The debate over the checks. The Morning, New York Times. Indeed, there has been a recent push by Democrats to include a hike in the national minimum wage as part of the stimulus bill—something that would seem counter-productive to driving better employment growth. Reducing income and wealth inequality in the United States is an important policy goal, but such efforts need to be paid for through increased taxes or reduced public spending elsewhere, not a massive expansion of government debt.
And while the stimulus checks are progressive, the poorly implemented and significantly larger PPP program was very regressive, given that business owners are typically considerably wealthier than the employees who work for them.
And fire-hosing money across the economy carries its own risks that need to be factored into the calculation. Economic instability is always harder on lower-income families. If one of the goals is to help these families in the long run, we should work to reduce potential instabilities. The stimulus packages being proposed will do the opposite. It will over-stimulate the economy, which while feeling good in the short run, will ultimately create new imbalances that will have negative repercussions down the line.
Remember how good the economy felt in when it was being juiced by the sub-prime credit bubble, and how bad it looked two short years later? We may well be doing vastly more harm than good by continuing this bizarre push for more stimulus. And there is plenty of pent-up demand to get things moving once the virus is under control.
Moreover, all this free cash is already creating economic imbalances. Such funding should be limited to disruptions that pose systemic issues for the broader economy, and there is little evidence the U. That is the need to constantly exaggerate the negative while ignoring the positive regardless of actual circumstance. Assuming that every problem is an existential crisis is at the root of the poor policy choices now being pursued as well as the radical populism that has so divided the nation politically.
The following two tabs change content below. Bio Latest Posts. Under his leadership the firm has become one of the most respected research organizations in California serving public and private sector clients across the United States. Latest posts by Christopher Thornberg, PhD see all. Key Points: The structure of the stimulus efforts means most of the money flows into the financial system rather than to current spending, reducing its intended and immediate value of growing the economy and creating new jobs.
Moreover, the impact of the first stimulus on savings and bank deposits will provide the necessary fuel to help the nation reach full recovery now that effective vaccines are being distributed and the virus is being brought under control. More stimulus will be potentially destabilizing for the U. What is clear is that a big package will be even more important to the eurozone, where the economic impact of Covid on GDP was worse than in the US and the recovery seems sure to be weaker.
Nor is this an argument against shifting the balance of stimulus from monetary to fiscal policy. Such a shift is desirable, given how aggressive monetary policy tends to promote excessive risk-taking in finance. It might be no bad thing if it ended up somewhat smaller than now proposed. Whatever is decided, one point is clear. The success of the package is of immense importance. Proving that an active government can deliver good things to the public is essential for the health of American democracy.
Manage cookies. If you think the same, join us. Opinion US budget. It might be no bad thing if the US fiscal stimulus ended up somewhat smaller than now proposed. Share on twitter opens new window Share on facebook opens new window Share on linkedin opens new window Share on whatsapp opens new window.
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