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Posts Tagged ‘stimulus’

Larry Summers Reminds Us That Federal “Stimulus” Mostly Exists to Help Wall Street | Mises Wire

Posted by M. C. on January 1, 2021

But Summers’s opposition isn’t because he’s a deficit hawk or in any way opposed to government spending. No, his opposition is due to the fact that he’s afraid giving money directly to the average American—instead of his friends on Wall Street—would “risk a temporary overheat” of the economy.

Translation: people who aren’t billionaire CEOs might spend the money incorrectly.

https://mises.org/wire/larry-summers-reminds-us-federal-stimulus-mostly-exists-help-wall-street

Over the past two weeks in Washington, the battle has raged over whether or not the latest so-called stimulus bill should include direct payments to Americans. This would be the second round of direct payments, which were sent out back in April as part of a $2 trillion spending package. The first stimulus checks were $1,200 per individual or $2,400 per married couple filing jointly, plus $500 per child under seventeen. 

In mid-December, Congress approved a smaller second payment at $600 per adult and $600 for children. But President Trump, ever the populist, refused to sign off on that deal and instead demanded a larger payment of $2000. Recognizing which way the political wind is blowing, the Democrats approved the increase in the House, but the effort has stalled in the Senate under GOP leadership. 

One would think this issue would be a slam dunk for most allies of the Democratic Party, but the old Wall Street antipopulist wing of the Clinton-Obama axis is leading a small revolt against the idea of giving stimulus to anyone but Wall Street bankers and bond brokers. 

There is, for example, Larry Summers. 

Summers is a former secretary of the Treasury (under Clinton), a former World Bank technocrat, and an advisor to both Obama and Biden. He was also formerly the president of Harvard, where he now teaches.

When Summer speaks, it’s a safe bet that his opinions well reflect those of the technocracy, Wall Street, and the wealthy “elites” of America’s ruling class.

He’s also a self-described Keynesian economist, and all this means is that Summers is an enthusiastic supporter of bailouts, easy money, and endless government spending. 

Whether following the 2008 financial crisis, or during the covid panic of 2020, Summers has supported doling out cheap and free money to Wall Street firms and huge banks in seemingly endless amounts. He has rarely met a corporate bailout he didn’t like.

But when it comes to giving money directly to the taxpayers, well, that’s where he draws the line.

Summers made this clear in an interview with Bloomberglast week, declaring he’s “not even sure [he’s] so enthusiastic about the $600 checks.” He’s definitely not excited about $2,000 checks, which he described as “a pretty serious mistake.”1

But Summers’s opposition isn’t because he’s a deficit hawk or in any way opposed to government spending. No, his opposition is due to the fact that he’s afraid giving money directly to the average American—instead of his friends on Wall Street—would “risk a temporary overheat” of the economy.

Translation: people who aren’t billionaire CEOs might spend the money incorrectly.

This is not surprising, as it is similar to the position Summers took during the Great Recession. In those days, Summers steadfastly opposed any financial relief for foreclosing homeowners, but “[a]t the same time, he supported every bailout of financial firms.”

Those bailouts, by the way, continue today. While many defenders of bailouts claim the bailout money was distributed merely as loans and was thus paid back by all those wonderful bankers, this ignores some key facts. Investment firms that invested in mortgage-backed securities (MBS) in the days following the 2008 financial crises were directly subsidized and bailed out by the Fed, which purchased more than 2 trillion dollars’ worth of MBS. These assets remain on the Fed’s books today, which means MBS investors essentially received free money for what would have quickly become near-worthless investments. This was done in order to ensure the prices of these assets did not collapse as they should have.

The truth is that when it comes to bailing out Wall Street, those who support bailouts hardly limit themselves to loans.

Are Ordinary Americans Doing Fine?

Summers further asserts that there is no shortage of demand among Americans. That is, the problem isn’t a lack of funds among Americans, but the fact that people aren’t permitted to spend because “they can’t take a flight or go to a restaurant.” People have money, he insists. They just can’t do much with it. Thus, he concludes, “I don’t necessarily think that the priority should be on promoting consumer spending beyond where we are now.”

