I’m not going to reject the $600 that Uncle Sam just put in my bank account, but I wish he’d found another use for the money.
I still have a job, unlike the 19 million Americans currently collecting unemployment benefits. I don’t own a business that’s been hurt by the coronavirus pandemic.
I’m also not likely to spend the $600 right away in ways that might help those beleaguered businesses. Things I normally might splurge on, like a theater ticket or a trip, are either unavailable or inadvisable right now. These so-called stimulus payments accounted for $166 billion of Congress’ $900 billion coronavirus relief package, but they’re not likely to stimulate the economy much. Increasing the $600 checks to $2,000 — as President Donald Trump and others wanted to do, and as Democrats may propose in their next stimulus bill — would divert even more resources from where they’re truly needed.
The unemployed, for example, deserve support for as long as this pandemic lasts. The relief bill provides an extra $300 per week in unemployment benefits, but only until mid-March.
It’s hard to imagine that restaurants, hotels and airlines will recall all their laid-off employees in the next two months. Instead of spending $166 billion on checks for people like me, Congress could have supported those workers at least through midyear.
The clamor for “stimulus” checks is a result of confusion about what kind of crisis we’re in. In most recessions, putting cash in consumers’ hands is helpful. In 2008 and 2009, checks and tax rebates repaired some of the damage the financial crisis did to households’ balance sheets.
The pandemic recession of 2020 was different. Consumers had money but couldn’t spend it in the usual way. The $1,200 checks that went out last spring actually lifted disposable income above pre-pandemic levels, but they also lifted the savings rate to levels not seen in decades. If stimulus isn’t spent, it doesn’t stimulate.
Steven Fazzari, a professor of economics at Washington University, has long argued that Congress didn’t do enough to stimulate the economy after 2009. He was glad to see the $900 billion package pass, but agrees that some forms of federal spending are less effective than others.
“If you were to rank all the things that are in the bill, giving checks to everyone isn’t very helpful,” Fazzari said. “There’s not a whole lot of point in stimulating demand right now.”
With Democrats winning control of the Senate, the odds of an additional stimulus bill just went up. There’s a good chance it will include even bigger payments to most Americans: New Georgia Sens. Raphael Warnock and Jon Ossoff both pledged to increase the checks to $2,000, an idea that has already passed the House.
Just because something is politically popular, though, doesn’t make it good policy.
“We have to put some discipline around this and make sure the money gets to those who are really disrupted, as opposed to piling on more money for those who aren’t really disrupted,” James Bullard, president of the St. Louis Federal Reserve Bank, told the Little Rock, Arkansas, Regional Chamber on Thursday.
Fazzari said his priorities for an additional relief bill would include extending unemployment benefits, continuing to help small businesses, aiding cash-strapped state and local governments and doing whatever it takes to get Americans vaccinated.
After that, he said, it might be wise to include some infrastructure spending. A long-term commitment to build roads and bridges would continue to boost incomes and employment long after Uncle Sam’s cash gifts are forgotten.