What are we to make of the United States’ and the euro zone’s opposing fiscal choices?
While the unemployment rate is close to the structural unemployment rate in the United States and the euro zone, we are seeing: An expansionary monetary policy in both regions, which is partly explained by the absence of inflation; A very expansionary fiscal policy in the United States , while it is quite restrictive in the euro zone. The difference between the fiscal policy guidelines is sufficient to explain the growth gap between the United States and the euro zone if we look at the demand side. What is the most reasonable fiscal policy between that conducted in the United States and that conducted in the euro zone? It is usually considered that an expansionary fiscal policy conducted at full employment is pointless; But we have to ask whether it drives companies to become more efficient, to increase their productivity, and whether it leads to a rise in the participation rate, i.e. whether it increases potential growth and whether it extends the expansion period.