Many Americans, however, are likely to disagree. Food banks report that demand “has greatly intensified since March,” especially among workers in the food service industry and among employees at “mom and pop” stores. USA Today reports more than 6 million households missed their rent or mortgage payments in September.

Studies also suggest that at least among a segment of the population—i.e., the lower-income or unemployed segment—stimulus money is quickly spent on necessities like food and rent, and catching up on bills.

Summers is right, of course, that some people just sat on their stimulus money. According to a study from Northwestern University, people with more than $3,000 in their checking accounts did not rush out and spend their first-round stimulus checks. Other data suggests many people used the money to pay down debts. These higher-income stimulus recipients are also likely the driving force behind the fact that the US savings rate is at historic highs right now. 

But the fact many are “hoarding” stimulus money only further disproves Summers’s analysis. If it is the case that a sizable number of Americans are simply saving their stimulus checks or paying down debt, there’s no risk of any short term  “overheating” of the economy. Both hoarding and paying down debt are deflationary acts, so by Summers’s Keynesian standards, it follows that opposing stimulus checks to ordinary people isn’t really something we need to worry about after all. 

Now, I don’t mention any of this because I think stimulus checks of any size are a good idea. Bailouts and government stimulus of all types are extremely damaging economically. Whether directed at billionaires or at mechanics, stimulus payments and programs—especially of the type funded by newly printed money—create bubbles and result in wealth destruction. We’ve examined this countless times here on mises.org.

But it is nonetheless important to note that the mainstream, establishment Keynesian view is one closely wedded to the idea that it’s billionaires and investment bankers who deserve bailouts and not ordinary people. People like Summers would have us believe that it’s fiscally irresponsible to give money away to regular folks but printing up $7 trillion in new money in order to buy up government and corporate debt all makes perfect sense. This first started to become undeniably clear in the days following the 2008 financial crisis. But now it’s become more apparent than ever. 

And it must never be forgotten that the severity of the current crisis was made far worse by policies that Summers and his fellows supported: lockdowns of businesses, stay-at-home orders, and monetary policies that favor wealthy borrowers over middle-class savers. This crisis is largely of their making. But should Summers’s victims get a bailout? Well, that’s just crazy talk in his view.

For people who remain mystified as to how populists like Donald Trump get elected, they need not look much further than this. 

  • 1. Thomas Friedman, a New York Times columnist who is married to an heiress and who is another reliable old partisan of the ruling class, agrees with Summers. He writes that a “$2000 untargeted giveaway, in many cases to people who don’t need the help, is crazy.” Thomas L. Friedman (@tomfriedman), “We need to take care of Americans hurting because of Covid-19. We need to buttress our cities that are running out of money. We need to invest in infrastructure. But a $2000 untargeted giveaway, in many cases to people who don’t need the help, is crazy. Can we stop and think?,” Twitter, Dec. 30, 2020.

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Contact Ryan McMaken

Ryan McMaken (@ryanmcmaken) is a senior editor at the Mises Institute. Send him your article submissions for the Mises Wire and The Austrian, but read article guidelines first. Ryan has degrees in economics and political science from the University of Colorado and was a housing economist for the State of Colorado. He is the author of Commie Cowboys: The Bourgeoisie and the Nation-State in the Western Genre.

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Erie Times E-Edition Article-There is no time to wait, pass COVID relief now

Posted by M. C. on November 18, 2020

Ooops ET-N forgot to mention the CARES act gives away thousands of dollars hospitals get for every hospitalized COVID “case”.

Or that anything that moves is tested for COVID, symptomatic or not.

Or that in California for example if you go in for a re-test you are counted again if still positive.

Death rates are down but “cases” are up. “Cases” were invented to keep the fear and control factor up. See this government sponsored source (NPR) for death rates dated a MONTH ago. https://www.npr.org/sections/health-shots/2020/10/20/925441975/studies-point-to-big-drop-in-covid-19-death-rates

It is getting harder to flog fear.

https://erietimes-pa-app.newsmemory.com/?publink=03ca57827

A version of this editorial first appeared in USA Today.

Like it or not, states are going to impose more shutdowns and social distancing orders as COVID-19 numbers rise and as people move indoors.

