Emergency Times, Extraordinary Measures — Public and Private

Tuesday is Economics, Finance, and Business Day

Today’s topic: Emergency Times, Extraordinary Measures — public and private

Wars are different. Things are done that ordinarily would not be. America looked quite socialist during World War II. Some emergency measures taken then had long term consequences. For example, it was wage and price controls during the war that got US employers in the health care business. What extraordinary but temporary measures should be taken now to avert economic catastrophe? At the national level? at the personal level? The first two sections of today’s post are a summary of a plan proposed by the economist Greg Mankiw. The third is a set of three questions. Experts — please chime in. Correct, elaborate, elucidate.

WRITE EVERYONE A MONTHLY CHECK OF $1000 OR $2000 A MONTH UNTIL THIS IS OVER

(Greg Mankiw)

1. Then have a surtax due in April 2021 for those whose income in 2020 turned out, in fact, to be higher than their income in 2019.

2. The maximum surtax would be the total of all the checks received.

3. Cost if $2000 a month — say $2000 X 6 months = $12,000 for each of 300 MM adults = $3.6 trillion. But wait. The real cost would be much lower.

THE REAL COST WOULD NOT BE $3.6 TRILLION — BUT MUCH, MUCH LOWER

1. “Because these payments would be short-term loans for most people, the net budgetary cost would be much smaller. “

2. “The only people who would not repay the loans in full via the surtax would be those with reduced earnings in 2020.”

3. “Let’s say 25 percent of the labor force is unemployed for half the year (a very bad scenario). Then 40 million people would experience earnings declines of 50 percent. Their surtax would repay half the social insurance payments, resulting in their receiving net payments of $6,000 per person. The net budgetary cost would be only $240 billion. about 1.2 percent of GDP. This is surely feasible.”

THE INTERSECTION OF PERSONAL DECISIONS AND POLICY DECISIONS

1.) If you can, should you keep paying service providers who can’t provide the service?

2.) If you can, should you stop charging rent?

3.) Is what you should do a function of what the government does or does not do?

NB: How much is too little? How much is too much? Who should decide? By what rule? When?

Greg Mankiw’s Blog

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