Giving Americans Money to Offset Coronavirus Impact Gains Support in Congress

While I'm not that worried (I've been able to find work in bad economies in the past), I also do feel a bit of paranoia about this.

Even in that top 10% there are still people that live paycheck-to-paycheck. I was there not long ago. It's a lot better to give everyone the money and be wrong about ~10% of the people needing it then delay it for people who have bill past due right now.

Why bother creating a bunch of rules that people have to apply in the middle of a crisis? You are living human who has not received this month's stimulus yet, great, here you go, good luck and blessings upon your health. Bureaucracies take time to spin up, more complex rules take longer to apply, and there are a huge number of people whose jobs are destroyed by "don't go outside until the virus dies off".

If you are way too rich for a thousand bucks to mean anything, then give it to someone who needs it more. Maybe a super-broke friend, maybe just withdraw a few hundreds and hand them out to homeless folks, whatever.

Today's crisis is different. The regular economy is grinding to a halt because we have to in attempts to slow the spread of the coronavirus.

What individuals and every component of the economy need are deferral and cancellation. Rubidium talked about it in another post. [0]

$1,000 to a family that is living paycheck to paycheck doesn't solve the problem. Do a search and most surveys put America at somewhere between 70-80% of workers living paycheck to paycheck.

So let's discuss giving Americans money but only to move the Overton Window. Then let's lead that discussion to solutions that address the fragility of our economic problems at their root--both in the short-term and long-term.

[0] https://news.ycombinator.com/item?id=22604982

My suggestion: use it to pay down your upcoming tax bill, give it to people you know could use it, if you order food, leave some really fat tips for the delivery guy, donate to charity.

Just cut the check, tax the rich, and don’t make more paperwork.

That sounds like stimulus to me.

In addition, we should be flooding individuals and households with money right now to ensure survival. An over payment of 10% is far less harmful than an underpayment of the same amount.

My sister and I were raised by a single mother in Russia in the 90ies, and we did relatively well compared to many. Mom mentioned once that she didn't really regret not having any hobbies or personal life for 10 years, not only because she loves us, but because she really didn't have time or mental effort required to seriously ponder these things, in almost a decade. That was all, mostly, because of economic mismanagement.

If you look at the life expectancy chart for Russia at that time, and births - both, again, affected by economic mismanagement - it's quite obvious that it would have been much better even in terms of literal years life lost to have a magical smooth economic transition in 1991, followed by a 100% unchecked coronavirus epidemic.

The unchecked covid-19 would have caused far less harm that what the real loss of life was; and that is before you consider lives wasted - the struggle to survive, but also drug use, alcoholism, crime, suicide statistics from the period. Oh and of course the end result - in Russia, most now want stability at any cost, so you have an emperor for life.

This recession is looking like it's going to be bad, and politicians from NZ to Malaysia to the UK are saying it's going to be worse than the last one or 1997 one; the way Fed is handling it here indicates they expect something worse than Great Depression, or they are out of options and are going to run it completely into the ground.

Meanwhile, the damage from the actual virus /so far/ is zero, literally zero, a rounding error. Yes, I know about Italy - the deaths there up until now are still a rounding error. Yes, I know about the exponential growth - the current levels are still a rounding error; they will grow exponentially, but exponential growth runs out very, very quickly when it has an upper bound of the entire population.

It would have been much better to have a one-month-long healthcare collapse where a million people with an average age of 60+ die, instead of a prolonged recession or a depression where tens/hundreds of millions of people in US alone, disproportionately young, children, the poor (not even speaking of the people in developing countries), have their life completely ruined - for many, forever; and many die.

It could be argued that under current circumstances, creating an opt-in mechanism might increase administrative complexity. That said, I imagine you still need a simple mechanism to figure out eligibility. Do non-citizens qualify? Permanent residents? Short-term visitors? International students? Only people with SSNs?

So if there's going to be an administrative layer anyway, the difficulty of adding an opt-in mechanism to that layer would be marginal.

Of course to really get this fair, you should tax wealth too, which tends to be difficult...

I'm not sure how feasible such a thing is or if it would hurt the cause of keeping the economy moving.

No, it's still a bad idea as stimulus.

It might or might not be the right idea from a humanitarian point of view. No opinion on that topic.

But if you care about nominal spending in the American economy, the Fed can do the job just fine. Just have them buy assets until total nominal spending (and thus also inflation) is up where you want it. Start with American government bonds, but if that's not enough, expand to other assets as well and keep buying.

