So, after reading numerous posts from you and Matt Y, I am well convinced on minimum wage, the recovery act, not fearing inflation much, doing away with the filibuster, etc. Well done! My remaining question is how do we convince Joe Manchin? Any thoughts?
Getting Joe Manchin behind all this just requires getting West Virginians to realize all those things are good for them, which is easier than done, obviously, but the fact he relented on opposing the direct checks after West Virginians protested back home gives me a *slight* bit of hope on other measures, though probably not the filibuster.
My question was kinda in jest but if I was going to take myself seriously would it make sense to start with focusing these points directly to the WV population? What do the numbers say about their specific need for a social insurance to make up for shortfalls throughout 2020? How would $15 minimum wage particularly effect WV employment capacity or wages? Childcare cost? How many single moms are in WV and what is their median income?
A problem I always have with national statistics or studies is that it doesn't help influence particular votes of particular congress people bc their localized numbers determine their individual vote/electoral survival
Manchin's not an idiot. He must that Democratic policies are better for his constituents than Republican ones. The problem is too many WV voters don't see it that way. They base their vote on guns, abortion and climate change denialism.
The hard truth is a lot of politicians in this country are concerned first and foremost with political survival. Sound policy-making is a very distant second.
Exactly! And I really do think Manchin could be swayed by detailed reports of the benefits of these measures to his states; he also consistently holds town halls with his constituents, where he's been willing to explain his votes on various measures (against the tax cuts, against repealing Obamacare for Trump's conviction). He did confirm many of Trump's Cabinet appointees, but he squarely rejected Betsy DeVos, even when he was lobbied by Jeb Bush, because he realized her educational policies would undermine WV's school systems. It really just needs to be put in a chart for him, which sucks, but could be useful.
Huh, oddly, the arguments Noah's made about minimum wage have actually pushed me into having more doubts about $15/hr everywhere being OK. 60% of median wage in West Virginia is like $10-12 (depending what exact measure you use). 60% of median in Puerto Rico is pretty close to the _current_ federal minimum of $7.25, and I strongly favor inviting PR to become a state. (And no, not just for purely partisan reasons. I have a good friend from my MBA cohort who has been a pro-statehood activist there for his whole adult life. Also my grandfather lived in DC and was a statehood activist there for like 4-5 decades, and I think the same "these are American citizens with a coherent identity who deserve representation" arguments apply to PR. Plus anybody that thinks PR will reliably elect Democrats hasn't paid attention to their local politics much.)
I'm all for abolishing the tipped wage, and for doing some kind of indexing to county median, but at this point I feel like even with a 3-5 year phase-in, $15 may be pretty disruptive. It probably would shake out OK in the end, the economy would find a way to adapt, but a lot of people will be out of work for a year or two as things change, as compared to what might happen with a more gradual shift.
Of course, really my ideal policy regime would be a UBI that sets a floor on how bad things can get for you, such that nobody _has_ to work a crummy job where the management mistreats them, plus a VERY generous unconditional negative income tax for low wages, for anyone that is not claimed as a dependent by somebody else, such that employers can hire people to do stuff that has positive-but-low additional value for the business, and the people being hired will get decent pay. Pay for it by ending subsidies for capital income, and making the higher brackets much steeper.
It's not clear to me that in a world of UBI + negative income tax, you actually even need a min-wage. If employers try to offer a pittance, give the people they're trying to hire a realistic option to say "no", where they won't starve in the streets if they refuse to accept bad working conditions.
You also could implement postal banking along the way, in order to make sure everyone is banked and the UBI can be pumped out to them easily. This also lets you mechanize counter-cyclical fiscal policy -- adjust UBI in response to some economic metric like the Sahm rule. And you could get some of the money from stuff like carbon taxes and other pollution taxes (sort of the "cap and dividend" idea) instead of raising higher end income taxes... But that's all just details. The main thing is just that I think min-wage is a blunt instrument, and while I obviously wouldn't want it rolled back without _something_ serving the same purpose, I think something that more _directly_ addresses the problem of employers using the desperation of a reserve pool of unemployed people to hold down wages would be a better idea.
I wish I saw cause for optimism on abolition of filibuster, but I don't. Paul Begala had a piece a few days ago suggesting that even a reconciliation bill might not be supported by Manchin if there's zero GOP support. My best guess is they'll get one or two Republican senators to support something in the, say, 1.2 trillion range, and pass it 52-48 via reconciliation.
