California to hand out $1000 stimulus payments to residents to combat inflation | Hacker News Reader

California to hand out $1000 stimulus payments to residents to combat inflation

fortune.com

13 pointspaulpauper20 comments

The first lesson of economics is scarcity: There is never enough of anything to satisfy all those who want it. The first lesson of politics is to disregard the first lesson of economics. --- Thomas Sowell

“Qualifying residents.” This is vote-buying with other people’s money, not legitimate public policy. No one believes this is a solution to anything, except maybe holding some seats while the Saudis snuff the SPR illusion.

Other people how? For many it's just a refund on state income taxes.

My understanding is that it causes legal issues for the state when the budget surplus is too high (they legally have to spend more or reduce taxes). The current surplus is sort of a windfall due to people taking capital gains (which CA taxes as regular income), and Newsom doesn't think that's sustainable in the future.

That's why he was ok with giving one-off $1000 checks based on income (which is probably mostly redistributed cap gains revenue), while also veto'ing relatively cheap improvements to the education system due to their cost. I'd imagine that a $1000 check also goes over better with voters than kindergarten for everyone or improved mental health resources in schools.

In general lower income people spend a higher proportion of their money than people who are ineligible for the $1000 checks, so I can see how it might possibly still drive inflation.

And It would drive inflation in those products that lower-income people in particular purchase.

Actually, I don't think the effect will be big enough to notice, except that I bet there'll be loud and targeted offers for poor people with a lack of judgement: "$1,000 plus a trade-in will get you a new car!" "Click here to invest your $1,000 windfall in BitCoin!"

Not to belittle the windfall but a thousand bucks doesn't go very far these days, especially for families. Because of the timing of the payouts in Oct & Nov, it's probably just going to make a lot of the Thanksgiving and Christmas holidays better than they would have been. Get your Honey Baked Ham order in early, I guess?

This is a straightforward wealth transfer.

69.5% of filers by count in the bottom groups, generate 10.5% of tax revenue, max refund, 79% of total refund. 4.5% of filers in the top groups, generate 55.2% of tax revenue, zero refund. Middle two groups are 12.3% and 14.2% of payers, generate 8.8% and 25.5% of revenue, receive 10.6% and 10.3% of total refund.

These categories don't match exactly, but close enough.

Sources: https://www.ftb.ca.gov/about-ftb/newsroom/middle-class-tax-r... https://data.ftb.ca.gov/California-Personal-Income-Tax/PIT-A...

Can someone explain to me how printing more money and handing it to consumers is combatting inflation?

combat? yes? win? no

Not sure this qualifies as printing money, CA cannot issue currency, they will be spending from their budget which is tax payer funded no? Is giving back money going to increase inflation? not sure how much of an impact a $1k payment will have on overall inflation. I would guess a lot less than the existing outside factors including the war in Ukraine and the impact of covid disruption and relief.

Inflation will likely cause a recession and you are advocating for something that will make it worse just vecause other people are doing worse things?

Also, you are trying hard to brush aside the actions taken by the current government that have fueled this (taking numerous actions to limit domestic fuel production in the name of environmentalism, 8 trillion in debt)…

1. This isn't printing money.

2. Even if it was printing money, the mechanism by which printing money causes inflation is by making the currency weaker relative to other currencies. The US dollar is stronger than ever, so "printing money" has nothing to do with the inflation we're facing right now.

3. Giving people money can absolutely help combat inflation because it means people can pay for the food/gas/energy that they couldn't otherwise, especially if the inflation is the result of a supply shock, which is what appears to be happening right now. Combating inflation doesn't just mean reducing inflation. It also means helping people navigate the effects of inflation. And giving people additional money helps do the latter.

1. Agree - it's coming from California's budget, and the state can't print money.

2. Partially agree - decreasing the value of your own currency is definitely going to drive up the currency amount needed to import goods into the country, but that's hardly the only driver for inflation - it also doesn't touch at all the inflation that's happening for services or real-estate/rents.

3. Pretty hard disagree. In fact - a supply shock is literally the definition of a period where "giving folks more money" is unlikely to do anything other than continue to drive prices higher. All you're doing is increasing the number of dollars available to chase the same limited supply. Price will increase as a result. Will the recipients of the cash influx have better purchasing power? Probably - but only at the expense of every other purchaser interested in the limited supply.

If printing money doesn't cause any net inflation, then what is your theory about what does cause inflation?

California does not control the Federal Reserve Bank, so it cannot print money.

Fuel inflation (right before elections!) to deal with inflation!

It's a tax refund: https://www.gov.ca.gov/2022/06/30/governor-newsom-signs-budg...

Most of us here are fortunate enough to not be seriously impacted except for specific high-cost items like vehicles or housing, but even there the poor are disproportionately affected in terms of the percentage of their monthly budget lost to inflation on non-discretionary spending.

While it may not seem like much, $1000 is absolutely a lot to those struggling the most right now. Those who are seeing their rent increase, the cost of food further limiting their already meager choices, and for whom buying even a used car is now out of reach.

You don't have to agree with the premise, scope or cost/benefit of this plan but this is the rationale that I see behind it.

You realize that this will cause more inflation which if it keeps getting worse will cause a serious recession?

If the economy shrinks by 5% b/c of inflation will you advocate for 4k checks?

Wow, only California would believe that handing out money combats inflation. To combat inflation, you need to reduce the supply of money, not increase it.

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