You may ask: what if this doesn't work to raise spending nor inflation?

Well, that's the best case! Congratulations: that means the Fed just bought up all the assets in the world in return for some ink and paper. [0] And all that without devaluing the dollar, since we assumed no inflation would result.

Your negative example of people _not_ spending the money they are given turns into the best kind of person you want to be buying assets from, if you are the creator of said money.

Of course, in practice this will raise spending. Especially if you announce the policy in a clear and credible way, spending will increase almost immediately even before you implement anything. Markets are all about anticipating expected events.

No need to enlarge the government budget or the deficit.

Oh, and if you are looking for practical steps to raise spending in the economy and the above programme is too radical for you; then a simple first step is to eliminate positive interest rates on (excess) reserves that banks park at the Fed.

In the Fed's defense, they lowered the interest on excess reserves to 0.1%. But you can argue that they should lower it further, perhaps to -1%. Make banks pay to park money at the Fed, so that they prefer bringing that money into the real economy. Either by spending it themselves, or by lending it to people to spend it for them.

[0] To be more precise: in return for some even cheaper to create numbers in a computer. Nobody prints these sums of money any more.

Most working class people will spend that money directly on essential goods and services. But for the health of the overall economy, it's important that enough people will have enough that they feel confident they can start going out again and supporting all sorts of shops.

I would personally feel obligated to spend it, and I normally save 75% of my income.

Keep it universal and simple, but optimise for cost:

- A/B test the messaging.

- Make it opt out for lower incomes and opt in for higher incomes.

- (?) Offer opt out-ers the possibility to dedicate part of their helicopter money to specific budgets (culture, army, police, medical care, ...)

$1000 to every american right now will end up just being a huge payment to landlords. i'm not saying it's a bad idea, people still need to make rent and buy food, but it's not going to stimulate anything. grocery stores are already bringing in record revenues, and landlords don't need the money. It's financial aid, not a stimulus.

only if admin cost to determine if a person needs it is low enough.

Joint statement by conservatives Stephen Moore, Art Laffer, Steve Forbes: "Don’t expand welfare and other income redistribution benefits like paid leave and unemployment benefits that will inhibit growth and discourage work" [1]

[1] https://twitter.com/JStein_WaPo/status/1239938361231585286

This way the benefit only applies to the bottom 40% of tax brackets and at 40-60 you pay some if not all back and 60+ you pay it all back and more. Then it's a fair safety net that everyone can see might be necessary in these times.

This is just a thought, I'd actually just put Yang in charge of this.

An example: restaurant are struggling and some people need food. Give money to Town gov, so they can buy food from restaurants and serve that in community center. Adjust volume as needed.

Plus the whole financial easing they are trying is dumb. It would be useful if the intention was not to control what is happening with the public markets. We just do not really control those, not on a daily basis anyway. Algorithms heavily relying on market volatility control those, and that is what they are doing right now. So, seeing an administration believing that humans are in control of a mostly automated trading system is dumb.

While the evolution of new virus with pandemic property is not something we control. Its propagation to pandemic level is something we have absolute control on. We are failing as a society, because we allow those things to happen.

I think it's important to realize that this tiny stimulus, whatever it ends up being, $1k, $3k, whatever, is just the sugar to help the massive bailouts go down.

All the companies that took extra profits from the last round of stimulus saved cash and bought back stocks to inflate the stock prices.

The virus was only the needle that popped the good times bubble. Now the market is in free fall, stopping only to bounce off of the branches (circuit breakers) on the way down the cliffside.

How about we accept the individual stimulus and fight against the bailouts this time? These companies aren't too big to fail. They are just too big to be run by profiteering gluttons who fall back on the taxpayer when their business plan is shown to be a failure.

I don't think "economic stimulus" is the right goal. The public health officials are doing their absolute best to bring the economy to a near-halt, at least any part of it involving non-essential physical interaction. I don't want to second-guess or undermine them.

I think the right goal is to make sure people have money to survive, including paying for food, medicine, and housing, paying off their debts, and building their savings, so they can make it through until we're ready to restart the economy. I wouldn't consider the measure to have failed if it's not all spent right away or if the stock market doesn't rise.

Agreed, and this makes total sense in a crisis like this.

Even better: folks will actually need the money and it will be doing some concrete good, quickly.

