@Matt, I hope in some future Slow Boring you can go a little deeper on "interest rates are low so we can borrow." Clearly some people in the comments are concerned about debt and go "how do we pay it back"? Even those less concerned about debt might say "what if interest rates spike up"? If Larry Summers and Jason Furman are okay with debts when interest rates are low, I'm thinking there must be some economic theory behind this view.
**If Larry Summers and Jason Furman are okay with debts when interest rates are low, I'm thinking there must be some economic theory behind this view**
The way I think of it in layman's terms is: when people are literally willing to pay the government to hold money for them, the market is signaling (really, flashing red) that the economy has a lot of unused capacity. And it's never a good idea to eschew trying to make use of excess productive capacity as long we humans (Americans, in this case) have unmet needs (which we always will!). Why would we ever want to refuse to help ourselves live better?
When it's no longer the case that we have plenty of excess capacity we'll know it (real interest rates will rise, among other signals) and we'll then do something different (namely, curb consumption).
The low yield could also represent that risk assets are too richly valued in the eyes of market participants. The mechanism of price discovery and a business cycle have been, and continue to be affected by QE.
Yeah - that WaPo article is sort of the "nagging voice".
It certainly does seem like a really big tail risk to put ourselves in such a levered state that a bump to US credit becomes a budget crisis almost instantly. For example, if the US loses its global reserve currency status, it drives up interest rates, people see that that will require austerity, which spooks bond holders, rates go up more...
(That's not an argument that we should be austere WRT fighting COVID - it's more of a long-term argument that we shouldn't just target debt levels based on interest rate costs.)
The single most important thing Biden can do is pull out all the stops to be sure the economy recovers as quickly as possible. That means spending, and lots of it. We must spend to support people while the pandemic rages. We must spend to get people vaccinated because that's the only way to end the pandemic and return to "normal". We must spend to support state and local governments so they can function under the burden of the corona virus response. Once the pandemic is over we must spend to rebuild aging infrastructure, address the climate crisis, and build a fairer, more equitable society.
Of course we need to plan and monitor the spending to be sure it is effective and efficient, but we HAVE to put people to work and begin fixing real problems. We are at a critical inflection point in several dimensions. The future of our country is at stake. And that's not hyperbole.
Elon Musk's wealth about to skyrocket as computer touchers around the country get another $1400 to spend on Tesla stock. (Make no mistake, I'm a huge fan of the plan. But between the prices of Bitcoin and Tesla stock you can really see the type of people for whom these stimulus payments were really unnecessary.)
I'm a fan in the sense that we need to get deliverables into the hands of as many people as possible, in as big a way as possible, in as noticeable fashion as possible, as quickly as possible, to reduce the probability of a disastrous return to GOP/seditionist governance.
I mean, I’m a fan of the rest of Biden’s plan. The extra $1400 check could certainly be better targeted, but given the scope of the rest of what’s in there then I think $1400 per American (making under $100k/year) is an acceptable price to pay to get it passed.
I think those satellites *barely* deliver internet.
Musk is essentially the 2010s (now maybe 2020s) version of what what Trump was in the 1980s: The billionaire who best summed up the national character in that era.
I begrudgingly agree with Ken here but for a different reason. I think you can make a strong case that if the stimulus checks cause a speculative bubble, they weren't targeted enough.
This is great reporting, and a real coup for Matt, but honestly I'm a bit concerned that senior transition officials would spend this much time laying their proposals out to someone whose Slow Boring site -- which is awesome!! -- only reaches some 7000 subscribers. That doesn't strike me as time-efficient for them, unless Matt was on a Zoom call with a *bunch* of other media types.
I think the federal government should be doing more to make vaccines roll out faster. I guess that surveillance testing is still a good idea as well, though that feels significantly too late for it to be really high priority.
Do we need to spend $1,000 for every man, woman, and child in America in order to vaccinate them and reopen schools? How are we going to find a use for that money?
