Hourunner wrote:
In economic terms it’s Marginal Propensity to Consume (MPC) and Marginal Propensity to Save (MPS). The sum of these always equals 1 as they expressed as decimals but essentially 100%. Under normal market circumstances income levels and MPC have an inverse relationship - people making less would spend more of any new money they come across vs those in higher tax brackets would save more. I agree that at this time - not normal market conditions - everyone should get a stimulus check because jobs at all income levels are being lost. The guidelines for who receives mo WU as they are covers over 90% of income earners. Giving money to the other 10% would not have cost much and would very likely still lead a decent amount of spending/consumption.
Also, I have to wonder if the benefit of targeting really justifies the administrative costs involved. Obviously it isn't optimal from a stimulus standpoint for people to save part of their check, but when you income verify and determine check values on an individual basis, you are spending money on bureaucracy that could be going out the door as stimulus money.
From an economic stimulus perspective, all that really matters is that you shovel money into the hands of people who will spend it (and let's keep in mind that this is an economic stimulus, not an unemployment check or a welfare payment). Given social distancing, I wouldn't follow Ben Bernanke's advice and throw cash out of helicopters, but the idea behind it holds true: you could more or less distribute the money randomly and still have the intended impact. Seems like they could just do the world's largest mail merge and cut a check of equal value to everyone who filed a tax return last year and consider the economy to be stimulated. Sure, you'd put some money in the hands of people who won't spend 100% of their check, but you'd also save a ton in admin costs.