One major lesson from the Great Recession was that the federal government should have done much more stimulus, sooner. A too modest rescue package, followed by years of state-level austerity, deeply scarred workers and the economy, producing a much slower recovery. This time around we ought to spend big to relieve suffering and prevent permanent economic damage.
Somehow, though, this important lesson has lately gotten twisted into: So long as we spend a lot of money, what we spend it on doesn’t matter. Attempts to strategically target federal spending are viewed as a betrayal of the progressive cause.
For example: The Democratic-controlled House passed legislation in December to expand stimulus payments to $2,000. This was marketed as aid to the poor and middle class, but the bill would have given some money to 94 percent of households — including those making over $300,000. President Biden, who supports more direct payments, said this week that he is open to negotiating eligibility details to ensure the funds are targeted to the needy.
To this anodyne (and reasonable) remark, some on the left reacted with rage: Just give the money to everyone, they argue, and stop this nonsense about targeting. It only slows things down.
Designing a swift, targeted package — when working with scant information about who actually needs assistance — is challenging. I first wrote about this tradeoff between speed and efficacy last spring.
Employment of low-wage workers is still down about a quarter since last January, whereas employment of higher-wage workers is slightly up. Higher-income households have amassed tons of savings, both because many of the activities they usually spend on (travel, restaurants) remain shuttered or unsafe; and because assets they’re more likely to own (housing, stocks) have appreciated.
Greater availability of real-time data has also offered valuable insights into which kinds of aid have had the biggest bang for the buck and therefore should be ramped up. Or down.
For example, a new Opportunity Insights analysis found that the $600 direct payments distributed this month increased spending among households making less than $50,000. Households making over $75,000, however, generally saved their payments.
“The fact that we have the ability to analyze this stuff after a few weeks gives us the opportunity to have policy that adapts to circumstances in a way we haven’t had before,” said Brown University economist John Friedman, who co-authored the analysis. In other words: We have tools to better tailor relief so it adds more value.
Some on the left counter that the only way to get money to the poor is to also give it to the rich. This sounds more like a Republican talking point than a socialist one, but either way it’s confused.
The argument that it’s administratively simpler for the federal government to send money to (almost) everyone misunderstands the actual administrative complications. The hard part of getting…
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