US

Coronavirus Relief

With Congress working on a $1.9 trillion Covid-19 relief package, potentially including an additional $1,400 in direct payments to individuals, we invited our US panel to express their views on the proposals. We asked the experts whether they agree or disagree with the following statements, and, if so, how strongly and with what degree of confidence:

(a) Until mass vaccination is achieved, any additional government spending going directly to households should focus on keeping low-income individuals and families safe and healthy rather than on boosting current economic activity.

(b) If the goal is to boost current economic activity, targeting checks at households making less than $75,000 per year would be more cost-effective than providing checks to higher income households as well.

Relief for low-income households

Of our 43 US experts, 42 participated in this survey. On the first statement about whether additional spending should be focused more on relief than stimulus while there remains a considerable threat to public health from economic activity, over 80% agree. Weighted by each expert’s confidence in their response, 18% of the US panel strongly agree, 64% agree, 12% are uncertain, and 6% disagree.

The experts are able to include short comments in their responses, and among those who agree or strongly agree with the statement, Larry Samuelson at Yale says: ‘The recession is a public health emergency, and stimulus without first addressing the health issues can be ineffective or counterproductive.’ Kenneth Judd at Stanford adds: ‘”Stimulus” should not be the focus. Much of what is proposed is economic relief to those who are facing economic ruin.’

A couple of experts explain their interpretation of the statement. Carl Shapiro at Berkeley notes: ‘Defining “safe and healthy: in a broad manner to include economic security.’ Daron Acemoglu at MIT states: ‘Interpreting “safe and healthy” as enough money to prevent poverty for low-income households. Also aid for state and local governments is important.

Jonathan Levin at Stanford adds a further consideration: ‘Agree on focus. Investment in testing and accelerating vaccination also welcome.’ Similarly, Christopher Udry at Northwestern comments: ‘Transfers to low-income families are needed for safety and health. Vaccines, testing and tracing more important than spending for stimulus.’

Additional caveats include one from Robert Shimer at Chicago, who mentions: ‘The only caveat is that disease prevalence may fall substantially before mass vaccination is achieved.’ James Stock at Harvard observes: ‘Caveat: if those vaccinated (older, wealthier) start feeling safe we might start to see services demand return early than full vaccination.’ Robert Hall at Stanford adds: ‘Economic activity is depressed mainly by supply restrictions’; and Pete Klenow at Stanford alerts us to their joint paper with Charles Jones on trading off consumption and Covid-19 deaths.

Among experts who say they are uncertain: Joseph Altonji at Yale comments: ‘Spending should focus both on health, which will help the economy, and on the economy, prioritizing those in need.’ Steven Kaplan at Chicago says: ‘Hard to have confidence in anything with regard to the virus. Ideally want to have economic and school activity while keeping people safe.’ Anil Kashyap at Chicago notes: ‘Propping up zombie firms and giving people checks that just get saved is not good. Some other support could still be useful. Details matter.’ And Maurice Obstfeld at Berkeley concludes: ‘Health/safety for low-income a priority, but there likely remains some negative output gap.’

Among the minority who disagree that making relief a priority over stimulus, David Cutler at Harvard says: ‘These aren’t in conflict now.’ David Autor at MIT adds: ‘Infection rates and deaths are falling and vaccination rollout is accelerating. It’s time to start recovery. Biden won’t get two at-bats.’

Targeting checks

The second statement focuses on whether the proposed ‘stimulus checks’ should be targeted at households making less than $75,000 per year – and here there is a strong majority of over 90% in agreement. Again weighted by each expert’s confidence in their response, 37% strongly agree, 57% agree, 6% are uncertain, and 0% disagree.

Among those who say they strongly agree, David Autor notes: ‘Evidence is that households with higher incomes simply put the money in the bank. We don’t need government handouts to spur personal savings.’ Richard Schmalensee at MIT agrees: ‘High-income households are more likely to save the money.’ And Raj Chetty at Harvard points to analysis he and colleagues recently did of the effects of the January 2021 stimulus payments on consumer spending.

Others refer to the different propensities to consume from additional income. Robert Shimer responds: ‘Wealthier households have been building up their savings and would likely do the same with any new “stimulus” checks.’ Aaron Edlin at Berkeley notes: ‘We already have a pile of savings from the well off. Targeting money to those who spend is most likely to increase spending.’ And Darrell Duffie at Stanford explains: ‘I’m assuming that the higher marginal propensity to consume of lower income earners is the dominant factor in making this comparison.’