$400 Billion for vaccine distribution and more testing (like, why?). If you assume roughly 350M Americans, that works out to $1142 per capita. Mind you that is to distribute/administer vaccine that was already paid for, and tests that the USG is currently reimbursing at $100 per.
Is anyone in the Administration actually looking at real costs, or have they just decided to hemorrhage money?
AP via the Guardian is reporting a figure of $160 billion for testing/vaccines, FWIW, so, there seems to be some confusion as to the price tags of the various elements:
I think Matt’s 400 number may be... not quite right. I’ve seen something like 160 for national vaccine distribution, additional workers and other things related to PPE and the like. The 400 number I’ve seen seems to be state relief, business loans and grants and other random stuff. But who knows really.
The extent you need to be an expert on reconciliation and CBO modeling to understand if a bill has a hope of getting enacted may not be the worst part of our democracy... but it is almost certainly the most absurd.
You know what's also absurd? A seditionist-traitor became our political leader, exhorted his troops to attack the seat of our government, which resulted in bloodshed and deaths, and he wasn't immediately forced to step down.
I agree but I do hope that there is a willingness at sometime in the future, when the alternative is the Fed raising interest rates, to step up to higher taxes
It does sound like Republicans get to be a part of the first, but if they nix, then they consolidate and go really big with a reconciliation bill. That's how you would actually do it if you wanted to go big but also let some of the credit go to Republicans.
They do have some advantages in that several GOP senators are on the record wanting $2k checks and more aggressive fiscal policy. I don't think it gets them to 60 - but it's something.
Can they not just use the magic of "dynamic scoring" the way Republicans always do? Just whip a model showing all these splendid investments will double your money and thus your tax take and voila 50 votes plus Kamala is all you need. They should point and laugh at anyone who crys foul.
Given the way the Congressional GOP have conducted themselves lately, the real galaxy brain play might be to bribe Hannity to start shilling it to you-know-who!
Just needs ten Republicans. Also, I'm assuming Joe's going big because he doesn't really need 1.9 trillion (would take, say, 1.4 trillion). Then you come back in two months and do a reconciliation bill.
It may not pass without reconciliation, mind you, but I don't think it's an impossibility (and 10<17).
I am guessing I’m not alone in my eagerness to watch you debate Tyler Cowen or Larry Summers on the appropriate size of additional stimulus. I’d like to see the other side steelmanned. All of your arguments in favor make sense, perhaps too much so, to the point where I have to think there ain’t no such thing as a free lunch so what’s missing ?
@Matt, I hope in some future Slow Boring you can go a little deeper on "interest rates are low so we can borrow." Clearly some people in the comments are concerned about debt and go "how do we pay it back"? Even those less concerned about debt might say "what if interest rates spike up"? If Larry Summers and Jason Furman are okay with debts when interest rates are low, I'm thinking there must be some economic theory behind this view.
https://www.slowboring.com/p/low-interest-rates-are-a-curse-we
**If Larry Summers and Jason Furman are okay with debts when interest rates are low, I'm thinking there must be some economic theory behind this view**
The way I think of it in layman's terms is: when people are literally willing to pay the government to hold money for them, the market is signaling (really, flashing red) that the economy has a lot of unused capacity. And it's never a good idea to eschew trying to make use of excess productive capacity as long we humans (Americans, in this case) have unmet needs (which we always will!). Why would we ever want to refuse to help ourselves live better?
When it's no longer the case that we have plenty of excess capacity we'll know it (real interest rates will rise, among other signals) and we'll then do something different (namely, curb consumption).
The low yield could also represent that risk assets are too richly valued in the eyes of market participants. The mechanism of price discovery and a business cycle have been, and continue to be affected by QE.
The assumption seems to be that interest rates will remain low until the end of time. If that isn't the case, we get into a lot of trouble
https://www.washingtonpost.com/outlook/2020/12/08/debt-interest-rates-biden-budget/
Yeah - that WaPo article is sort of the "nagging voice".
