Some of us warned when the idea of cash payments to most citizens was first proposed that throwing money blindly at people, irrespective of personal need or circumstance, was not the best way to respond to the coronavirus. The Swamp went ahead and did it anyway, with even President Trump green-lighting the $2.2 trillion in debt piled onto future generations in hopes that the $1,200 taxpayer-funded checks sent to eligible adults would help stimulate the economy.
We had already seen this hilarious, if disturbing, result in widespread internet boasting from millennials and members of Generation Z alike about wasting “Dad Trump bucks” on pornography, drugs, and more. Now, new polling empirically suggests the checks have largely failed to stimulate spending, just as critics predicted.
Throw stimulus money at everyone blindly, they said.
It will stimulate the economy, they said. pic.twitter.com/PnU65Uyyqk
— Brad Polumbo (@brad_polumbo) April 28, 2020
Pornography, new shoes, and welfare for Harvard?
That new coronavirus relief money is already being wasted in too many ways to count.
New from me @dcexaminer ⤵️https://t.co/osJfQ6mFfV
— Brad Polumbo (@brad_polumbo) April 20, 2020
A new survey from Axios and Ipsos found that “much of the stimulus money does not appear to be going directly back into local economies.” The idea behind these payments was that, hopefully, people would spend them, injecting money into their local economy and helping to keep it alive. It hasn’t worked out that way.
Almost 40% of respondents said they have chosen to save their stimulus check. Given the looming prospect of a steep economic downturn, this is an imminently reasonable thing for an individual to do. But on the macroeconomic level, it is exactly the opposite of what policymakers hoped to incentivize with these stimulus payments.
It’s economic theory that savings takes money out of the circular flow of the economy. And stimulus is often targeted at those most likely to spend the money, because that’s how it will receive the most “bang for buck” in terms of economic growth stimulated per dollar in stimulus funded.
So, too, 18% report not having spent the money yet, though they plan to spend it later. Meanwhile, another 26% say they used it to pay down debts. Just roughly 40% appear to have used the money in the ways in which policymakers and Keynesian stimulus advocates would have hoped they would, such as paying rent, buying food, and so on.
This was always the problem with throwing money blindly at most people irrespective of circumstance. If this aid money had instead been targeted (in higher amounts) at those truly affected by this crisis, such as furloughed workers, it’s likely these cash-strapped adults would have spent almost all of the money, thus better stimulating the economy. But when you give stimulus checks to adults who have maintained their incomes, are working from home, and not going out due to quarantine, more often than not, that “stimulus” doesn’t end up getting spent or doing much stimulating at all.
Shocker.
These are the points that critics of the taxpayer-cash-for-all approach to stimulus have made since day one. The results continuing to come in, so far, vindicate this criticism in full.
