#ChecksChecksChecks is a Conservative – and Good – Idea
Recession Response Policy
Traditionally, two areas of policy-making are utilized to prevent or get out of a recession: fiscal policy and monetary policy. Fiscal stimuli are always an option, but there is often much time wasted on where to inject capital and how much, losing valuable opportunity to reinvigorate the economy (see: failures of the 2009 stimulus). Monetary policy has traditionally been effective as a means of incentivizing investment through lowering interest rates, but with interest rates being dropped to zero, and public debt at an all-time high, monetary tools are limited. This leads to a revert to our existing welfare programs being expanded as people lose jobs, income, and benefits.
Milton Friedman and Charles Murray: Progressives?
The status quo in a recession is essentially an expansion of these unemployment, health, and paid leave benefits due to necessity as people lose jobs and wages. These policies are often associated with progressive politics. Expanding these through the public sector is proposed in mostly left-leaning circles, so it is not wrong to say that these are progressive ideas. But in a recession crisis these are expanded as a result of inaction by the federal government, rather than decisiveness.
When looking for alternatives, many conservatives and state-capacity libertarians propose what Minnesota Vikings wide receiver Randy Moss so eloquently called “straight cash, homey”. Because these proposals are discussed alongside progressive hobby horses in recession contexts, many in our robust, nuanced discourse immediately conflate these proposals with progressivism, even though they have been supported as business cycle policies on the Right for decades.
These ideas are unique to crisis scenarios outside of natural business cycles, however, and that is what has distinguished them from progressive intentions to maintain them in times of plenty and further expand the welfare state generally. This fundamental misunderstanding has led many unfamiliar with conservative intellectual history to believe that Republicans are somehow outflanking their counterparts to the left. (Seriously. They. Are. Really. Convinced. I’m not sure how many genuinely don’t know or are just determined to malign mainstream Democrats.)
Milton Friedman’s Helicopter Money
In 1969, the father of modern free-market economics proposed a thought experiment: “Let us suppose now that one day a helicopter flies over this community and drops an additional $1,000 in bills from the sky, which is, of course, hastily collected by members of the community. Let us suppose further that everyone is convinced that this is a unique event which will never be repeated.” (Milton Friedman, “The Optimum Quantity of Money,”)
This came to be referred to colloquially as “helicopter money”, and is seen as a fiscal alternative to incentivize spending and growth when monetary tools are limited. If given a one-time (or at least limited-time) set of cash payments when inflation is well below targets, this could both fire up economic growth and avoid decreasing the value of that growth.
This has been championed on the Right as an answer to deflation and recession for decades. It has been chided by progressives as regressive and insufficient. When Mitt Romney and Treasury Secretary Stephen Mnuchin propose it, however, it becomes conflated with traditional welfare policy that is expanded during recessions and associated with the political left. But the idea of “just write people checks” has a long intellectual history within conservatism.
Of course, any time “$1,000 checks to every American” gets brought up in 2020, one name comes to mind: conservative intellectual Charles Murray. “Andrew Yang”? That sounds like the made-up name of a Silicon Valley tech bro who sells CBD vape technology.
I kid, of course. Yang’s rise to political stardom came through his proposal of so-called “Freedom Dividends”, a monthly payment to every American of $1,000. This is what is called a “universal basic income” (UBI), and Yang’s popularization of the idea recently has made the policy associated with the political left in the Year of Our Lord Two Thousand and Twenty. Yang and his supporters have been loudly claiming that a pandemic-caused recession is a perfect example of why a UBI is necessary. Even The Atlantic dared to ask “What if Andrew Yang Was Right?”
However, the idea of a UBI was originally made popular (though not invented) by Charles Murray, who laid out a basic income proposal in his 2006 book In Our Hands. Conservatives and libertarians have long been frustrated with the (alleged) paternalism and inefficiency of America’s current welfare system. The conservative solution is found in Murray’s writing: cut all forms of welfare spending, and give that money directly to American individuals and families. According to Murray, at 2011 levels of spending, the U.S. could provide $10k to every adult American as a form of welfare. Yang proposes a fundamentally different view, in which welfare programs are expanded significantly on top of providing a universal basic income.
But that is the key difference between a UBI and helicopter money: a UBI is a safety net, where a helicopter drop is an intentional stimulus. In the midst of recession, a UBI will do little to get the economy back in the black. It would provide a vital soft landing for those hurt by a shrinking economy, but that is fundamentally different from fiscal stimulus.
If fiscal stimulus is slow or limited due to political fighting and general bureaucratic nonsense, and monetary options just don’t exist, how do we handle recessions? Claudia Sahm, Director of Macroeconomic Policy at the Washington Center for Equitable Growth has a fascinating idea: codified helicopter money.
In layman’s terms, the “Sahm Rule”, an early indicator of recessions, would be a tripwire for the unleashing of fiscal stimulus. Automatic checks of $500-$1000 would be sent as soon as a recession begins to appear, thus limiting the economic damage of a recession. Sahm states “[r]ecent research finds that broadly distributed, lump-sum payments to individuals directly boost spending and help stabilize demand, making these types of payments effective responses to recessions…The total amount of stimulus would offset about half of the slowdown in consumer spending, totaling about 0.7 percent of GDP.”
If the recession were to continue (like in a pandemic that shutters businesses), another round of checks would be sent. Obviously hindsight is 20/20, and nobody expects the Spanish influenza, but this kind of preventative measure could prepare us much better to handle future recessions and limit their damage to American families and workers, as well as the global economy. If this were what Republicans were proposing, there may be validity to the claim that they are moving left. But as of right now, they are not supporting Sahm, who also proposes expanding Medicaid, TANF, SNAP, and CHIP in a recession, and surely aren’t supporting a more expansive welfare state generally.
Photo by Lisa Brewster