I asked Mark Zandi, the chief economist at Moody’s Analytics, to assess Republican claims that economic growth is coming in response to their policies. His answer:
The tax cut deal is an important reason why economists, including me, have raised their outlook for 2011 growth. The deal was a significant surprise, including the temporary payroll tax cut, the extension of emergency UI benefits through the end of the year, and perhaps most underappreciated.. the expensing of all business investment in 2011.
I don’t think the GOP takeover of the House makes a material difference to the outlook, unless it results in a serious impasse over increasing the debt ceiling which would be a significant negative for financial markets and the economy. I don’t expect this, however.
Fiscal stimulus can have a very rapid impact on the economy; the tax cut deal has already had a meaningful impact. In general, stimulus through temporary tax cuts have a faster impact than stimulus through temporary spending increases.
