Coronavirus

Congress and the White House Are Inching Closer to a 'Helicopter Money' Response to Coronavirus Crisis

In the past, the federal government has sent everyone checks to stimulate the economy. But paying for all the losses that come with a coronavirus-induced shutdown would require more novel policies.

|

Cutting every single American a check was once the zany idea of a long-shot Democratic presidential candidate (Hi, Andrew Yang!). It's now the consensus policy response to an imminent coronavirus-induced recession.

"We're looking at sending checks to people immediately," said Treasury Secretary Steve Mnuchin at a press briefing. "Many companies have shut down, whether it's bars or restaurants. Americans need cash now, and I mean now in the next two weeks."

On Monday, Sen. Mitt Romney (R–Utah) endorsed a minimum one-time transfer of $1,000 to all Americans as part of a broader set of economic relief proposals.

Democrats are warming to the idea as well. Rep. Tulsi Gabbard (D–Hawaii) has introduced a resolution for an emergency universal basic income to last until the current crisis is over. Harvard professor and former Obama administration economic advisor Jason Furman has reportedly been trying to get House Democrats behind a check-cutting policy.

These proposals are not entirely unprecedented.

To combat the dot-com bubble bursting, Congress passed stimulus legislation in June 2001 that saw some 90 million taxpayers get rebate checks of between $300 and $600.

Then in early 2008, Congress passed the Economic Stimulus Act in an attempt to stave off the Great Recession. That legislation included provisions for mailing 130 million taxpayers a basic tax rebate of either $600 for single-filers or $1,200 for married couples. Parents could claim an additional $300 for each dependent child.

There are some significant differences between these rebates and what is being proposed now, however, says David Beckworth, an economist at George Mason University's Mercatus Center.

"They were just one-time shots. They weren't like what was being proposed now, which is a little more continuous, or at least [continued] for the duration of the crisis," says Beckworth. That means the current policies being considered would be much, much more expensive.

The 2001 rebates cost $38 billion. The rebates given in 2008 cost $113 billion. Sending every adult American a $1,000 check, as is being proposed now would cost $2.8 trillion a year according to the Tax Foundation, or about $230 billion a month.

Paying for something like that, says Beckworth, will likely require intervention from the Federal Reserve. The Treasury, he says, could sell bonds to the Fed for cash, and then give that money to the Internal Revenue Service to mail out as checks to taxpayers.

This would essentially be the "helicopter money" approach Milton Friedman first proposed as a thought experiment in the late 1960s.

Beckworth says the idea has a couple of things going for it during this current crisis. With huge swaths of the economy essentially shutting down in an effort to stop the spread of coronavirus, dropping money from metaphorical helicopters (or maybe drones) would be the best way to ensure that everyone who suddenly finds themselves out of work will get some relief.

"It would bypass the normal plumbing of monetary policy. I think that's the biggest argument for it," says Beckworth.

The Cato Institute's Michael Tanner criticized this approach to me yesterday, suggesting that most people either aren't missing paychecks because of the current crisis or are already eligible for existing relief programs. Sending checks to everyone will then shower benefits mostly on people who don't really need it, Tanner argued.

"This is a knowledge problem," counters Beckworth, saying that government officials are not going to be able to come up with precise eligibility requirements that funnel aid to the people who need it while avoiding sending it to people who don't.

Even if bureaucrats could come up with the appropriate eligibility criteria, there's a question of whether the government would be able to effectively administer a program like that in a pinch.

There are still huge risks of an emergency universal income financed by the Fed, acknowledges Beckworth.

"If you start doing that, then you open a Pandora's box for politicians and others who are going to want to do it all the time," he says, adding an ideal policy "needs to be very much based on a rule or condition. You don't want to send them out willy-nilly. You want to tie it to an economic indicator." Such a rule, he says, would force politicians to "turn off the spigot" when the crisis has passed.

