December 29, 2020
A few weeks ago I had exchanges with people on Twitter in which I argued against across the board payments to individuals. I was concerned that these were likely to come out of other provisions (most importantly unemployment insurance) in the pandemic relief package. Since most people have actually not seen their income cut from the pandemic (they are still working) and many are saving on commuting costs, there is no obvious reason they need another check.
On the other hand, the people who have lost their jobs or are unable to work because of care giving responsibilities or health, really do need their unemployment benefits. (One item often overlooked in these exchanges is that the Pandemic Unemployment Assistance Program gives benefits to more than 9 million people who would not ordinarily be eligible for UI benefits.)
Unemployment has been extraordinarily concentrated in this recession, as can be seen in the sharp rise in the number of long-term unemployed. People lost their jobs in March and have not gotten them back. In a normal recession, different groups of workers see short spells of unemployment.
Also, there has been no reduction in the length of the average workweek in this downturn. This is true even within sectors, so it is not just a result of the compositional change. In other recessions, part of the reduction in demand for labor is met by reduced hours of those who keep their jobs. That is not the case in the pandemic recession.
Anyhow, what I feared happened. A month was cut from the duration of the unemployment supplements and the life of the special pandemic programs to cover the cost of the $600 checks. To my view, that was a very bad deal.
But now we have The Reality Denier in Chief insisting that people need $2,000 checks, even though he has already signed the bill. This is a very different picture. Now we can get another $1,400 per person with no trade-off for other forms of necessary spending. What is the argument on the other side?
According to Larry Summers, this extra payment will end secular stagnation and cause us to worry about inflation. That’s not likely since, based on the earlier checks, most people will save most of their money, but it would be great to see the labor market get to the point where we were worried about wages rising too rapidly.
The higher payments will add to the debt, but so what? The debt mongers will complain about the debt no matter what and there is zero reason to think we’re coming up against any limitations.
But will the Republicans use the high debt as a reason to block all of Biden’s initiatives on climate, health care, and child care? Of course they will, and they would use the high debt as a reason to block all of Biden’s initiatives even if the debt were half as large. We all know that the Republicans don’t give a damn about debt and deficits, they will do whatever they can to sabotage Biden and the debt is just an excuse.
In short, right now, the $2,000 per person check is the closest thing in politics we will ever see to free money. Do it folks, I want my check!