I simultaneously agree and disagree with the editors of the Washington Post:
As much as we often approve of bipartisanship, another round of direct payments is not necessarily the best use of our political leaders’ limited capacity for compromise. The cost, as such, is not the problem, though the Democratic House’s proposed second round would be larger than the first one; deficit considerations are secondary in this crisis. Rather, the issue is efficacy — bang for the buck — both in terms of protecting the most vulnerable and in terms of enabling economic growth. By those standards, it’s not optimal to deliver billions of dollars in aid to tens of millions of people who have not lost their jobs, when the Federal Reserve estimates that the bulk of unemployment is concentrated in households earning under $40,000. As for spending and economic stimulus, many recipients will treat a second payment as a one-shot windfall to be saved, just as they did with the first.
I’ve got to admit that talk of ignoring a soaring deficit makes me queasy. Cost doesn’t matter until it does and I think it’s terribly risky to be shaking confidence in the dollar. I mean I have lived through multiple major wars, a presidential assassination, our cities burning multiple times, a major terrorist attack on our shores, a serious recession, three pandemics, and the loss of esteem on the part of nearly every institution (federal, local, and state governments; the White House; the Supreme Court; churches; big companies; the media) other than the military. I don’t know what distresses me more: the loss of esteem by so many institutions or that we still hold the military in high regard. I don’t want to have to face hyperinflation, too.
Here’s their prescription:
Far better to focus on higher priorities: generous unemployment benefits, adjusted to include appropriate incentives to take jobs as they become available; a refined sequel to the Paycheck Protection Program for small businesses; and substantial aid for state and local governments. Consideration should also be given to a bonus of some kind to low-wage essential workers, who have remained on the job throughout the pandemic, in some cases ironically earning less than what laid-off counterparts in similar but nonessential work received from unemployment insurance.
I agree wholeheartedly that the next economic stimulus should be much more targeted than the Cares Act. I’m just not sure of their target.
I think that we have been presented with a rare opportunity to rebuild the economy on a more solid footing, less dependent on financial institutions and with the opportunities shared more broadly. That window of opportunity won’t stay open forever. Carpe diem. Shouldn’t we be more focused on creating jobs for those who are out of work that ensuring that they’re comfortable in unemployment?
Some of our companies are experiencing hiring problems because people prefer the subsidies. And before people reflexively say “pay them more” remember, for some people the government check is enough and just fine with them. Sad but true.
This was warned about. I understand that’s an even graver problem in France—people are becoming accustomed to not working.
To be honest, government debt / deficit by itself is not an issue. The Japanese government has a debt to GDP ratio of 235% and no one worries about hyper-inflation there.
It is a government deficit / trade deficit / and non self-sufficient domestic production combined that is the risk. If foreigners (China, Japan, Korea, Germany, and almost every other country) lose confidence in the dollar all at once and demand actual US goods for their goods, that would be quite a shock.
By the time people start worrying about it, it is too late.
I’ve posted on this subject in the past. Historically, it has not had a gradual onset but happens suddenly.
I think a shotgun stimulus was unavoidable with CARES. There is no excuse for the next round. The government has had plenty of time to get things in place for something more targets, or at least make plans. Yet I have this feeling that nothing has actually been done, particularly by our political class.
Maybe too cynical, however, got a feeling any round two is going to played out at length for the media and may not get resolved until post election.
Re: subsidies, Number 1 son is grumbling about getting recalled, he is lost about $300 a week.
Getting by with less, in the distant past, remember folks eager to get their $48 ADC grants and about $80 in food stamps. Now adays it seems 771 in SSI benefits is the new target.
I agree with Drew. They set the payments too high. I sort of understand wanting to pump a lot of money into the economy fast, but I think that they could have provided lower payments and that would have met people’s needs which should have been the primary goal of the payments. Could have then provided payments longer if needed.
Steve
“pay them moreâ€
I’ve heard employers all my life say people won’t work harder for more money, and I remind them that for more money, you get different people.
Which is a bit off the subject. Here, with service economy workers laid off by the millions because of the virus, there truly are very few jobs available, and none these workers are trained to do. If they don’t at least extend jobless bennies a few months at a time, they’re asking for trouble. The rest of this year looks like unmapped territory economically,
let alone politically.
It depends. Preference means something, too. Also age. Union rules generally preclude merit pay so you’ll end up paying based on seniority which can mean that you’re just paying more to the same people.
That said I think the solution is getting as many people as practical back to work.