We are trying to change the debate a bit over here at MR through a variety of methods, and so I was very happy to see Matt Yglesias rip off ideas from yet another MR comments thread – giving piles of money to the middle class is a good idea right now:
“But doing this by trying to engineer a stock market boom is insane. We should do something much simpler: print up a bunch of money and send it to American households.
The best thing about helicopter money is that it’s largely agnostic as to what lies at the root of our problems. As long as you think there’s some level of excess capacity in the economy, putting cash in the hands of households will help. Most obviously, if people had more money they’d buy more stuff. That means more jobs making, transporting, and selling the stuff. But not everyone would spend all of their helicopter money. Lots of families would use it to help pay off debts already accumulated, which would help speed the process by which we climb out of the debt hole of the boom years. Prosperous families without debts would just save a large share of their money. Increasing the size of the savings pool should drive borrowing costs down for firms that want to expand, while pushing up the value of stocks and other financial assets.”
It could be just coincidence, but Matt Y seems to follow what happens over here at MR pretty closely. If we have a good thread, you’ll see something on it just a few days later. I am glad to see Chris Hayes follow this idea as well.
We need to give the middle class piles of money. However, there is a huge problem with just giving piles of money to the middle class – it’s a political non-starter. ftm, stone, and Philip Deihl pointed this out and they are correct.
Here is Mr. Deihl:
“Giving piles of cash to the middle class” is a losing message. Even many, probably most, middle class voters would reject it as irresponsible or a cynical election ploy. Ask George McGovern how it worked for him. (Years later McGovern himself said his proposal to give $1000 to every American was a mistake. It wasn’t the GOP that killed the proposal as a vote-buying scheme; it was Humphrey.) Sure, the McGovern campaign was 40 years ago, but it says something that no Democratic candidate for the presidency since 1972 has made such a just-give-em-cash proposal. It’s always been middle class tax cuts or grants and loans for college tuition, and the like, not cash handouts.”
This is entirely correct. It’s a losing message. It’s a proposal which will be crucified (heh) in trial of public opinion. Yet, giving piles of money to the middle class is one of our best options for stimulating the economy at this particular moment. In general, it’s a great way to get the economy moving at any time!
I find it entirely offensive that this good solution is so politically un-possible. It shows the debate is being framed around the wrong ideas. If a good and worthwhile proposal which would increase our standard of living is not politically possible, there is a major problem with the discourse.
It’s good to see people talking about this helicopter drop – because talking about something repeatedly is a way to make people more likely to support an idea. But even a helicopter drop isn’t really enough. Helicopter drops structured like this are too one off – much like the stimulus checks Bush mailed out in early 2008 (! They freakin’ knew! The recession wasn’t called until much later that year – can you imagine the outrage if Obama did something like this?) – a very useful stimulus which went almost entirely down the memory hole.
These checks worked despite going against widely accepted economic theory, and going against what crazy people think about fiscal policy.
beowulf then proposed a technocratic way of delivering those piles of cash, entirely automatically, through a series of proposals:
- Tie the level of the full employment (payroll) tax to the level of unemployment. Higher unemployment = lower taxes.
- Close the trade deficit with Buffet’s import certificates so we don’t end up funding the entire planet’s demand problem.
- Move fiscal authority to the fed – Make them responsible for both monetary and fiscal policy so they can fill their legal mandate of full employment and stable prices.
- Have the Fed use the Trillion Dollar when necessary.
Carlos has a specific plan in mind. But his larger point is that unless you make this process almost entirely automatic, there is no way it will happen repeatedly when needed most needed. Even if you disagree with his specific proposal, it’s really hard to disagree with the automatic nature of his idea. If we have to negotiate a fiscal stance every year for the next 100 years, the fiscal stance will never get close to what we need to have a truly prosperous society.
We did this with monetary policy – where we’ve given the automatic nature to a group of “wise men” who decide what is needed for the economy at any given moment, and then implement this decision across the economy. No matter what you think of the fed, this process is largely automatic. We don’t need to negotiate, bargin, decide, or otherwise do anything – there is already a process in place to implement monetary policy across the wider economy. There is nothing like this at all for fiscal policy, no method or process, which automatically adjusts the amount of fiscal policy with any sort of pre-determined thought. Our automatic stabilizers are tiny compared to the size of our economy, and are so ill directed.
As Philip pointed out, if we need to campaign giving piles of money to the middle class, the idea will lose even among the middle class. Even though it is probably a good idea right now, and a decent idea even during normal downturns, this is a losing idea. So we need to find a way to bake it into the structure of the economy.