This is exactly why it should be targeted. For stimulus, sending everyone an $x check makes sense. But when there's no need for stimulus, and most people have lost no income or even gained income (due to the unemployment bonus). Most people don't need any extra $1400 to make ends meet; for those who do, it's probably not enough.
It sounds to me like you're suggesting that the government should send out money to compensate people for pain and suffering, but it's simply not possible to make everyone whole. The pandemic reduced our overall utility frontier. "People feel bad" is not a good reason to add an extra $1 trillion or more to the deficit with no macroeconomic benefit.
I suppose you can say that we can make it up by taxing the rich even more heavily than we already do, but at that point, aren't you just using the pandemic as an excuse to do the things you wanted to do anyway?
I think the meaty, important part of the bill is the expansion in unemployment insurance, which specifically targets those who have lost the most due to covid. The point of the checks is to be fun and shiny and distracting, and send a prosocial signal that we're all in this together.
With low interest rates, this money is more or less free, so I think it is justified. If you think deficits are likely to be an actual problem in the near future (I don't think this), then I can see where it would rub the wrong way.
I think there is a better reason here - even if they just pay down their card debt with the check, it is good! Household deleveraging is really good. The US Treasury can borrow the same amount with much less interest payments.
On #1, the wealth redistribution. Being an engineer and non- economist I find your posts the most clear and helpful of the economics blogs I read, but I still need help on this point. I see who is receiving the wealth being redistributed, but not where it is being distributed from. Is it from future higher tax rates? Something in the bond market?
Thinking about this some more, and based on comments from Richard and Nathan, could one mechanism be that "wealth" distributed through direct payments to low-income people or people without jobs gets spent pretty much immediately, for rent, food and other necessities, whereas the bonds issued to finance it are held long-term? Once interest rates and/or inflation rise due to the economy heating up after this pandemic is over, those who received the money are relatively unaffected since their "wealth" has been converted into other hard assets and consumables, whereas bondholders start paying the bill as their bonds go down in value. That is, of course, if inflation actually happens.
Is that, other than taxes, the main mechanism? Or are there other major ones?
What Richard said but also if it's financed by the government issuing bonds, which it will be to some extent, bond holders will (if inflation isn't too high) make money. This is complicated somewhat if the Fed buys bonds from individual bondholders.
I too am an engineer, so take this with 0.065 g of NaCl, but it depends! If the debt is financed by printing money, then everyone who holds assets that have a fixed price in dollars -- mortgages, bonds, and so on -- takes a hit, not to mention any poor fool with dollars stuffed under the mattress. If by taxation, then taxpayers take a hit. If by spending cuts -- yeah, like that's gonna happen -- then we'll have to wait and see what gets cut.
One related thought: the economy as a whole will be weaker in the long term if we don't help out those in need. People adversely affected by the economic toll of the pandemic will suffer evictions and increased homelessness. Their credit will be damaged. Gaps in their work history will reduce the earning power. They'll suffer sundry physical and psychological problems. As will their children.
Alleviating their suffering isn't only the right thing to do on the merits. It's also the smart thing to do to keep the country's workforce and consumers as healthy and as productive as possible to maximize prosperity over the long term.
I think that generically, insurance acts as stimulus by propping up demand. So the government providing social insurance is also stimulus for the economy.
Also, anyone who says the relief package is too big should be required to show a model and estimates (with standard errors/confidence intervals/error bars!) or automatically be sent to Twitter jail.
It's small business that has been hurt the most. They are the ones in need. But $1.9T you say is not enough? Perhaps you can prove why anyone who thinks this amount is not enough should do so through models and estimates? Where is the $1.9T going? Anyone know? We already have record amounts of savings over the past year from COVID. Once things open up, people are going to go out and spend. So why do we need another $19T in debt. We are now approaching our total economic output with these debt levels. No big deal right? I think not.
If people are only spending 40% of their checks, I guess they're saving the rest (?). If they're saving it, might that money go into the stock market and fuel a bubble?
if checks for 600 and or 1400 is considered wealth, then I afraid that I have been misinformed at the highest level. It's more of wealth distribution from the wealthiest 10% to the wealthiest 1%
So, after reading numerous posts from you and Matt Y, I am well convinced on minimum wage, the recovery act, not fearing inflation much, doing away with the filibuster, etc. Well done! My remaining question is how do we convince Joe Manchin? Any thoughts?
