The data are reasonably clear-cut. The US economy has not returned to sustained above-trend growth. The unemployment rate has been at or above 9.5 per cent for more than a year, the longest period of such high unemployment since records began. The verdict must be that this fiscal boost has made little difference to the unemployment rate. In that sense, Keynesianism has failed. 

No doubt counter-arguments and excuses will be put forward by the Keynesians.  They may say that underlying demand in the US economy has been weaker than they or anyone else expected and that the fiscal boost has at any rate stopped unemployment from rising further. But: "Why has underlying demand been so disappointing?"

The explanation could turn on the stagnation in the quantity of money since early 2009, which is the kind of evidence that non-Keynesian, monetarist economists would emphasise. But that has a devastating message for Krugman and his Keynesian associates. By implication, the correct policy move at the start of the Obama Presidency was to increase the quantity of money, not to expand the budget deficit. If the persistence of high unemployment is to be attributed to monetary forces, monetary policy — not fiscal — should be the focus of policy action. 

Meanwhile, Steinbrück has every reason to chuckle. Germany has allowed some increase in its budget deficit, but not on the US scale. Its public finances, unlike the US's, are fully sustainable. But the absence of an immense fiscal stimulus package and a large budget deficit has not been accompanied by disappointing outcomes on demand, output and employment. On the contrary, Germany's unemployment rate is lower now than it was in mid-2007, when the crisis began. 

In the second quarter, Germany's GDP rose by over two per cent. If that pace were to continue for a year, output would be up by almost 10 per cent. Again a special influence was at work, the rebound in construction activity after a very cold winter. Nevertheless, Germany's economy has clearly not been handicapped by its government's refusal to embark on large-scale "fiscal expansionism". I propose that in 2011 the Nobel Prize in economics should be awarded to Peer Steinbrück. Given the emerging evidence, he has a better understanding of the determinants of macroeconomic success than Paul Krugman, the 2008 laureate.