It's not about priming the pump; it's about making people whole.
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 #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?
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?
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.
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.