Another Bad Idea: There is a disconnect between proposed stimulus spending and improving economic conditions

Policymakers have been quarreling over the content and size of a proposed new stimulus spending bill for five consecutive months now. In the latest round of discussions, Democratic lawmakers called for at least $2.2 trillion in spending, Republican senators proposed an alternative $500 billion “skinny” stimulus bill, and the president and the Treasury secretary proposed $1.8 trillion in additional spending.

Regardless of the outcome of the election, it seems highly likely that there will be a push to pass another multitrillion-dollar stimulus package. But such a package makes little economic sense and may do more harm than good.

With the passing of the CARES Act in the spring, policymakers of all political stripes came to a broad, if not rash, consensus that $2.2 trillion was an appropriate amount of stimulus spending, given the economic conditions at the time. In hindsight, there were several problems with the rushed-through CARES Act, including the following: (1) an overly generous unemployment insurance expansion that meant most recipients were better off not working; (2) a Paycheck Protection Program that was badly targeted and had little impact on employment levels; and (3) a vast bailout of states that had been deeply irresponsible in managing their finances for many years.

Given all the flaws of the CARES Act, you might be naive enough to believe that several months after passing the initial stimulus bill, policymakers would be more informed about how to better target government support and less apt to simply throw large sums of money at a complex problem such as the COVID-19 pandemic. But you would be wrong. In fact, with the labor market continuing to make a strong recovery from April lows and several economic indicators signaling a V-shaped recovery, policymakers are still dead set on an all-too-familiar figure: $2.2 trillion.

To illustrate why a new stimulus package with spending levels equal to those of the CARES Act makes little economic sense, one only needs to look at a few economic data points in the table below comparing pre-COVID conditions (January/February) with those in spring 2020 (April/May) and fall 2020 (September/October).

While the unemployment rate remains high compared to pre-COVID levels, it has declined significantly since the spring and is forecast to reach its historic norm by January. (The historical average unemployment rate from 1975 to the present is 6.3%.) Meanwhile, continuing unemployment claims have fallen precipitously, declining by over two-thirds from historic highs in May. While there is still significant slack in the labor market, particularly in states such as California and New York, conditions today are not remotely as severe as they were in the spring. These improvements must be accounted for when formulating employment support policies.

As for income, spending and savings patterns, Bureau of Economic Analysis data reveal that personal income levels have not just recovered from March lows but actually exceed January 2020 levels by a notable margin. Personal consumption expenditures have recovered by 89% from April lows, and the savings rate remains at double the historic average level.

In October the monthly Purchasing Managers Index (PMI) noted, “Recovery gains momentum amid sustained upturn in demand.” The latest PMI data show that the services sector grew at its fastest pace in two years, while manufacturing output rose at its steepest rate in 21 months. After contracting in the first two quarters of the year, GDP grew at 33.1% in Q3 (the seasonally adjusted annual rate) and is projected to grow at a respectable 3.5% in Q4.

In spite of all this good news, policymakers who are dug into stimulus package negotiations seem to think that we’re still living in the spring, that unemployment is at historic highs, and that most businesses remain closed.

As the dust settles after the presidential election and politicians return to the negotiating table, they should start by acknowledging the significantly improved economic conditions. More importantly, they should refrain from spending hundreds of billions of taxpayer dollars on bailing out irresponsible state governments or airlines to compensate them for egregious overcompensation of workers and executives and share buybacks.

Meanwhile, continued improvements in labor market conditions should convince negotiators that additional unemployment benefits (especially anything above $200) would be counterproductive. Furthermore, the states with the slackest labor marketstoday also tend to be the ones with the most generous state unemployment benefits—showing that additional generosity in these states would only further discourage work.

As my colleague Veronique de Rugy points out, “It’s right to help those low-income Americans hurt by the pandemic-induced recession. But that relief bill shouldn’t cost anywhere near $2 trillion.”

