economic stimulus: musings from a tuesday night
- Do these assumptions seem a bit far-reaching to you, too..?
“First, fiscal stimulus should go to households or businesses most likely to raise spending in response to the stimulus and thus increase gross domestic product in the short run.”
Stimulus should go to businesses whose ability to spend has decreased the most in order to not only increase GDP in the short run, but ensure timely re-stabilization of other health indicators like unemployment and the velocity of money. Cut small business’ tax rates supply-side.
“Second, fiscal stimulus should provide the greatest benefit to the people most adversely affected by the slowdown. These two aspects of targeting are complementary.”
These two aspects of targeting are not always complementary. Enter a preset lack of wealth distribution and the definition of wealth including non-liquid assets. More importantly, define “most adversely affected.” Mine would be largest decrease in spending power. Subsidize essential goods and services demand-side, defined by their respective contributing proportions of GDP and prioritized by the same.
Keep supply-side revenue stable until demand catches back up. Hot take, I know, but speed to fix in the short term has to be more of a priority.
2. Deficits and national debt
The fear of longterm negative effects have always slowed fiscal and monetary policy response times, as it should. In my opinion, we need to be comfortable separating between short-term and longterm solutions, though they oftentimes negatively affect one another. To restore demand, short-term solutions are crucial, and we need to restore demand.
P.S. If we were truly concerned about longterm negative effects, why is money basically free right now? In fact, if we can substantially invest in stimulus/relief now, the cheaper it will be for our longterm.