Also, like it or not, on Dec. 31 a number of benefits provided in the March CARES Act expire. Among the lapsing provisions are protections against homeowner and renter evictions, increases in the dollar amount and duration of unemployment benefits, and provisions that make these benefits more available to freelancers, small businesses, gig workers and others.

These events could take a huge toll on the economy. Which is why Congress needs to pass an additional relief package now and not wait for the arrival of the Biden administration and a new Congress.

This is not a radical idea espoused only by the deficits-don’t-matter crowd. Nor is it something that benefits one party. It’s a mainstream, pragmatic position espoused by large sectors of the business community as well as the more liberally minded.

Just last month, Federal Reserve Chairman Jerome Powell — an appointee of President Donald Trump — urged more stimulus, even at the expense of greater deficits. Without prompt action, Powell said, “household insolvencies and business bankruptcies would rise, harming the productive capacity of the economy, and holding back wage growth.”

These things could play out in many ways. Restaurants and other small businesses could close, leaving empty storefronts in once vibrant commercial zones. Widespread defaults on commercial real estate loans could lead to a tightening of credit for everyone.

The next few months are the most critical period America has yet faced with the pandemic. New cases of COVID-19 are twice what they were during the summer peak, and the infection rate shows no signs of slowing even as the nation awaits the arrival of safe and effective vaccines.

On Capitol Hill, the two sides dug in as they started the lame-duck session. The Democrat-controlled House passed a $3 trillion measure in the spring, then cut it down to a $2.2 trillion plan before the election. The latest version includes a new round of $1,200 checks to individuals and aid to schools, among other things.

The Republican-controlled Senate has considered, but not passed, a $1 trillion measure in the summer, and a plan about half that size just before the election.

Neither side seems inclined to budge. And Trump is a wild card.

Something in the range of $1.5 trillion seems like the most practical idea. The two sides can negotiate what goes into it. They appear to agree on the need for additional stimulus checks, but little else. They must prioritize funding for programs that will directly impact the spread of COVID-19, including money to expedite the distribution of vaccines.

It is time for Congress to put the lives and livelihoods of Americans first and pass an economic relief measure now.

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Erie Times E-Edition Article-America needs stimulus relief

Posted by M. C. on October 22, 2020

Louie did not offer specific prescriptions for Erie’s economic recovery except the need for stimulus. House Democrats first put forward their proposals for the next round of COVID-19 stimulus funding long months ago. So it is galling that the wrangling — with Senate Republicans and the White House divided on the scale and focus of the funding — continues.

The pandemic has plunged another 8 million Americans into poverty.

Not one word about ending lockdowns, getting people back to work, re-opening businesses.

“Free” money. That is the best the Behrend Economic Research Institute and Gannett Times…err…Erie Times-News have to offer.

https://erietimes-pa-app.newsmemory.com/?publink=17b3b9091

The issue: Erie economic downturn Our view: Stimulus overdue

President Donald Trump promised exuberant crowds at Erie International Airport Tuesday night the ‘greatest economic year’ in history. It is happening right now, he said.

Perhaps he should have stayed longer in Erie rather than cut the visit — which he said he made only to ask for votes — short. Trump boasted that historic unemployment rates at the outset of the pandemic had dropped to 7.8%. But in Erie, as reporter Jim Martin detailed, the pace of recovery lags. In August the seasonally adjusted unemployment rate was 11.2%, far above the then-national rate of 8.4%. Wabtec Corp. announced new layoffs just before Trump’s visit.

Not all of the data is in to complete the Erie Leading Index, but Penn State Behrend Professor Ken Louie said it appears for the first time in a decade that Erie’s economy is moving from expansion to decline. The Penn State Behrend Economic Research Institute of Erie tracks eight indicators to detect changes in the local economy.

The trend is not surprising given the wrecking ball the pandemic took to the global economy. But the time to take command of this carnage, confront the virus comprehensively and steer the country to recovery is past due.

Louie did not offer specific prescriptions for Erie’s economic recovery except the need for stimulus. House Democrats first put forward their proposals for the next round of COVID-19 stimulus funding long months ago. So it is galling that the wrangling — with Senate Republicans and the White House divided on the scale and focus of the funding — continues.

