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Terrible NY Times article arguing against simply sending people checks. Full of disinformation. @NelsonSchwartz & @gillianreporter, you can do better. https://www.nytimes.com/2020/12/30/business/economy/600-dollar-stimulus-check.html?action=click&module=Top%20Stories&pgtype=Homepage
First, they find a 71 year old lawyer who lives in the Boston suburb who (makes less than $75k???) says he'll merely save his, thus we shouldn't do stimulus checks. Stimulus version of I saw Trump yard signs reporting.
The big problem with the article is that there is no mention of the fact the US has been in a liquidity trap for a decade, with too low inflation and unemployed resources. In this situation, it happens that deficits actually are not such a big deal. Printing money is the way out.
That's not the only problem, of course. Just b/c people saved stimulus while in lockdown and there was nothing to spend money on doesn't imply it's a bad idea for 2021, when the economy will come out of lockdown.
However, it turns out that the detailed survey the article sites (which itself is likely to be quite inaccurate), suggests that people actually spent 40% of their stimulus checks on average. So stimulus checks do stimulate, even in lockdown. https://www.nber.org/papers/w27693
Also, if people use the money to save, and pay down debt (helping safeguard the banking system), start a business, or make a productive investment, or even stash it into a bank account for a rainy day, I don't necessarily see these things as bad outcomes.
In the US, 44 million people carry student loan debt, with an average of $37k each. What a big waste of money stimulus checks would be if people use them to pay down some of the debt noose around their necks which we all agree would be better if they didn't have in the 1st place.
I give the authors props for making the ages old logical fallacy that we need the economy to stay in a state of slow growth to ensure no financial bubbles form. As if we haven't heard this argument for tight MP for a decade.
Then there is the quote from a girl living the high life making $32k a year in LA and who struggles to pay the rent, who says those less fortunate should get the stimulus money. What a waste stimulus money would be giving it to a girl struggling to pay her rent!?!
Lastly, we are told that economists on "the left and right", with Milton Friedman's name dropped, find that that financially secure people "invariably save" unexpected windfalls.
In fact, there is evidence of nearly the opposite. Turns out that rich people tend not to smooth consumption even in the expected windfall case: https://academic.oup.com/qje/article-abstract/133/4/1693/5036538?redirectedFrom=fulltext
As of May of this year, 55% of Americans had credit card debt. What a travesty it would be if high rollers making $75k a year merely used stimulus money to pay down their high interest loans! https://www.cnbc.com/2019/05/17/55-percent-of-americans-have-credit-card-debt.html
Of course, I too would have liked to see larger checks sent to those who are unemployed. But, we can print money to do that, and to send money to a broader base of people who have been affected. You need political support after all.