He suggests tying such a policy to a monthly measurement of household income or even a rate of nominal GDP growth, with the government continuing to spend until that target is reached.

Even if a helicopter money policy was bound by such a rule, however, there'd always be the danger that politicians and central bankers could ignore it. Paying for economic relief by creating money also raises the specter of inflation.

Beckworth urges free marketers to "think strategically, not tactically." If universal economic assistance, financed by the Fed and bound by some sort of nominal GDP or other target, is successful in staving off a serious economic crash, that would reduce the demand for more extensive regulatory interventions that could have a longer, more damaging effect, he argues.

"Take a pragmatic approach here," says Beckworth. We should be willing to "fight the good fight to minimize any further growth of permanent government programs that are going to happen if we don't get ahead of this."

NEXT: Occupational Licensing Requirements in an Emergency

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  1. I will gladly cash any checks sent.

    1. Do you have a paypal account. in the event if you do you can add an extra 650 weekly in your pay check only working on the laptop for 4 hours every day. checke Read More

  2. Right in an election year we need to promote Cato policies that show people what would have been good ideas 30 years ago.

    We have underfunded liabilities over the next 80 years that dwarf anything we would spend in a stimulus this year. There is no way in an election year that anyone is going to go the libertarian route.

    1. “Right in an election year we need to promote Cato policies”

      Well, yeah. Unlimited, unrestricted immigration is looking better than ever.

      #OpenBorders
      #(EvenDuringAPandemic)

      1. The gimmick is tired now

        1. Personally, I find his musings (satire, though they may be) to be the best reason to visit here.

          1. “Maxime Weygand – Hero Of France”

            Sadly, all the evidence we have indicates that you have terrible taste and judgment.

        2. I’m still enjoying it.

      2. Beyond tired; fuck off.

    2. That said, unfunded liabilities can change but money you’ve already spent is harder to evaporate.

  3. “We’re looking at sending checks to people immediately,”

    All those people social distancing at home will send their money to Amazon, enriching the world’s richest man.

    Good job, assholes. It’s a supply crisis, not a demand crisis – visit a store and see for yourself.

    1. I think they’re looking ahead and worried about all that job loss.

    2. Hilarious

    3. Very well said

    4. “All those people social distancing at home will send their money to Amazon, enriching the world’s richest man. ”

      It seems the concept of corporate ownership is a mystery to you. Are you getting out of the 6th grade this year?

      1. I didn’t realize Bezos had left Amazon. It’s amazing what one learns on the internet!

        /s

  4. if they’re gonna money this up can’t they pump it to the makers of Charmin and Bounty?

    1. I read about that and apparently their factories and systems are set up for efficiency and the regular demand. Probably be a mistake to change that too dramatically. We just need to suck it up. I have 6 mega rolls, two are on the rolls now but newly placed. I refuse to buy more because someone might need it more than me. Though I didn’t see any last time I was in the store so my “sacrifice” is still a theoretical one at this point. It’s kinda funny too because before all this happened I saw a funny video from China of a teacher teaching little kids to wipe their butts. She was using a small piece and straight up wiping and folding it and wiping and folding the same little piece like 6 times. I couldn’t believe it. My butt destroyed toilet paper cant imagine folding it over. Now that I think about it the Chinese probably knew this was coming and they were preparing people for it. Someone needs find that video and get it to Alex Jones.

      1. what they meant by “floating in the Sea of Coronoavirus”

  5. By all means, helicopter money to people. And pay for it with corresponding cuts to traditional welfare.

    1. Dissolve destructive departments like TSA and DEA as well.

    2. Cut anything they want and give the money to the taxpayers.

      It’s probably politically infeasible to cut Medicaid right now, but we can withdraw our troops from Germany.

      1. Needless to say, end all the Regime Change~! wars as well

      2. Yeah, Americans learned a lot during the financial crisis. We should just tell the Germans we are sending the GIs on extended leave back home due to COVID. And in about 5 months when the germans get curious and go on the bases they’ll see them abandoned with all the copper ripped out of the walls.