On that, your guess is as good as mine.
Getting Joe Manchin behind all this just requires getting West Virginians to realize all those things are good for them, which is easier than done, obviously, but the fact he relented on opposing the direct checks after West Virginians protested back home gives me a *slight* bit of hope on other measures, though probably not the filibuster.
Yes this but more and for everyone in congress. Influence their vote with how these points will effect their local numbers
My question was kinda in jest but if I was going to take myself seriously would it make sense to start with focusing these points directly to the WV population? What do the numbers say about their specific need for a social insurance to make up for shortfalls throughout 2020? How would $15 minimum wage particularly effect WV employment capacity or wages? Childcare cost? How many single moms are in WV and what is their median income?
A problem I always have with national statistics or studies is that it doesn't help influence particular votes of particular congress people bc their localized numbers determine their individual vote/electoral survival
Manchin's not an idiot. He must that Democratic policies are better for his constituents than Republican ones. The problem is too many WV voters don't see it that way. They base their vote on guns, abortion and climate change denialism.
The hard truth is a lot of politicians in this country are concerned first and foremost with political survival. Sound policy-making is a very distant second.
I honestly think a $15 minimum wage won't hurt as much as his vote to convict Trump.
Exactly! And I really do think Manchin could be swayed by detailed reports of the benefits of these measures to his states; he also consistently holds town halls with his constituents, where he's been willing to explain his votes on various measures (against the tax cuts, against repealing Obamacare for Trump's conviction). He did confirm many of Trump's Cabinet appointees, but he squarely rejected Betsy DeVos, even when he was lobbied by Jeb Bush, because he realized her educational policies would undermine WV's school systems. It really just needs to be put in a chart for him, which sucks, but could be useful.
Huh, oddly, the arguments Noah's made about minimum wage have actually pushed me into having more doubts about $15/hr everywhere being OK. 60% of median wage in West Virginia is like $10-12 (depending what exact measure you use). 60% of median in Puerto Rico is pretty close to the _current_ federal minimum of $7.25, and I strongly favor inviting PR to become a state. (And no, not just for purely partisan reasons. I have a good friend from my MBA cohort who has been a pro-statehood activist there for his whole adult life. Also my grandfather lived in DC and was a statehood activist there for like 4-5 decades, and I think the same "these are American citizens with a coherent identity who deserve representation" arguments apply to PR. Plus anybody that thinks PR will reliably elect Democrats hasn't paid attention to their local politics much.)
I'm all for abolishing the tipped wage, and for doing some kind of indexing to county median, but at this point I feel like even with a 3-5 year phase-in, $15 may be pretty disruptive. It probably would shake out OK in the end, the economy would find a way to adapt, but a lot of people will be out of work for a year or two as things change, as compared to what might happen with a more gradual shift.
Of course, really my ideal policy regime would be a UBI that sets a floor on how bad things can get for you, such that nobody _has_ to work a crummy job where the management mistreats them, plus a VERY generous unconditional negative income tax for low wages, for anyone that is not claimed as a dependent by somebody else, such that employers can hire people to do stuff that has positive-but-low additional value for the business, and the people being hired will get decent pay. Pay for it by ending subsidies for capital income, and making the higher brackets much steeper.
It's not clear to me that in a world of UBI + negative income tax, you actually even need a min-wage. If employers try to offer a pittance, give the people they're trying to hire a realistic option to say "no", where they won't starve in the streets if they refuse to accept bad working conditions.
You also could implement postal banking along the way, in order to make sure everyone is banked and the UBI can be pumped out to them easily. This also lets you mechanize counter-cyclical fiscal policy -- adjust UBI in response to some economic metric like the Sahm rule. And you could get some of the money from stuff like carbon taxes and other pollution taxes (sort of the "cap and dividend" idea) instead of raising higher end income taxes... But that's all just details. The main thing is just that I think min-wage is a blunt instrument, and while I obviously wouldn't want it rolled back without _something_ serving the same purpose, I think something that more _directly_ addresses the problem of employers using the desperation of a reserve pool of unemployed people to hold down wages would be a better idea.
I wish I saw cause for optimism on abolition of filibuster, but I don't. Paul Begala had a piece a few days ago suggesting that even a reconciliation bill might not be supported by Manchin if there's zero GOP support. My best guess is they'll get one or two Republican senators to support something in the, say, 1.2 trillion range, and pass it 52-48 via reconciliation.
