June 23, 2020
For some reason, reporters feel it is part of their job to read politicians’ minds. We got another taste of this in a Washington Post news story pushing the idea of sending out another big check as a stimulus. The piece begins by telling readers:
“President Trump has told aides he is largely supportive of sending Americans another round of stimulus checks, believing the payments will boost the economy and help his chances at reelection in November, according to three people aware of internal administration deliberations.”
Of course, the Post has no idea what Trump believes about the economic impact of stimulus checks. It knows what he says about the economic impact. If Trump “believes” that the checks will boost his re-election chances then he is likely to say that he thinks they will boost the economy, regardless of what he really believes.
As a practical matter, these checks are likely a very poor form of stimulus. The point of another round of spending is first and foremost to help the people who have lost their jobs or in other ways have been hurt by the pandemic. The vast majority of people getting another round of pandemic checks will not be in this category.
The other motive for a stimulus is to increase demand in the economy. Sending checks to people who have not lost their jobs or seen a large decline in their income is likely to have little impact on spending, as shown by the record saving rate seen in April. The saving rate will be lower in May, but likely still extraordinarily high. Many potential check recipients are hesitant to spend money because they are worried about the pandemic, not because they don’t have it.
Incredibly, the Post does not give the view of any economists who have this perspective, even though they would not be hard to find. The only reservations about another round of stimulus mentioned in the piece come from Republicans concerned about the size of the budget deficit.