It certainly does seem like a really big tail risk to put ourselves in such a levered state that a bump to US credit becomes a budget crisis almost instantly. For example, if the US loses its global reserve currency status, it drives up interest rates, people see that that will require austerity, which spooks bond holders, rates go up more...
(That's not an argument that we should be austere WRT fighting COVID - it's more of a long-term argument that we shouldn't just target debt levels based on interest rate costs.)
Holy shit we're actually going to have a government again
The single most important thing Biden can do is pull out all the stops to be sure the economy recovers as quickly as possible. That means spending, and lots of it. We must spend to support people while the pandemic rages. We must spend to get people vaccinated because that's the only way to end the pandemic and return to "normal". We must spend to support state and local governments so they can function under the burden of the corona virus response. Once the pandemic is over we must spend to rebuild aging infrastructure, address the climate crisis, and build a fairer, more equitable society.
Of course we need to plan and monitor the spending to be sure it is effective and efficient, but we HAVE to put people to work and begin fixing real problems. We are at a critical inflection point in several dimensions. The future of our country is at stake. And that's not hyperbole.
Your comment sounds like a Biden campaign commercial: A word salad of platitudes.
Elon Musk's wealth about to skyrocket as computer touchers around the country get another $1400 to spend on Tesla stock. (Make no mistake, I'm a huge fan of the plan. But between the prices of Bitcoin and Tesla stock you can really see the type of people for whom these stimulus payments were really unnecessary.)
“Make no mistake, I'm a huge fan of the plan.”
Why? Do you think it makes sense to pump up a stock market bubble with borrowed money that will have to be paid back by taxpayers?
I'm a fan in the sense that we need to get deliverables into the hands of as many people as possible, in as big a way as possible, in as noticeable fashion as possible, as quickly as possible, to reduce the probability of a disastrous return to GOP/seditionist governance.
All else pales in importance.
What "deliverables"?
$1400 in the bank account of nearly every American is almost the dictionary definition of a deliverable.
And it's a waste of money. For naked political purposes.
I mean, I’m a fan of the rest of Biden’s plan. The extra $1400 check could certainly be better targeted, but given the scope of the rest of what’s in there then I think $1400 per American (making under $100k/year) is an acceptable price to pay to get it passed.
Also, this wealthier Musk gets, the more spectacular his fall once a lot of Tesla’s fraud comes to light.
Don't wish for Elon's fall...he has rockets and flame throwers and a tunneling machine...it's not going to end well for the rest of us.
You think those satellites *only* deliver internet?
I think those satellites *barely* deliver internet.
Musk is essentially the 2010s (now maybe 2020s) version of what what Trump was in the 1980s: The billionaire who best summed up the national character in that era.
I begrudgingly agree with Ken here but for a different reason. I think you can make a strong case that if the stimulus checks cause a speculative bubble, they weren't targeted enough.
That was exactly my suggestion.
I'm excited too! Wow. Just reading "he plans to hire 100,000 new health workers" was a jolt. What a difference a year could have made!
This is great reporting, and a real coup for Matt, but honestly I'm a bit concerned that senior transition officials would spend this much time laying their proposals out to someone whose Slow Boring site -- which is awesome!! -- only reaches some 7000 subscribers. That doesn't strike me as time-efficient for them, unless Matt was on a Zoom call with a *bunch* of other media types.
Maybe they are reading the comments to get early feedback from a particularly august group of intellectuals.
OK, I see now that they talked exclusively to Matt. And, uh, the New York Times and the Washington Post and . . .
Way to burst my bubble!
Matt has 500k Twitter followers. He's already tweeted favourably about this
He also hosts the nation's top public policy podcast
Obama gave Matt a 1x1 on camera interview. Doesn't seem too crazy to have some staffers talk to him
I got the impression Matt was participating with other journalists. Perhaps their collective audience is more (like, way, way more) than 7k.
500k twitter followers isn't nothing
I think the federal government should be doing more to make vaccines roll out faster. I guess that surveillance testing is still a good idea as well, though that feels significantly too late for it to be really high priority.
