Greg Mankiw Annoys Paul Krugman
Camden, Maine

Ryan Avent on Ben Bernanke

Note, first, that the Federal Reserve's forecasts of unemployment are consistent with its forecasts of GDP only if you have a pessimistic view of long-term potential output growth.

Ryan Avent watches the Man Who Did too Little:

America's recovery: The man who did too little: American unemployment is expected to remain uncomfortably high through 2013 at least (in which year the Fed projects an unemployment rate between 7.0% and 7.5%, up from April's estimate). Keep in mind that 2013 is 7 years from the official start of the recession. One simply can't look at projections of serious labour market difficulties over that stretch of time and see anything other than a major crisis, for workers, wages, and budgets.... The Fed projects that the economy will expand at less than 3% for 2011 as a whole; growth was revised downward for 2011, 2012 and 2013. It should be noted once again that rapid labour market recoveries are associated with periods of rapid, above-trend growth. If you don't have the latter, you don't get the former.... It could be the case that if the Fed attempted to push the economy to go any faster, accelerating inflation would result. The Fed doesn't actually seem to believe this; following the initiation of QE2, the Fed's economic projections for 2011 were for growth between 3.5% and 4.5%. The Fed was obviously happy with this; if it had believed that inflation were running out of control it would have curtailed the programme. It didn't....

[R]ight now, it appears that nominal output growth in 2011 will fall short of the economy's long-term trend. Not short of the growth rate consistent with a speedy recovery; short of trend.... I don't expect the Fed to work miracles. There are lots of economic problems Ben Bernanke can't solve. I do expect the Fed to do its job, and right now it looks like the Fed is saying it has no responsibility for meeting its nominal goals. That's not acceptable...