How the US won the economic recovery

“For millions of Americans, the pandemic has been a nightmare. But many have also found that the country’s safety net actually caught them.”

“The country is recovering quickly from the economic shock of the pandemic.
And we did so despite botching our response to the crisis itself. Using aggressive social distancing, testing, and contact tracing to contain the virus — as nations like South Korea and Australia did early on — had huge economic benefits, and the US’s failure to contain its outbreak had enormous economic costs.

But many other large, rich countries also botched their response to the pandemic. If you compare the US to the five most populous countries in Europe, it fares roughly the same in terms of deaths from Covid-19. Germany does better, but the UK, Italy, Spain, and France are right there in the muck with the US.

If this past year is any indication, countries are not always going to be able to contain future pandemics. If and when that happens, they need to be able to manage the economic fallout.”

“the US is near the top when comparing countries for the scale of their stimulus responses. What makes the US response more unusual is its focus on spending to increase the incomes of its residents, as opposed to backstopping businesses.”

“Reasonable people can disagree on whether the fiscal programs to assist Americans during 2020 and 2021 were excessive or merely generous. What’s inarguable, though, is that they were massive, and enough of them worked to make the overall economic response incredibly strong.”

Hunger rates plummet after two rounds of stimulus

“The percentage of Americans struggling with hunger is now at its lowest level since the pandemic began, suggesting the recent flood in aid from Washington is making a significant difference to families struggling economically.

Data released by the U.S. Census Bureau this week shows the percentage of adults living in households that sometimes or often did not have enough to eat dipped to just over 8 percent late last month, down from nearly 11 percent in March. That is a substantial drop, and it came after hundreds of billions in stimulus checks went out.”

“While the recent spate of federal aid is clearly a major factor, it’s still too early to know how much of the recent drop in hunger is related to the stimulus payments and stepped up food aid versus how much has been fueled by the improving economy. Economists have found that previous rounds of stimulus checks also led to declines in hunger amid major spikes of unemployment.”

Houseless Americans are eligible for stimulus checks. Here’s how they can get their $1,400.

“this problem of an overcomplicated system that makes it hard for people to access benefits isn’t limited to the stimulus checks. For many government benefits, lots of people who are eligible don’t get it — often because they have no idea how to sign up.”

“the federal government needs to make its assistance programs simpler and more accessible. Some headway was actually made on this issue in the recent stimulus plan — Biden’s child allowance converted the existing child tax credit into a near-universal benefit sent to eligible recipients every month, making the program both more generous and accessible. But that’s a one-year fix, and there’s much more work to be done on this front.”

“it’s not enough to pass programs that help them in principle; the government actually has to build the infrastructure to get that help into their hands.

For example, the IRS was made responsible for sending out the stimulus checks and publicizing eligibility, but it doesn’t have a budget for public outreach or marketing. It could easily have been given one along with the responsibility of sending the checks out.”

“Some policy thinkers favor giving every American a federal bank account, which would simultaneously solve the problem of underbanking — where poor people, who aren’t profitable for the banking system to seek out as customers, struggle with access to basic financial services — and the problem of sending out stimulus checks and benefits. In principle, the government could respond to recessions, pandemics, and disasters of every kind by just dropping some money in our Fed Accounts.”

The stimulus shows why the left should stop worrying and learn to love the suburban voter

“So if white college-educated suburbanites really are turning to the left, why might this be?

The simplest and best explanation appears to be partisanship.

In their book Open Versus Closed: Personality, Identity, and the Politics of Redistribution, scholars Christopher Johnston, Christopher Federico, and Howard Lavine take a close look at the psychological underpinnings of people’s views on economic policy. What they find is surprising, and more than a little counterintuitive: Economic policy has become, to an extent, an annex of the partisan culture war.

Increasingly, Americans pick their party on the basis of cultural affinity: whether people like them, who share their cultural values on topics like race and immigration, are in one party or the other. This is why college graduates, who tend to be culturally progressive, are an increasingly Democratic bloc, and non-college whites, who have conservative cultural views, are increasingly voting Republican.

In contemporary America, identification with one of the two major parties is an exceptionally powerful psychological force. People who care about being a Democrat or a Republican tend to feel strong psychological pressures to adopt the entire policy slate of their party.

