Comment by AnthonyMouse | Hacker News Reader

Comment by AnthonyMouse | Hacker News Reader

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> Certainly people will protest if fiscal stimulus means just handing money to people and companies who aren't in dire straights.

How is it not the opposite? Bailing out only the people who have lived beyond their means or made poor decisions is a big moral hazard. Moreover, it doesn't do everything you want -- if you give money to people who are in debt, they use it to make their loan payments and pay rent. Which is better than defaults and evictions, but you also want some of the money to go to people who will actually spend it and stimulate new demand.

You also have to worry about some kind of emergency "dire straights" metric being off by a significant amount in one direction or another and as a result you either end up paying most of the money to whoever is most willing to play accounting tricks or lie on forms, or it doesn't go where it's supposed to and you still get the defaults and evictions, or both.

As a result it seems like the best option is to distribute money evenly, to everybody.

I find this situation very different from the bail outs of 2008. In 2008, the economy was too focused on housing and lending, and so real substantive changes needed to occur to refocus. People need to change jobs, etc. I was annoyed by the bailout then, though in the long term I came to see parts of it as wise.

In this situation, many many business which are fundamentally viable (great restaurants, cruise lines) are going to be threatened by a temporary dislocation (everyone social distancing). It's not clear to me that we need a fundamental reallocation of resources in the long term (we don't have too many restaurants, or vacation destinations).

In addition, I don't think its economically sensible to ask every business (say restaurant) to plan for a 2 year pandemic. It would just be inefficient. I think its right to handle that risk at the gov't level. It's all of our problem.

So, in this case, I am hoping for effective gov't action to preserve much of the economy. I don't think I benefit if in 2 years, all my favorite restaurants are gone, and all the big vacation operators are bankrupt.

> In this situation, many many business which are fundamentally viable (great restaurants, cruise lines) are going to be threatened by a temporary dislocation (everyone social distancing).

The issue is that it isn't just restaurants and cruise lines. How many of the shops in the local mall are in trouble if people stay home and order from Amazon? What happens to gas stations and convenience stores and truck stops if people are temporarily driving less? What happens to charter bus companies? Local community organizations? Conference organizers?

Pretending that we can predict what all the effects are going to be on everyone and centrally plan optimal resource allocation is dangerous hubris.

> In addition, I don't think its economically sensible to ask every business (say restaurant) to plan for a 2 year pandemic. It would just be inefficient. I think its right to handle that risk at the gov't level. It's all of our problem.

That's kind of the point. When times are tough, that's the time for the government to borrow money and use it to help people out. But they're notoriously bad at deciding whether a cruise ship captain deserves it more than a small business owner with a sandwich cart.

To be clear, I am not arguing for central planning.

If I were in charge, I would try to combine (1) a temporary but much broader federally run unemployment system, with (2) measures to prevent short-sighted reallocation of capital resources based on contracts (say leases) that did not adequately anticipate this kind of disruption. My strong emphasis would be on (1).

Part of my perspective is that I remember being very, very annoyed by the bailout of the automakers in 2008. Now, though, I think "where were all those workers going to go?" Would I have really been better off if we had hundreds of thousands more unemployed ex-autoworkers, and no GM? Ultimately, I think Obama made the right call on that.

I am just arguing that in this case, gov't support for struggling individuals and businesses seems quite justified to me, and I think actions meant to support a return to something like the status quo in 2 years are probably wise.

This is what I mean.

Suppose you've got a small shop owner. Right now their sales are temporarily down by 60% -- but they're still open, or it would be down by 100%, so they're not unemployed. Unemployment doesn't help them. They also own the building, so reallocating a lease isn't their problem. Their problem is that after making their mortgage payment and utility bills, they can only pay themselves a third of their normal salary, and in two months of spending down savings they won't have money to buy food.

Which is also a problem for all the places they usually buy everything else from, because all the non-necessities get cut out of their budget.

Unless they get an injection of cash.

One might call this a universal basic virus income.

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