Our political leaders should avoid multitrillion-dollar spending packages that are more akin to election promises than good policy. Instead, they should take a measured and targeted approach that supports those still negatively affected by the pandemic, while avoiding policies that discourage work.

And here we are 27 trillion in debt because of congress and they are preparing for another go big spending package of over 2 trillion.

In order for the American economy to thrive, people need to have disposable income. For a working American, struggling to provide housing, health care, food, and a tank of gas, there’s little left over at the end of the week. That reality is starting to hit home, and people are finally wising up. For the last 20 years consumers have used credit cards to make up the difference between the lifestyle they think they deserve and the lifestyle they can really afford.

The tax cuts for the very wealthy need to be rolled back. Policies need to be put in place to rebuild THE most critical element of America’s economy - a healthy middle class. Universal health care, living wages, educational opportunities, and significant investment in America’s infrastructure (schools, roads, mass transit, levees, etc…) can help to turn this mess around.

The economic situation is as dire as climate change and if something isn’t done soon, we are headed for a train wreck. Now is a golden opportunity for the Democrats to show some leadership and turn that train around.

As soon as Biden takes office he must eliminate the Trump tax cuts. The truth of our economy is that under Trump the fabulously rich have gotten fabulously richer, while the working class has gotten left behind.

You are correct. Where we differ is how we get to the desired end results. Where did the wheels fall off the bus, was it multiple events?

My assessment:

  1. Off shoring, When the US accepted globalization as the answer, we traded manufacturing and support jobs for cheap imports. t one tim auto assembly was a sought after job the paid excellent wags and benefits. The story given to the masses was we dolt want those stinking manufacturing jobs, we want tp repair their goods, As it turns out buying new is far cheaper than repairing the old we own. Nam it Computers, printers, cell phones, any electronics. Business found to was cheaper t manufacture auto parts over seas than manufacturing in the US. The list is endless of goods that are now throw away.

  2. Immigration. We have allowed the free flow of labor to enter the US that has caused wags to stagnate, With that has come a reduction in benefits. Why would any employer hand out pay raises when abundant labor is available at lower wages. And yes government is once again is responsible. Billions are paid out supporting our legal and illegal immigrant population.

  3. Government freebies. Where’s the incentive to work when government is your backstop. The same government who allows unlimited access to US jobs and benefits for immigrants. The payments made for the state government shutdowns did little but add to the deficit and national debt.

Taxes. And the only solution you see is to raise taxes on those paying taxes. to address the stagnant wag issues caused by immigration, off shoring and a host of other issues. And raising taxes will push the economy into a major recession which you like your party can blame Trump.

Climate change. If it’s so dire, why aren’t governments addressing the root cause? Over world population. More people, more pollution. All the wind, solar and all the angst doesn’t fix the to many people problem and are nothing but a band aid on an arterial wound.
p.s. Ever hear the saying it ask money to make money???

Its sign of a recession the middle class pulls the plug the people with many begin investing and end up wealthier.

As far as your wet trans universal healthcare, free college, tuition loan forgiveness, this country is over 27 trillion in debt, that’s more than our GDP for a year. Investment in schools, state and local responsibility. Roads, a state and local responsibility. mass transit a local and state responsibility,

Bit then again, When my tacos reached 50% for my business I dumped all my employees and now am a sole proprietor and now I gt paid for every job I chose to do. Yes I still pay outrageous taxes but I no longer support the Welfare States of America.

As a side note, the democrats are equally responsible for this train wreck yet you somehow think this time will be different. Sort Sparky, Biden is at best a dementia case and this cannot be fixed without addressing the root causes of the problems we have today.

Right-wing Republicans used to warn Americans in the direst tones of the severe consequences of Democrats running the economy. Remember how vociferously they warned us that they were the vigilant custodians and that “tax and spend liberals” would saddle us with massive debt and destroy the value of our dollar?