The simple example is that we can't go around breaking windows to stimulate the economy. Sure, the window manufacturer and the window replacement companies might benefit, however that money which went towards the window could have gone elsewhere.

Engineering taught me one very important lesson. We can never get something for nothing. There is always a trade off. If the government is handing out money, it has to come from somewhere. Its either taxes, which means that tax money collected can't be spent elsewhere. Or it has to be printed, which is inflation.

Some people say, people aren't spending it, they are saving it! Thats important too. Unless they are keeping it in their mattress, that money is deposited in banks, which loan out the money for capital improvements, etc.

Lastly, my anecdotal experience is that "free money" tends to be squandered more than earned money. Which means poorly allocated funds towards resources less valuable to a strong economy.

Almost zero revenue. Negative profit.

I think this is the primary motivator for providing money to all Americans. Many people on HN who are salaried and able to work from home might not be worried about making rent but many people who work hourly jobs aren't getting a paycheck this week.

Also a society that was emerging from WWI. The mindset was different.

I may be misunderstanding the scope of "universal" in this context. If that's the case, I'm curious what the typical requirements for access are.

Direct cash flow to citizens gives immediate association to the source of the cash and helps restore faith in the current US economic system and government, or at least makes people a little less cranky to soften the blow.

People want change and these issues are further highlighting massive systemic problems in the US to the population at large who are already looking for significant change.

To most, a onetime $1000 (the idea that was floating, this could be different) may pay one months rent or part of it to some, but it's not going to help when it comes to layoffs and downsizing businesses are sure to follow up with. To me, the elephant in the room will be medical expenses many are sure to incur and their associated fallout that's going to be very hard to make people forget.

You could do this with the major banks and associations, but poorer Americans are already unbanked and have no available credit.

In addition, where a major component of our economy is housing and that's a major concern; there are many private landlords that depend on that income; targeting just landlords with a credit would require an entire amdministration.

One of the goals of UBI is it cuts the bureaucracy. Instead of a person or group of people deciding who benefits how, it goes to everybody indiscriminately.

I haven’t fully thought through the effects of handing out cash, just wanted to point out that suspending debts isn’t costless. Landlords would reduce spending, and banks might slip into crisis.

And what of those with no debt, but who can’t work due to virus? Or those with debt, but who can’t work? They still need to eat.

Who would say this? The Federal government? I'm no lawyer, but essentially, they would be voiding hundreds of millions of contracts (?)

The Government can't just wave a wand and take an action like this. Even if they could, I don't think you would feel very good about this 'eat the rich' approach for long.

Think about it: Why would I as a landlord keep paying utility bills, taxes, insurance when my tenants don't pay me rent? Why would I pay my mortgage? I wouldn't. I would simply walk away. How long after you stop paying rent before your apartment doesn't have running water?

The real estate market would be decimated. Banks would fail. Trillions and trillions in value and investments destroyed. Unemployment would skyrocket. Goodbye recession, hello depression.

A back door approach to this is a moratorium on evictions, which some states have done. Good luck trying this approach if you're a tenant tho. If this crises is shorter than expected, you'll shortly be evicted and carry that on your record.

I think you're operating on the misconception that landlords and businesses are making outsized margins and 'hoarding' wealth. To think that they somehow would have the ability to continue providing you with services and incurring all expenses without any income is naive.

Direct cash payments to all taxpayers is the easiest, fastest, and probably cheapest way to achieve your goals of bailing out those at risk.

For today... as a human you are very valuable if you stay the hell home.

I think direct cash to individuals is only one small part of the bigger picture though. And to your point, businesses are going to need help too. It's not a matter of choosing only one or the other path, but finding a balance employing multiple strategies simultaneously.

The supply disruptions that hit China are now moving to the rest of the world.

The largest companies in the US do a large amount of foreign business - I’ve heard up to 40% or so of the revenue of the S&P 500 comes from outside of the US.

COVID-19 will absolutely cause the death of millions in the US alone if proper steps aren't taken to reduce R0. If not from the disease itself, then from hospitals being completely overloaded.

Edit: Let's be real: lockdown/isolation is going to have to persist for at least a month or more to have a real chance of preventing the spread to most of the population in the US. 2 weeks is not going to cut it.

Isolations and shutdowns limit virus transfers. This is 'flattening the peak'. The peak will always be there and since the only way not to have a 'peak' is to not have virus to deal with from the start!

This is exactly what progressive taxes are for.