This is exactly why it should be targeted. For stimulus, sending everyone an $x check makes sense. But when there's no need for stimulus, and most people have lost no income or even gained income (due to the unemployment bonus). Most people don't need any extra $1400 to make ends meet; for those who do, it's probably not enough.
It sounds to me like you're suggesting that the government should send out money to compensate people for pain and suffering, but it's simply not possible to make everyone whole. The pandemic reduced our overall utility frontier. "People feel bad" is not a good reason to add an extra $1 trillion or more to the deficit with no macroeconomic benefit.
I suppose you can say that we can make it up by taxing the rich even more heavily than we already do, but at that point, aren't you just using the pandemic as an excuse to do the things you wanted to do anyway?
I think the meaty, important part of the bill is the expansion in unemployment insurance, which specifically targets those who have lost the most due to covid. The point of the checks is to be fun and shiny and distracting, and send a prosocial signal that we're all in this together.
With low interest rates, this money is more or less free, so I think it is justified. If you think deficits are likely to be an actual problem in the near future (I don't think this), then I can see where it would rub the wrong way.
I think there is a better reason here - even if they just pay down their card debt with the check, it is good! Household deleveraging is really good. The US Treasury can borrow the same amount with much less interest payments.
This is an excellent point.
On #1, the wealth redistribution. Being an engineer and non- economist I find your posts the most clear and helpful of the economics blogs I read, but I still need help on this point. I see who is receiving the wealth being redistributed, but not where it is being distributed from. Is it from future higher tax rates? Something in the bond market?
Thinking about this some more, and based on comments from Richard and Nathan, could one mechanism be that "wealth" distributed through direct payments to low-income people or people without jobs gets spent pretty much immediately, for rent, food and other necessities, whereas the bonds issued to finance it are held long-term? Once interest rates and/or inflation rise due to the economy heating up after this pandemic is over, those who received the money are relatively unaffected since their "wealth" has been converted into other hard assets and consumables, whereas bondholders start paying the bill as their bonds go down in value. That is, of course, if inflation actually happens.
Is that, other than taxes, the main mechanism? Or are there other major ones?
What Richard said but also if it's financed by the government issuing bonds, which it will be to some extent, bond holders will (if inflation isn't too high) make money. This is complicated somewhat if the Fed buys bonds from individual bondholders.
I too am an engineer, so take this with 0.065 g of NaCl, but it depends! If the debt is financed by printing money, then everyone who holds assets that have a fixed price in dollars -- mortgages, bonds, and so on -- takes a hit, not to mention any poor fool with dollars stuffed under the mattress. If by taxation, then taxpayers take a hit. If by spending cuts -- yeah, like that's gonna happen -- then we'll have to wait and see what gets cut.
This is a very clarifying post, Noah, thanks.
One related thought: the economy as a whole will be weaker in the long term if we don't help out those in need. People adversely affected by the economic toll of the pandemic will suffer evictions and increased homelessness. Their credit will be damaged. Gaps in their work history will reduce the earning power. They'll suffer sundry physical and psychological problems. As will their children.
Alleviating their suffering isn't only the right thing to do on the merits. It's also the smart thing to do to keep the country's workforce and consumers as healthy and as productive as possible to maximize prosperity over the long term.
I think that generically, insurance acts as stimulus by propping up demand. So the government providing social insurance is also stimulus for the economy.
Also, anyone who says the relief package is too big should be required to show a model and estimates (with standard errors/confidence intervals/error bars!) or automatically be sent to Twitter jail.
It's small business that has been hurt the most. They are the ones in need. But $1.9T you say is not enough? Perhaps you can prove why anyone who thinks this amount is not enough should do so through models and estimates? Where is the $1.9T going? Anyone know? We already have record amounts of savings over the past year from COVID. Once things open up, people are going to go out and spend. So why do we need another $19T in debt. We are now approaching our total economic output with these debt levels. No big deal right? I think not.
https://twitter.com/paulkrugman/status/1359197557348569088?s=19
If people are only spending 40% of their checks, I guess they're saving the rest (?). If they're saving it, might that money go into the stock market and fuel a bubble?
if checks for 600 and or 1400 is considered wealth, then I afraid that I have been misinformed at the highest level. It's more of wealth distribution from the wealthiest 10% to the wealthiest 1%
It's about showing disgruntled Trump voters that Biden isn't an ogre.