Focusing on individuals and families who need relief, Larry Samuelson states: ‘The brunt of the pandemic has fallen on those at the bottom of the scale, and relief is most needed and will be most effective there.’ Jonathan Levin comments: ‘Yes, but might think less in terms of stimulus multiplier and more about aiding at-risk families.’ And Markus Brunnermeier at Princeton adds: ‘Targeting unemployed or households who suffered losses due to COVID shock would be even more desirable.’

Further caveats include this from Caroline Hoxby at Stanford: ‘I agree with the question as asked, but this is also a crude way of targeting compared to what could be attained by using available data.’ And Carl Shapiro argues: ‘This seems very clear, but there is nothing magic about using $75,000 as the upper limit.’

Finally, among the experts who agree, William Nordhaus at Yale concludes: ‘Both on equity and efficiency grounds, this is appropriate approach.’ And Anil Kashyap refers to wider concerns about macroeconomic policy: ‘We will have to pay off the debt and there are lots of pressing other needs. So conserving fiscal space is desirable.’

Two experts who say they are uncertain point to the same issue. Hilary Hoynes at Berkeley notes: ‘The problem is that the phase out is based on *2019* income – many with higher incomes in 2019 could be in financial stress now.’ Judith Chevalier at Yale adds: ‘I would be more inclined to agree if we had a mechanism to target based on actual current circumstances rather than 2019 tax income.’

All comments made by the experts are in the full survey results.

Romesh Vaitilingam
@econromesh
February 2021

 

Question A:

Until mass vaccination is achieved, any additional government spending going directly to households should focus on keeping low-income individuals and families safe and healthy rather than on boosting current economic activity.

Responses weighted by each expert's confidence

Question B:

If the goal is to boost current economic activity, targeting checks at households making less than $75,000 per year would be more cost-effective than providing checks to higher income households as well.