The pandemic has plunged another 8 million Americans into poverty.

People face hunger and eviction and local and state governments risk insolvency and the prospect of layoffs and suspended services. Entities key to the recovery, from small businesses to the airlines, teeter on ruin.

As Louie said, ‘It isn’t as easy as it sounds to turn things around.’

Stimulus funds must be used to track and mitigate the virus and shore up those workers and industries who have paid a toll to keep Americans safe. States and local governments that face crippling tax revenue shortfalls need help now. As the Philadelphia Inquirer reported, Pennsylvania confronts a $4.5 billion deficit.

The president and Congress must act with Americans, not the upper hand, in mind.

It appeared Wednesday that the White House and House Speaker Nancy Pelosi were nearing agreement, while Senate Majority Leader Mitch McConnell tried and failed to pass a package less than half the size of the $2.2 trillion and $1.9 trillion packages eyed by Pelosi and the White House, respectively.

It is welcome to see the president join with Democrats to seek a package that matches the scale of the need.

Delivering relief to the American people is a winning strategy for both sides.

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Trump and Pelosi Ready to Spend Another $2 Trillion on Infrastructure

Posted by M. C. on April 7, 2020

Sadly, a large quantity of Americans seem eager to take the fast lane on this road to serfdom, even as the economic and civil liberties restrictions pile up under the guise of a public health emergency.

https://www.theadvocates.org/2020/04/trump-and-pelosi-ready-to-spend-another-2-trillion-on-infrastructure/

Who says there’s not enough bipartisanship in Washington? President Donald Trump is praising House Speaker Nancy Pelosi and urging Congress to follow her lead by passing yet another $2 trillion coronavirus bill that would “invest” in infrastructure.

privacy coronavirus south korea 

What a sight to behold, a country in crisis inspires its leaders to come together for the common good. Even better, by forcing more debt and inflation on Americans, the economy can finally get roaring again!

That demented logic prevails in Washington, D.C., and the swamp-drainer-in-chief is no exception.

Fresh off signing the most expensive bill in American history, more than twice the cost of FDR’s New Deal, Trump is ready for whatever Pelosi throws at him next, as long as it also costs at least $2 trillion.

On Monday, Pelosi unveiled her wishlist for what she called “Phase 4” of Congress’s response to COVID-19. This fourth bill could very well be bigger than the previous three, setting a new price tag record.

The San Francisco Democrat listed “more direct payments,” “more opportunity for family and medical leave,” and an infrastructure megaproject.

“She wasn’t bad,” Trump tweeted after watching Pelosi’s press conference.

“With interest rates for the United States being at ZERO, this is the time to do our decades long awaited Infrastructure Bill. It should be VERY BIG & BOLD, Two Trillion Dollars, and be focused solely on jobs and rebuilding the once great infrastructure of our Country! Phase 4,” Trump wrote, adopting Pelosi’s term for the forthcoming proposal.

Sadly, a large quantity of Americans seem eager to take the fast lane on this road to serfdom, even as the economic and civil liberties restrictions pile up under the guise of a public health emergency.

Economist Peter Schiff, who predicted the 2008 financial crisis, has been sounding the alarm that another crash is imminent since the Federal Reserve dropped interest rates to zero, promising to monetize debt without restraint or limit.

“President @realDonaldTrump thinks it’s the perfect time for the government to borrow trillions more to improve our infrastructure. That’s like a guy who just lost his job deciding it’s the perfect time to take out a second mortgage to put in the swimming pool he’s always wanted,” Schiff tweeted.

To extend the analogy, Trump is gaining support for the project by promising the biggest pool party ever. All politicians and special interests are invited.

There is no opposition to this profligate spending. Senate Majority Leader Mitch McConnell just wants to wait “a few weeks” to see how the other $2.2 trillion stimulus bill plays out first.

It doesn’t actually matter what happens in a few weeks though. When government policies go horribly wrong, a bureaucrat knows that just means the policy wasn’t enacted with enough gusto.

The coronavirus pandemic remains the sole focus of the country to the detriment of the people. Worse than the disease is the government’s cure.

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