On the plus side: this makes more sense than a non-refundable tax credit to see Mount Rushmore before we demolish it to demonstrate our wokeness. On the minus side: Another ocean of red ink, assuming anyone cares about fiscal responsibility and debt loads these days.
Since no one cares about such matters, the only limiting principle left in play is just how effective a pander certain forms of helicopter cash might be. The most bang for the political buck looks like sending some actual bucks to taxpayers again in the next stimulus package, and Donald Trump’s ready to attach his signature to Round Two:
VIDEO: President Trump commits to 2nd stimulus. He says details would be announced in the coming weeks. The President would not tell me how much of a check Americans will receive. pic.twitter.com/Abd5E8P3Au
— Joe St. George (@JoeStGeorge) June 22, 2020
Not everyone’s on board with the idea, at least at the White House. Democrats in Congress like the idea of another direct-stimulus payment, but the Washington Post reports it’s not too popular among Trump admin officials or Senate Republicans. The big question is just how much the stimulus payments actually stimulated the economy:
However, leading congressional Republicans and some senior White House officials remain skeptical of sending more checks, creating a rift within conservative circles that could have significant consequences for the stimulus package set to be taken up by lawmakers in July. The White House has not officially taken a position on the matter. …
House Democrats included another round of $1,200 stimulus checks in the bill they approved last month, but the GOP position on the measure has remained murky.
Internally, the president’s advisers and allies are split. Treasury Secretary Steven Mnuchin has advocated sending another round of checks, two people with knowledge of internal deliberations said, speaking on the condition of anonymity to frankly discuss matters they weren’t authorized to comment on publicly. Larry Kudlow, director of the White House National Economic Council, is skeptical of sending payments out to as many people who received them in the first round, said one person familiar with internal matters who also spoke on the condition of anonymity.
Other conservative White House officials and influential congressional Republicans oppose the plan, expressing concern with the impact of tremendous levels of new spending on the deficit. Some White House officials have also argued internally that the checks were pocketed by Americans rather than spent in the economy, pointing to an enormous increase in Americans’ personal savings rate after the payments went out, one person aware of internal discussions said.
There are two issues with that conclusion. First, the stimulus checks took a while getting out, so to those who still had an income, they didn’t make any difference. To those whose income got interrupted, the unemployment bonuses in the CARES Act likely made up the gap before that point. And given the bleak economic outlook at the time that those checks went out, putting them into savings for more rainy days was likely the best choice.
This time around, though, perhaps the effect might be more stimulative. States are reopening their economies, jobs are bouncing back (a bit), and the moment might be right for more of the recipients to spend the money rather than bank it. The bigger problem is that the stimulus is probably still too widespread to ensure that it immediately enters into commerce. The stimulating effects of this approach will likely still only take place over a long period of time. If the idea is immediate spending that wouldn’t take place without the subsidy, it would be better (and cheaper!) to limit it to low-income households that are living paycheck to paycheck rather than cut checks for most American households.
It might make more sense to put that money into another tranche of the Paycheck Protection Program. That has an immediate effect of subsidizing payrolls and allowing people to continue to work, thereby reinforcing the quasi-normal economy immediately and over the specific period of time of the crisis. The new bill might also include PPP spending too, of course, since debt doesn’t matter at all anymore, but at the very least that would be a more efficient use of the cash.
Having set the expectation, however, Trump has little choice but to deliver on it now. I’d bet that the checks start flowing around the revised July 15 tax deadline date, and perhaps wrap up just about the time Trump takes the stage in Jacksonville to formally accept the GOP nomination. We’ve finally evolved to publicly financed presidential campaigns after all.