Do we need to spend $1,000 for every man, woman, and child in America in order to vaccinate them and reopen schools? How are we going to find a use for that money?
I’m a big fan of Michael Mina’s home testing plan, but yeah, totally agree that vaccines are where it’s at, at the moment.
“How are we going to find a use for that money?”
Upgrade my terrace furniture.
Weeds on this when?
$400 Billion for vaccine distribution and more testing (like, why?). If you assume roughly 350M Americans, that works out to $1142 per capita. Mind you that is to distribute/administer vaccine that was already paid for, and tests that the USG is currently reimbursing at $100 per.
Is anyone in the Administration actually looking at real costs, or have they just decided to hemorrhage money?
***$400 Billion for vaccine distribution and more testing (like, why?).***
The Washington Post article reads: "$400 billion for provisions to fight the coronavirus with more vaccines and testing..."
I reckon there should be a comma between "coronavirus" and "testing" for greater clarity:
"Provisions to fight the coronavirus" could mean lots of things.
AP via the Guardian is reporting a figure of $160 billion for testing/vaccines, FWIW, so, there seems to be some confusion as to the price tags of the various elements:
https://www.theguardian.com/us-news/2021/jan/14/joe-biden-coronavirus-stimulus-package
"Hemorrhaging money" doesn't matter when you possess an unlimited capacity to make more of the stuff you're hemorrhaging.
I think Matt’s 400 number may be... not quite right. I’ve seen something like 160 for national vaccine distribution, additional workers and other things related to PPE and the like. The 400 number I’ve seen seems to be state relief, business loans and grants and other random stuff. But who knows really.
Do they need only 50 votes +VP for this to pass?
The extent you need to be an expert on reconciliation and CBO modeling to understand if a bill has a hope of getting enacted may not be the worst part of our democracy... but it is almost certainly the most absurd.
You know what's also absurd? A seditionist-traitor became our political leader, exhorted his troops to attack the seat of our government, which resulted in bloodshed and deaths, and he wasn't immediately forced to step down.
Bob just wanted to say I loved your work as Squiggly Monster, very scintillating
This is a testament to years of work by left economics writers to improve the consensus view, yourself prominent among them. Kudos and thank you.
I agree but I do hope that there is a willingness at sometime in the future, when the alternative is the Fed raising interest rates, to step up to higher taxes
What's the number for local/state?
Tax cuts? I thought his tax plan had tax increases on those making over $400k.
Looks pretty good to me.
It does sound like Republicans get to be a part of the first, but if they nix, then they consolidate and go really big with a reconciliation bill. That's how you would actually do it if you wanted to go big but also let some of the credit go to Republicans.
Boondoggle.
Stop liking your own comments! It's unbecoming.
Unless they are willing to use reconciliation this has as much chance as passing as some of my ideas in those college bull sessions.
They do have some advantages in that several GOP senators are on the record wanting $2k checks and more aggressive fiscal policy. I don't think it gets them to 60 - but it's something.
Can they not just use the magic of "dynamic scoring" the way Republicans always do? Just whip a model showing all these splendid investments will double your money and thus your tax take and voila 50 votes plus Kamala is all you need. They should point and laugh at anyone who crys foul.
Given the way the Congressional GOP have conducted themselves lately, the real galaxy brain play might be to bribe Hannity to start shilling it to you-know-who!
Just needs ten Republicans. Also, I'm assuming Joe's going big because he doesn't really need 1.9 trillion (would take, say, 1.4 trillion). Then you come back in two months and do a reconciliation bill.
It may not pass without reconciliation, mind you, but I don't think it's an impossibility (and 10<17).
I am guessing I’m not alone in my eagerness to watch you debate Tyler Cowen or Larry Summers on the appropriate size of additional stimulus. I’d like to see the other side steelmanned. All of your arguments in favor make sense, perhaps too much so, to the point where I have to think there ain’t no such thing as a free lunch so what’s missing ?