We are 10m jobs short, virus is spreading, millions are a weeks away from losing benefits, we should not wait any longer to act. The idea that we can get a better deal if we delay until February is both wishful thinking and ignores the suffering now. nytimes.com/2020/11/14/bus…
No legislation signed after 1/20/2021 can help anyone in November or December of 2020 or even much of January 2021.
Also means schools get nothing now etc.
So delaying until next year by definition can’t get more for people when they most need it.
If your goal is to get more for people in Feb/Mar/Apr/etc. next year also have more leverage now: (1) McConnell more reluctant to give Biden a win; (2) vaccine distn will strengthen hand of arguing to just wait and (3) pressure of GA won’t motivate McConnell.
Maybe Dems win both seats in GA (p<.25). Even then, more plausible that passing something now would enable them to add more/longer than that it would crowd out by a large margin.
Or bad Dec jobs number motivates action, but won’t change vaccine coming argument.
In sum, a 0% chance waiting gets more in Nov/Dec/Jan. A 10% chance waiting gets us more in Feb/Mar/Apr.
I really don’t want to gamble with the economy or people’s lives at a time like this, especially with those odds.
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My guess is my corner of twitter agrees with the substance of my latest @WSJopinion arguing for more stimulus/relief. So let me flesh out the underlying political argument--everyone will need to compromise to get this done and better this year than next. wsj.com/articles/the-e…
My comments are filled up with blame for President Trump and Leader McConnell. A lot of that is justified. But blaming them, however justifiably, does not help anyone if nothing ever passes. Instead need to figure out how to pass something. Which is going to require compromises.
Maybe the Democrats win both Georgia Senate seats in which case they could come back and try for more. But when you're worried about a problem should place a lot of emphasis on making it as unbad as possible in the bad case not as good as possible in the good case. So better now.
What reduces economic activity: (i) the virus leading people to choose to distance or (ii) government required distancing.
Research on services in March/April has found it is much more (i) than (ii) than many people thought.
BUT, mistake to think is always/everywhere 100% (i).
1. Manufacturing and construction mostly shutdown when it was required to and continued when it was allowed to. That is a smaller share of GDP than services but clearly a case of govt policies reducing economic activity (for better or worse, may be worth doing to save lives).
2. In some cases govt required social distancing may be like an investment that pays off: less economic activity today but better virus control & more activity in the future. In this case one would see a short-run tradeoff between activity & govt social distancing, but worth it.
If we are not taking *some* steps (at the margin) to curb the virus that also hurt the economy then we are not doing enough to curb the virus.
It is also possible that our efforts to curb the virus help the economy (in total or on average).
(Possibly educational thread.)
In this case, as in many others where we have multiple objectives (think climate change and inequality, for example), we should do absolutely everything we can that is win-win. More masks and more testing might reduce the virus and help economic activity.
Many win-win policies.
In addition to everything that is win-win, we should also evaluate everything with a tradeoff and adopt those that save lives at an acceptable cost for the economy (e.g., closing indoor dining) and reject those that save lives at an unacceptable cost (e.g., halting construction).
When economists frame a non-consensus view as obviously correct economics (or even worse "arithmetic"). It devalues the currency of consensus economic views. Take a stand and defend it, just don't claim obvious truth. Eg, @caseybmulligan on fiscal policy. nationalreview.com/2020/10/paul-k…
Casey argues UI and other transfers do not increase total demand because we cannot simply count the additional spending associated with them without also counting "the spending (both consumption and investment) of those who finance the government."
The CARES Act was not paid for w/ current tax increases. @caseybmulligan knows that but appears to be arguing in support of "Ricardian equivalence"--that it will be paid for by future tax increases & rational people anticipating those will cut back on their spending now.
On Thursday the government will release its estimate of GDP growth in the third quarter. The number is expected to be something like 35%. Three bits of arithmetic context followed by some advance interpretation.
1. The reported growth of -31.4% for Q2 was less bad than the headline because it was an annualized number--which is what would happen if the economy contracts the same way 4 quarters in a row. The economy really shrunk by 9.0%.
Similarly if the headline growth rate on Thursday is 35% then it will mean the economy grew at 7.8% for the quarter. That is also very, very high--just the better way to think about it.
To describe anything as "Trump's Economic Dream Comes True" even pre-pandemic is rewriting an awful lot of the history of confident statements about 3% growth--with John Taylor being the most prominent economist making those predictions.
Randall Stephenson (then Chair of the BRT and ATT CEO), said he saw no way the tax cut passes and we don't get 3% growth--again total confidence. (Quick search failed to find the quote, if anyone has it please share.)