This Is An Experiment. And Nobody Knows Anything.
Over the course of the pandemic, I've variously insisted that the debate around stimulus checks in the US almost always missed the point.
While it was generally understood during the early days of the crisis that "stimulus" was a misnomer (you can't "stimulate" an economy that isn't open), we quickly moved into a kind of gray area.
Once the initial, nationwide lockdown was lifted, states attempted to reopen parts of the local economy in a piecemeal fashion. This led to confusion, as frustrated
Unless the root cause of why Americans continue to run up high debt levels is addressed. I see no reason why we wouldn’t just return to the mean.
When assessing the efficacy of this expenditure, we would do well to remember that the most useful standard is not the MPC percentages itself (with 100% representing perfect policy) but rather the equivalent figures for the last several rounds of QE. One would hazard a guess that if these were ever fully assessed , stimulus spending would look far more impressive.
“Proof” is likely elusive except in retrospect, but my guess is that: for the lowest-income, “stimulus” helped stave off financial distress; for the middle-income, stimulus loaded the spring of future spending; and for the higher-income, stimulus was unreceived or unnoticed.
I assume we’re talking here about the $1,200 and $1,400 lump-sum payments, not the expanded unemployment benefits. The latter served a very different function.
One thing that the two rounds of stimulus has shown, at least in my opinion, is how difficult any meaningful form of UBI will be to implement. Each stimulus package cost very roughly around $280 billion; imagine doing that monthly, to the tune of some $3-4 trillion per year. No realistic tax increase will fund that. UBI requires MMT.
It certainly does and in many ways UBI via MMT is the only immediate antidote to our current political and productivity quagmire. If you can give people some stability and consumption power all the sudden there is money to be made by investing in growth as well as capacity for people to invest their energy in political reforms. I think it is becoming clear that no single policy can do more to turn the tide.