How To Pass a Temporary Stimulus

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Matt Yglesias on the problem of credibly committing to a “temporary” stimulus:

If we paid tons of people to dig ditches and then fill them in, I think it would be easy to convince people that we intended to stop doing that once unemployment fell. But conservatives recognize that, in general, liberals think the government should be spending more money on infrastructure projects and public services. So if we get to pass some spending increases at a time when the case for temporary stimulus is strong, who believes we’ll really give the spending up? And the same thing applies to conservatives and tax cuts.

Actually, I think there’s an easy solution to this quite aside from automatic stabilizers like extended unemployment insurance, which will automatically come down as the recession eases. And that solution is: a temporary payroll tax holiday paid out of the general fund. At this point, if we’re going to pass a second stimulus I think it needs to be something that takes effect quickly, and a payroll tax holiday is about the fastest possible stimulus you could ask for. What’s more, it’s pretty effective, since the benefits primarily go to middle and working class families, who are more likely to spend it than rich families. And making it credibly temporary isn’t hard either. Just set it on autopilot with a gradual phaseout: maybe a full holiday for two quarters, followed by a 75% holiday, a 50% holiday, and finally a 25% holiday. Or something like that. That would be easy to stick to and would avoid the problem of withdrawing all the stimulus at once just as the economy was starting to seriously pick up steam.

Would Republicans agree to this? Probably not. But some of them might, and public opinion would probably be pretty favorable even among the tea partiers, who prefer tax cuts to deficit reduction by a margin of 49%-42%.

Even if you think federal spending is the first best solution to stimulate the economy, a payroll tax holiday is a pretty good second best solution. It’s faster, easier, and more likely to get some Republican support. Liberals could do worse than to start putting their weight behind something like this.

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And the truth is, going into the final 4 days of the year we still needed to raise $TK to hit our $350,000 goal and start 2021 on track. It's nerve-wracking, wondering if the big spike we normally see at the end of December is going to be another thing that doesn't go as planned in 2020, or worse, if, now that Donald Trump is set to leave the White House (for longer than a taxpayer-funded golf trip to a property he owns), folks might be pulling back from fighting for the truth and a democracy and think the hard work is done.

It's not, and if you can right now, please consider a year-end donation to support our team's fearless nonprofit journalism so we can close that big fundraising gap and finish the year strong, ready for all that's ahead in 2021. Whether you can give $5 or $500, it all matters in keeping us charging hard, and we'd be grateful.

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