What Sort of Macro Mannequin is the Heritage Basis Utilizing?

From Heritage:

Each greenback the federal government spends should first be taken from the personal sector. Whether or not the federal government pays for its spending by means of express taxation, or the hidden tax of inflation, or by means of borrowing, public exercise crowds out personal exercise.

In brief, authorities spending takes away as a lot or extra because it provides to the economic system.

That’s EJ Antoni in June 2023, arguing that the US economic system was in recession (I believe based mostly on the 2 quarter drop in GDO, which has now been erased by the BEA’s annual replace). Curiously, that’s precisely the identical type of mannequin that Brian Riedl — then at Heritage Basis, now on the Manhattan Institute — used 13 years earlier on this WashTimes article:

However there’s one drawback with the federal government stimulus principle: Nobody asks the place Congress acquired the cash it spends.

Congress doesn’t have a vault of cash ready to be distributed. Each greenback Congress injects into the economic system should first be taxed or borrowed out of the economic system. No new spending energy is created. It’s merely redistributed from one group of individuals to a different.

It’s intuitive that authorities spending financed by taxes merely redistributes current {dollars}. But spending financed by borrowing additionally redistributes current {dollars} right this moment. The truth that borrowed {dollars} (in contrast to taxes) will probably be repaid some years later doesn’t change that.

I might’ve thought (truly thought in 2010) that conservative economists with any credibility would’ve moved past easy metaphors. So far as I can inform, Heritage macroeconomists nonetheless depend on some type of Classical (heck not even New Classical!) fashions.

Personally, I believe Dr. Antoni would possibly’ve been a bit much less absolutist in his declarations given  Chapter 1 of his PhD dissertation (though I’m somewhat doubtful of the devices he utilized in his 2SLS regressions).

Digression: Does anyone know what’s the standing of the lawsuit Heritage introduced towards Treasury for (allegedly) altering the definition of recession?

Hyperlink.