That’s right: if you’re already getting at least a thousand a month in cash, you wouldn’t qualify for another thousand, unless you found work. Finding work, on the other hand, ought to be a lot easier, once the program goes into effect.
Because 1.) that much money would discourage people from working. (Work is the source of wealth: we need people to work in order to create more wealth.) and 2.) it would generate much more inflation. $1000 a month is barely enough to get by. Some people might quit for one thousand a month, but not many. $20,000 would induce most people to stop working. Then what would they buy with the money? The point is to get more people working, so there’s more stuff to buy. But you have to have people working, in order to have that happen.
I’d support much o what you’re saying. Certainly doing away with the mortgage deduction, which makes no sense to me. I wouldn’t send checks to people who’re incarcerated, but there are some advantages to it.
I’d also retain Social Security, since many (almost all?) are making more than $1000, and that’s money they’ve been promised and are relying on. It’d be unfair to suddenly take that away from them.
On the other hand, you could possible phase out Security for people under a certain age, I suppose.
$1.5 trillion is a back of the envelope calculation. I figure there’s something there’s something like 150 million people who qualify for the program, excluding children and people who are already getting at least 12,000/year in government assistance: most people over 65, and some people who are getting unemployment or disability or some other assistance.
I then offset it a little more for increased employment (more people working and therefore paying taxes), more people filing (and therefore paying taxes) in order to participate in the program, and for the fact that the money would be taxed as ordinary income: higher earners would be paying their marginal tax rate on the additional money.
The number could be off, but certainly not as low as .2 trillion.
You will,spend money. That’s the point. But initially, businesses will hire more people to meet demand, which will result in less unemployment and more production. So long as production is able to keep up with demand, competition will keep prices from rising.
When or if businesses can longer keep up,with demand, they’ll raise prices. But by then several million more people will be working, and everyone will be better off.
While I think it’s an unwise use of $1.5 trillion dollars, to play along, I would have to say that I think there’ll be at least a year worth of lag time built into any benefit to the economy, based on the attempts at stimulus from GW Bush.
I say this because if you assay people’s economic status, now, you’ll see a lot of debt. So if you are working below subsistence level and are scraping by, you’ll pay off anything that will help you stabilize (eg rent) or, if you are stable in house and home, you’ll pay off debt first.
Credit cards and such will get paid off, as will any arrears in cars, mortgages, etc. This won’t boost economic activity as much as I think you are planning, because those payments will go to the lenders’ books. They won’t need to hire more people to handle the volume for that sort of thing, and they won’t, say, give out bonuses to their employees to spread the joy around. It’ll get absorbed by debt and interest rates.
I think this would work better if everyone was just cash poor instead of actually in debt.
Well, not all of them, and certainly not all at once. For one thing, there are rental agreements, so they’d have to wait until the lease ran out. At that point, of your rent went up, wouldn’t you start looking for somewhere else?
And if there were lots of people looking for apartments, that would provide an incentive for apartment builders to build apartments.
That’s happening in my city right now. Unemployment is low, people are moving here, and new apartment complexes are going up like mushrooms after a rain.
If there were only a fixed number of apartments, your theory would be right. But there is not. When there’s a demand for more places for people to live, construction workers go to work.
The financing will be done through the Fed, which will buy the bonds and hold them indefinitely, returning the interest to the Treasury (which is already their standard practice). There would be no increase in taxes. (Not that I’m against raising taxes, or at least some taxes, but that’s not what I’m proposing here.)
The number could be low. As I said earlier, not everyone would be getting the payment: dependents (children), people who are getting Social Security, and other people who are already getting assistance of at least $1000 a month. The number would also be offset because it would be taxed as regular income, and I anticipate it would dramatically reduce unemployment, meaning more people working and therefore paying more taxes.
Perhaps. But even if people pay off debt, that means the people to whom they pay the money will then have be looking for other opportunities to lend (perhaps at lower interpret rates), or else otherwise invest. The only other options are to do nothing (which means the money will be worth less and less over time, because of inflation) or to spend it.
Right now you can’t really get lower interest rates. And a Credit Card rate isn’t going to drop any.
In terms of spend or invest, we showed with the last stimulus plans that paying off debt doesn’t change the situation much. I’m sure the situation would change if we paid off ALL of their debt and then gave them extra money. $12,000 in a single year (ostensibly tax free) might do that for a lot of people. The average is somewhere in the neighborhood of $14-16,000 so for a little more than half wouldn’t get there.
Every one of those programs pumped more than 1000/mo per household of “printed out of thin air money” into the economy. Maybe inflation doesn’t work like we think it does.
All rental markets are local. But I think that’s funny “alternatives to renting”. Sure, single mom, three kids, working at WalMart for minimum wage … she can just sleep on a friend’s couch … or better, she can just buy a house !!! The one thing you’re missing is a typical person’s priorities, what with food stamps and clothing vouchers … safe housing is most people’s number one expense, up to 1/3 their income. A smart landlord preys upon this, literally entraps the tenant.
Landlord are raising rents … have been for 5 years … it’s called obscene profits. Whoever else has been suffering during this recession, it hasn’t been landlords [giggle].
If landlords are making obscene profits, then why isn’t every businessman doing everything they can to build new apartments and rental houses? If a new apartment is a license to print money?
The fact is that owning a rental house or an apartment building is not, in fact, a license to print money and generate obscene profits. You may have noticed the housing boom, which crashed a while back? And all the shiny new apartment buildings slapped together back in the boom days, which are struggling to find tenants?
Housing is subject to the laws of supply and demand just like any other good. Yes, rent goes up. This is because the landlord figures that if you won’t pay the new higher rent, someone else will.
And yes, a lot of landlords lost their shirts during the housing crash. You build or buy properties at vastly inflated prices, and then watch the value of those properties crash to the ground, you lose a lot of money. And if you borrowed the money to purchase those properties from the bank, you’re not just seeing the value of your assets decrease, you’re now in the hole. That’s what the housing crash was all about. People–including landlords–owed mortgages on properties and the value of the mortgage was now much higher than the market price for the property.
As I said, if acting as a landlord is such a sure-fire way to make money, why aren’t you doing it? OK, you’re broke and don’t have the money for such an investment. But what about your neighbor, who isn’t broke? Why isn’t he buying a rental property and making obscene money?
There’s no doubt inflation doesn’t work the way a lot of people think it does. The Fed has purchased trillions in bonds over the last few years, and inflation has only gone down. It’s rare in economics you can perform an experiment to test a theory, but this was one of those rare cases. People who thought that QE would cause inflation were wrong.
Broadly speaking, the plan is a fine one though it is ~6 years too late. It’s sometimes called a helicopter drop. I see no reason for the SS offsets though. And I’d extend payments to minors.
Higher inflation during times of recession combined with ultra low interest rates results in even lower inflation adjusted interest rates. Which aids economic recovery. I would think that Milton Friedman would approve.
The downside is that the end of the lesser depression is within sight now (1-3 years?) And I would abort the plan once core inflation hit my 3% target. I’m allowing for overshoot: 4% inflation wouldn’t be too different than what we had during the late Reagan/early GHWBush era.
Inflation indeed does not work like folk economics says it does. I’m not aware that Milton Friedman ever said that the monetary base would be the relevant monetary aggregate to study. And M2 isn’t really out of whack.
Surprising, really. One would think that the most mainstream measure of the money supply would show greater evidence for QE1, 2 and 3.
Incidentally, I mostly disagree with Friedman’s monetarist views. But at least his framework was coherent, if not subsequently empirically supported.