Even the US doesn’t have a ‘magic money tree’

I never thought I’d say these words, but here goes: I agree with Mitch McConnell.

The Republican Senate majority leader refused to move forward with President Donald Trump’s command that most American adults be sent $2,000 checks. This, after Mr Trump had signed into law a $900 billion stimulus bill that included means-tested $600 payments.

But Mr McConnell said he opposed adding more money to the $600 stimulus payments because it would greatly inflate US debt and benefit some families who aren’t in need of financial assistance. Some of the people who would qualify for the payments belong to households earning up to $300,000, Mr McConnell pointed out. He added that many of the households had not been disadvantaged by the pandemic.

This is absolutely true.

It bears noting that after today (Jan. 3), Mr Trump’s legislative demands don’t much matter. On Jan. 3,  the 117^th US Congress convenes, meaning that any pending legislative business of the 116^th Congress dies with that body. Mr Trump’s grand plans for a more generous stimulus bill formally end with the 116^th Congress.

Even so, there is a more general point to be made re. Mr McConnell’s reservations about the larger stimulus payments. Stimulus money should be means-tested and laser targeted to reach people who need it most. It makes no sense to send large amounts of money to people who are still in work and not in any particular distress.

According to Harvard economic policy professor Jason Furman, it would be sensible to tie future stimulus response to improvements in economic indicators so that assistance scales up or down depending on how much people need it.

Congressional Democrats and even some members of the Republican Party – particularly those toadying to Mr Trump – are quite wrong to be arguing for generous direct payments to everyone. Even the US, the richest country in the world, does not have a “magic money tree”, to use former British prime minister Theresa May’s phrase.

As Bloomberg’s editorial board recently said, “bigger stimulus checks will just use up limited resources (the government can’t borrow infinity dollars, one presumes) that could be better spent on more targeted relief”. In fact, the focus could have been women or more specifically working mothers, or some such segment of the population that has suffered grievously because of the pandemic.

But that didn’t happen and all of Mr Trump’s sputterings end with the 116^th Congress.

In real terms, of course, they were rendered null and void when Mr McConnell rightly spoke out about the wrong-headedness of throwing money around like confetti.