        1. In the last spat with Merkel, as I understand it, a German biotech is developing a particularly promising treatment for the coronavirus, and the U.S. came knocking for info about how to get it. Merkel invoked a German law that would prevent German biotech companies from exporting their new product until Germany’s demand for it was completely exhausted, so Trump countered with all sorts of offerings to get the German biotech company to finish their research in the USA so as not to be subject to Merkel’s law.

          Merkel is extremely upset and crying foul . . .

          If they don’t appreciate the billions we spend on defending their country from the Russians enough to share whatever treatment they have for the coronavirus, then maybe we shouldn’t bother underwriting their national defense anymore. I don’t know what we’re getting in return for our billions, but if it doesn’t include sharing the proceeds of one of their company’s coronavirus research, then I don’t know whether we can count on their support if we’re in a tough spot anyway.

          We’re not here for the benefit of the Kurds or the Germans, and if they’re not there for our benefit either, then sending those billions back to the taxpayers instead of protecting Germany makes a ton of sense to me.

          1. Criminy, it’s not like sharing the idea will slow down how much they produce.

            1. If they developed it in the United States, we’d be happy to share with Germany whatever the company wants to export to Germany.

              In Germany, however, they won’t send it to the USA until the German government doesn’t want anymore.

              If you don’t see the difference there, it’s because you don’t want to see the difference.

              1. “Last week CureVac CEO Daniel Menichella was among the pharmaceutical representatives invited to the White House to discuss coronavirus vaccine development with Trump, Vice President Mike Pence and members of the president’s Coronavirus Task Force.

                In a press release, the company said that Menichella had told U.S. officials about the vaccines it had in development, and revealed its hope to have an experimental vaccine ready by early summer.

                The news prompted angry reactions from German politicians who demanded that Berlin do everything possible to prevent the U.S. from controlling access to an eventual coronavirus vaccine.

                https://www.politico.eu/article/germany-confirms-that-donald-trump-tried-to-buy-firm-working-on-coronavirus-vaccine/

                Right now, the Trump campaign is praying that the left jumps on this and impeaches the president for trying to get a promising vaccine for the American people–and sooner rather than later.

  6. When all you have is a hammer, every problem looks like a nail.

    There isn’t anything they can do about the virus at this point until it plays itself out, and we won’t know anything about how that’s going for at least a couple more weeks. In the meantime, it’s an election year–and just because there’s isn’t anything they can do about the virus doesn’t mean there isn’t anything they can’t do.

    They can always squander our money!

    That’s the only hammer they have right now, so that’s what they’re gonna do.

    1. That’s the only hammer they have right now, so that’s what they’re gonna do.

      They could volunteer to be test subjects for virus vaccines.

    2. I have to agree. Government’s major focus at this time should be getting resources to minimize the infection. Don’t get ahead of the economic problems. Deal with the economics as they come up. Biggest thing right now is to make sure that unemployment compensation stays solvent. Sent money to those that are out of a job at this time. I don’t need a $1000 right now, but a waitress or hotel clerk may well need it for food and shelter.

  7. The Treasury, he says, could sell bonds to the Fed for cash, and then give that money to the Internal Revenue Service to mail out as checks to taxpayers.

    “We skin the cats, feed their carcasses to the rats, feed the rats to the cats, sell the skins to the Fed for cash, then give that money to the Internal Revenue Service to mail out as checks to taxpayers.”

    1. For what it’s worth, sending money to the taxpayers is the best thing they can do with it.

      If you have to spend money, give it to the taxpayers.

