First, she suggests that the neutral or natural interest rate – which is defined as the interest rate consistent with full employment given everything else – does not exist. But the analysis I’ve just given doesn’t depend on the natural rate being either easily estimated or stable over time. So what purpose does claiming that the natural rate is a meaningless concept serve? It seems as if she’s saying that deficits necessarily lead to an increase in the monetary base, that expansionary fiscal policy is automatically expansionary monetary policy. Are they claiming that expansionary fiscal policy actually reduces interest rates?

Source: New York Times February 25, 2019 21:00 UTC