policy was strongly contractionary. The “monetary austerity” is illustrated in the sequence of charts below:

And since 2011, despite “fiscal austerity” the economy is growing by as much as monetary policy allows it to do!