      1. Don’t worry, any pennies they toss to the taxpayers will be dwarfed by the trillions rained down on the banks.

        1. I’ll use my 1000 a month to buy shares of those banks.

  8. What a great idea!
    Have the cities and states shut down everywhere money can be spent, then send everybody an extra grand a month!
    Will the money be taxable income? If not, why not? If so, how you gonna collect it later?
    Will Hillary and Bernie get a grad a month as well? How can that possible be justified?
    Will the last adult leaving DC please turn out the lights?
    Who is John Galt?

    1. Will the last adult leaving DC please turn out the lights?

      Assumes data not in evidence.

  9. What are they calling the money they’re planning on sending Boeing? Because that kind of money don’t fit in a helicopter, you need a cargo plane for that many pallets of cash. And all because Boeing are big boosters of privatizing profits and socializing losses and when times were good Boeing’s directors were looting and pillaging to their heart’s content and now that the company’s in danger of slipping down the shitter, it’s time for the taxpayers to get bent over the table and fucked up the ass so the looters and pillagers can keep the party rolling a little longer.

    You know, I’ve always said that Dwayne Andreas and Archer Daniels Midland was the biggest welfare queen in the country, but damn if Boeing isn’t making a run at the title. It’s slimeball crony capitalists like this that make Bernie Sanders look attractive – if we’re going to aid and abet looting and pillaging, fuck standing by and watching the others loot and pillage, I’m going to by-God get in on the action. And fuck Trump for not telling Boeing to eat a big bag of dicks – you didn’t need my help getting into this mess, you don’t need my help getting out. It’s how capitalism works, assholes, you’re sitting on a shitload of equity, sell it off and move on. Sure, it’s going to hammer the shit out of your market cap but you’re shitty people running a shitty company and there’s no reason to pretend that you’re anything else. Why the hell should Boeing be treated any different than K-Mart?

  10. How is a thousand bucks to everybody equal a trillion? There are 320 million of us. That’s 320 billion. Even with costs that’s no a trillion

  11. Not to give them any ideas, but I bet state unemployment offices know who “needs” that extra cash.

    1. The people who work at state unemployment offices? I’ve heard they’ve been struggling to find work the past few years.

  12. In the Carboniferous Epoch we were promised abundance for all,
    By robbing selected Peter to pay for collective Paul;
    But, though we had plenty of money, there was nothing our money could buy,
    And the Gods of the Copybook Headings said: “If you don’t work you die.”

  13. Any ideas on how 15 to 20 percent unemployment might influence the fall elections?

    That might make the influence of the stock market dive, or of the general diminution of the economy, seem a rounding error.

    Carry on, clingers.

    1. You waited until now to show up and again prove you’re an asshole bigot?
      Were you drink all day?

    2. ” 15 to 20 percent unemployment”

      So you’re saying Obama will somehow be president again?

  14. Spend money on cheap, reliable universal virus testing. If every person in the country can be tested every couple of days, the problem ends overnight! Quarantine positives, and allow the rest to return to normal.

    This would be much much cheaper than suspending the economy and having the government print money to pretend everyone is working. Contain the spread!!!!

    https://spectrum.ieee.org/the-human-os/biomedical/diagnostics/biotech-pioneer-home-test-kit-coronavirus

  15. Hey you guys I have found the perfect job as a full time student, it has changed my life around! If you are self motivated and social media savvy then this is ideal for you. The sky is the limit, you get exactly how much work you put into to it. Click on this link to get started and see for yourself,
    More Read

  16. I am making a good MONEY (500$ to 700$ / hr )online on my Ipad .Do not go to office.I do not claim to be others,I yoy will call yourself after doing this JOB,It’s a REAL job.Will be very lucky to refer to this…. Read more  

  17. Can’t wait to see everyone here refuse to cash the checks. It is “socialism” and you all can’t possibly be hypocrites right?

    1. Never look a gift horse in the mouth.

  18. Well we’ll all be working from home for quite a while
    Or so I’m told

    1. I’ve got a pretty good thing going. I’m the only one who comes to work. Or one of a small handful. Very peaceful.

Please to post comments

Comments are closed.