Then came George W and Trump :rofl:


Right! Like Obama didn’t out spend both of them. At least present an honest picture instead pacifying your feelings all the time! Get over it snowflake!

By every accepted mathematical interpretation and standard of accountancy, Republican Presidents have borrowed not only more money during their tenures, but have done so regardless of the contemporary inflation rate(s). [Ronald Reagan created massive federal debt during the first two years of his Administration despite prime interest rates of nearly 20%.]

Worse, with Ronald Reagan and the first George Bush, lack of oversight of the savings and loan industry produced a major debt crisis and a massive stock market crash. Much of the cause of these fiascoes was due to the shaky debt created by playing fast and loose with leveraged buyout rules and “merger mania” – which later had to be re-paid in the so-called “black books” of the Federal budget. [First, because of the size: $700 billion, and second, because people like John McCain would have gone to jail.]

Ergo, numbers about the national debt “jump” again in the late 80s. Americans later wound up paying this money back during the first Bush’s term and part of Bill Clinton’s in the form of higher taxes. [Despite GHWB’s “read my lips…no new taxes!”]

Yet…despite this: a sizeable minority of Americans STILL believe that the “liberals” entitlement programs run up our vast deficits – i.e., that the government’s “welfare” budget spends 5 to 10 times on entitlement programs than it spends on defense.

These same people also think that foreign aid is also 5 to 10 times the amount that’s actually spent. Go figure.

All anybody has to do is visit a couple of websites to dispel their own misconceptions. Too bad too many people don’t give enough of a shit to do that.

Remember…it’s pretty much these same unenlightened people who hate on refugees seeking safety without making the connection that Republican wars in the Middle East created the refugee crisis in the first place - and that was all to get Saddam for 9/11 - yeehaw!

I remember a while back some Republican legislator blowing a gasket that high schools spend too much time showing students how to put condoms on bananas but little or no time explaining how interest rates work in the housing industry?

I remember this because I agreed with him. He was absolutely right.

And – if high schools did start explaining interest rates to students – every major bank and savings and loan in the school district would be running candidates for the school board to make sure the practice was stopped. And my guess is that most of these folks would be running as Republicans.

Fox News can keep spreading their bullshit propaganda but sooner or later a sizable chunk of the public has to take some responsibility for not reading anything anymore.

All we can ask for is a few tens of millions of inquiring minds.

10 Presidents With Biggest Debt Increases


to Debt (in trillions)



Percent Increase

Added to Debt (in trillions)

Franklin D. Roosevelt



Woodrow Wilson



Ronald Reagan



George W. Bush



Barack Obama



George H.W. Bush



Gerald Ford



Jimmy Carter



Richard Nixon



Donald Trump



Barack Obama (2009-2017) : Under President Obama, the national debt grew the most dollar-wise ($8.6 trillion) but was fifth in terms of percentage: 74%. Obama fought the Great Recession with an $831 billion economic stimulus package and added $858 billion through tax cuts.

Sorry - you are going to have to clean up that sloppy copy/paste. I can’t make any sense out of what you just posted.

A source would also be nice.

I am sorry who are you again? You can’t read?

And it is people like you that vote, and it people like yourself that actually think a president spends money in this country.

You are the perfect example of why our education system has failed this country.

How is it possible that people like yourself actually complete HS and some actually graduate from college and know little about how their government functions???

The Constitution places the power of the purse in Congress: “No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law . . .” In specifying the activities on which public funds may be spent, Congress defines the contours of federal power. This requirement of legislative appropriation before public funds are spent is at the foundation of our constitutional order.

1 Like

They get worthless liberal arts degrees and then believe that such a worthless education makes them experts in all things political.

Degree? How did they graduate HS without the basic government/civics class?

1 Like

I think they stopped teaching what we refer to as civics when they started teaching their left wing social justice bullshit.

1 Like

HS graduation requirements:
Three (3) school years of social studies, including history, American government, and economic systems and institutions

But that’s here a conservative State.