For this reason, Johnston and his co-authors argue that economic policy preferences flow downstream from partisan identity. Democratic partisans who are highly engaged in politics will tend to adjust their economic views leftward to fit more comfortably in the Democratic coalition, perfectly explaining the counterintuitive rise of the progressive white suburbanite.

“Individuals identify with the cultural liberalism of the Democratic party and adopt its approach to economic matters as a package deal,” they write. “Economic preferences [are] an expression of a more basic cultural division in the electorate.”

Open Versus Closed’s thesis fits in with a significant body of political science literature documenting that most ordinary citizens are only weakly attached to their policy preferences, and frequently adjust them based on cues from political elites.

And the core argument that educated voters will hold more down-the-line partisan views as polarization increases is supported by other studies.

A 2008 paper by NYU’s Delia Baldassarri and Columbia’s Andrew Gelman found that between 1972 and 2004, highly educated and politically engaged voters were much more likely than others to have consistently liberal or conservative views on all sorts of issues (social, economic, and foreign policy). A 2020 reanalysis using more recent data has found that voters have only become more ideologically aligned with their parties in the hyperpartisan 21st century — including on economic issues.

Hence “post-material materialism”: Material divides in the classic self-interested sense no longer define the contours of national American politics; people don’t vote their class. They still care about economic policy but come to their opinions for different reasons: They see them as an extension of their partisan identity and moral worldview.

This isn’t to say that white college-educated suburbanites are perfect progressive voters. At the local level, where issues feel more personal and less ideological, these voters often stand in the way of egalitarian policies. Think of the NIMBYs who oppose housing construction in their neighborhoods.

But politics is about working with the kind of supporters you have. And at the national level, the white educated suburbanites who have come over to the Democratic side in recent years are looking like solid supporters of a redistributionist party.”

Tesla Wouldn’t Be Tesla Without Stimulus Spending

“About a month after Barack Obama won the presidency, a cash-strapped Elon Musk made it clear that Tesla Inc.—then a boutique maker of a $109,000 sports car—would have to delay the rollout of a less expensive electric sedan unless it got government support. It was the middle of what was then the worst American financial collapse since the Great Depression, and the markets had just taken too much of a beating. “We can’t move forward with that without a major amount of capital,” the chief executive officer said in an interview in December 2008.

Musk’s plea was well-timed: The incoming president was keen to use part of the approximately $800 billion stimulus package his team was preparing to create a new green energy economy. One year after Obama took office, Tesla got a $465 million federal loan to design electric vehicles and build them at a manufacturing plant in Fremont, Calif. The company went public shortly thereafter, repaid the loan early, mainstreamed the electric vehicle, and now employs about 20,000 people in the Bay Area alone. It has the second-largest market capitalization of any automaker worldwide.

More than a decade after the financing came through, former heads of the office that approved it—a division of the U.S. Department of Energy known as the Loan Programs Office—point to the Tesla story as a best-case scenario for federal energy investment.”

How Trump’s team amassed a $1 trillion war chest for Biden to deploy

“The Treasury has a cash pile of well over $1 trillion, which will allow the government to quickly disburse money in line with the sweeping new law, including direct checks to millions of Americans that are expected to start hitting bank accounts in the coming week. That robust rainy-day fund was built last year by then-Treasury Secretary Steven Mnuchin, who preemptively cranked up the pace of government borrowing, unsure of how and when Congress might mandate further relief measures.

So, despite concerns that markets will be flooded with new U.S. government debt to pay for the rescue package, the Treasury Department might not have to change its borrowing plans much at all to fund the legislation signed into law”

““There are enormous implications for everyone else, but the Treasury was out in front of this nine months ago,” said Lou Crandall, chief economist at research firm Wrightson ICAP.
The advance moves by the Trump team are proving to be key to limiting turbulence in government debt markets from such massive spending. Bond yields have already been inching up in recent months due to brighter prospects for the economy”

“The planning by Mnuchin also demonstrates that, even as Republicans now balk at the price tag of Biden’s rescue package, the Trump administration itself was prepared for the possibility that the economy would need another big infusion of cash to fully emerge from the pandemic.”