Scott Sumner argues that since the monetary authority is the last mover in targeting the nominal economy, fiscal cyclical policy is mostly neutered. If the Fed is targeting a certain nominal production level or inflation level and the government institutes fiscal policy intended to increase nominal economic activity, then the Fed will offset that policy in order to remain on target. If the Fed wouldn't offset fiscal policy stimulus, then the question is why wasn't the Fed creating more stimulus to begin with? The zero lower bound isn't a reason. I have found that the Fed has been able to influence forward inflation and interest rate expectations at the zero lower bound. Here is a recent study coming to the same conclusion.
At any rate, Scott has posted some comments I made about the issue. Click on the link for the full story. The short version is that we can see monetary offset in the Fed transcript from September 2008.
In fact, I suspect that, on a policy like Emergency Unemployment Insurance (which was first implemented in this cycle by President Bush in June 2008), the modelers at the Fed probably model the policy as stimulative. So, there is a double whammy effect of monetary offset. Someone like Janet Yellen sits down at the FOMC meeting and she looks at the models from the Fed quantitative staff, which reflect perceived additional fiscal stimulus, and thinks, "Hey, things aren't so bad. We don't have to be as accommodative as I thought." Then, bringing her own intuition to the meeting, she notes that the unemployment rate is probably overstated because of the recently instituted emergency unemployment insurance. We would normally expect rising unemployment to be disinflationary, but since it is likely exaggerated by the effects from EUI, we can kind of figure that the labor market is doing better than the unemployment rate would suggest.
So, EUI might cause Fed modelers to point to a more hawkish policy and then the FOMC adds their own additional hawkish twist.
In actuality, Janet Yellen was right that EUI probably caused higher unemployment, but this probably called for more dovish policy.
Here is a fiscal policy that could be contractionary, but that leads to an exaggerated monetary offset that is also contractionary.