Responses weighted by each expert's confidence

Question A Participant Responses

Participant University Vote Confidence Bio/Vote History
Acemoglu
Daron Acemoglu
MIT
Agree
4
Bio/Vote History
Interpreting "safe and healthy" as enough money to prevent poverty for low income households. Also aid for state and local govs is important
Altonji
Joseph Altonji
Yale
Uncertain
5
Bio/Vote History
Wording is tricky. Spending should focus both on health, which will help the economy, and on the economy, prioritizing those in need.
Auerbach
Alan Auerbach
Berkeley
Agree
5
Bio/Vote History
Autor
David Autor
MIT
Disagree
5
Bio/Vote History
Infection rates + deaths are falling and vaccination rollout is accelerating. It's time to start recovery. Biden won't get two at-bats
Baicker
Katherine Baicker
University of Chicago
Agree
3
Bio/Vote History
Banerjee
Abhijit Banerjee
MIT
Disagree
6
Bio/Vote History
Bertrand
Marianne Bertrand
Chicago
Agree
7
Bio/Vote History
Brunnermeier
Markus Brunnermeier
Princeton
Agree
6
Bio/Vote History
Chetty
Raj Chetty
Harvard
Agree
10
Bio/Vote History
Chevalier
Judith Chevalier
Yale
Agree
7
Bio/Vote History
Of course, resources designed to open school safely, etc. also are helpful to the economy.
Cutler
David Cutler
Harvard
Disagree
3
Bio/Vote History
These aren't in conflict now.
Deaton
Angus Deaton
Princeton
Uncertain
5
Bio/Vote History
Duffie
Darrell Duffie
Stanford
Agree
2
Bio/Vote History
I had difficulty interpreting the phrase "rather than," but the prioritization of safety and health seems natural.
Edlin
Aaron Edlin
Berkeley
Agree
7
Bio/Vote History
My answer might change if the economy heads too far south.
Eichengreen
Barry Eichengreen
Berkeley
Agree
5
Bio/Vote History
Einav
Liran Einav
Stanford
Agree
1
Bio/Vote History
Fair
Ray Fair
Yale
Agree
6
Bio/Vote History
Finkelstein
Amy Finkelstein
MIT
Agree
7
Bio/Vote History
Goldberg
Pinelopi Goldberg
Yale
Strongly Agree
6
Bio/Vote History
Goolsbee
Austan Goolsbee
Chicago
Strongly Agree
8
Bio/Vote History
Yee
Greenstone
Michael Greenstone
University of Chicago
Uncertain
1
Bio/Vote History
Hall
Robert Hall
Stanford
Agree
5
Bio/Vote History
Economic activity is depressed mainly by supply restrictions
Hart
Oliver Hart
Harvard
Strongly Agree
8
Bio/Vote History
Holmström
Bengt Holmström
MIT
Agree
8
Bio/Vote History
Hoxby
Caroline Hoxby
Stanford
Agree
10
Bio/Vote History
Hoynes
Hilary Hoynes
Berkeley
Agree
8
Bio/Vote History
key here is how to define 'low income" - I say yes for those in need.
Judd
Kenneth Judd
Stanford
Agree
8
Bio/Vote History
"Stimulus" should not be the focus. Much of what is proposed is economic relief to those who are facing economic ruin.
Kaplan
Steven Kaplan
Chicago Booth
Uncertain
3
Bio/Vote History
Hard to have confidence in anything with regard to the virus. Ideally want to have economic and school activity while keeping people safe.
Kashyap
Anil Kashyap
Chicago Booth
Uncertain
5
Bio/Vote History
Propping up zombie firms and giving people checks that just get saved is not good. Some other support could still be useful. Details matter
Klenow
Pete Klenow
Stanford
Strongly Agree
5
Bio/Vote History
Levin
Jonathan Levin
Stanford
Agree
3
Bio/Vote History
Agree on focus. Investment in testing and accelerating vaccination also welcome.
Maskin
Eric Maskin
Harvard
Agree
5
Bio/Vote History
Nordhaus
William Nordhaus
Yale
Uncertain
5
Bio/Vote History
False dichotomy.
Obstfeld
Maurice Obstfeld
Berkeley
Uncertain
5
Bio/Vote History
Health/safety for low-income a priority, but there likely remains some negative output gap.
Saez
Emmanuel Saez
Berkeley
Agree
6
Bio/Vote History
Samuelson
Larry Samuelson
Yale
Strongly Agree
8
Bio/Vote History
The recession is a public health emergency, and stimulus without first addressing the health issues can be ineffective or counterproductive.
Scheinkman
José Scheinkman
Columbia University Did Not Answer Bio/Vote History
Schmalensee
Richard Schmalensee
MIT
Strongly Agree
8
Bio/Vote History
Will also boost activity, since mpc is high for low-income households.
Shapiro
Carl Shapiro
Berkeley
Agree
3
Bio/Vote History
Defining "safe and healthy" in a broad manner to include economic security.
Shimer
Robert Shimer
University of Chicago
Agree
8
Bio/Vote History
The only caveat is that disease prevalence may fall substantially before mass vaccination is achieved.
Stock
James Stock
Harvard
Agree
6
Bio/Vote History
Caveat: if those vaccinated (older, wealthier) start feeling safe we might start to see services demand return early than full vaccination.
Thaler
Richard Thaler
Chicago Booth
Agree
5
Bio/Vote History
Udry
Christopher Udry
Northwestern
Agree
6
Bio/Vote History
Transfers to low income families are needed for safety and health. Vaccines, testing and tracing more important than spending for stimulus.

Question B Participant Responses

Participant University Vote Confidence Bio/Vote History
Acemoglu
Daron Acemoglu
MIT
Agree
4
Bio/Vote History
Altonji
Joseph Altonji
Yale
Agree
8
Bio/Vote History
Auerbach
Alan Auerbach
Berkeley
Strongly Agree
8
Bio/Vote History
Autor
David Autor
MIT
Strongly Agree
8
Bio/Vote History
Evidence is that HH's with higher incomes simply put the money in the bank. We don't need government handouts to spur personal savings.
Baicker
Katherine Baicker
University of Chicago
Agree
3
Bio/Vote History
Banerjee
Abhijit Banerjee
MIT
Agree
6
Bio/Vote History
Bertrand
Marianne Bertrand
Chicago
Agree
6
Bio/Vote History
Brunnermeier
Markus Brunnermeier
Princeton
Agree
6
Bio/Vote History
targeting unemployed or households who suffered losses due to COVID shock would be even more desirable
Chetty
Raj Chetty
Harvard
Strongly Agree
10
Bio/Vote History
Chevalier
Judith Chevalier
Yale
Uncertain
7
Bio/Vote History
I would be more inclined to agree if we had a mechanism to target based on actual current circumstances rather than 2019 tax income.
Cutler
David Cutler
Harvard
Strongly Agree
5
Bio/Vote History
Deaton
Angus Deaton
Princeton
Agree
7
Bio/Vote History
Duffie
Darrell Duffie
Stanford
Agree
3
Bio/Vote History
I'm assuming that the higher marginal propensity to consume of lower income earners is the dominant factor in making this comparison.
Edlin
Aaron Edlin
Berkeley
Agree
7
Bio/Vote History
We already have a pile of savings from the well off. Targeting money to those who spend is most likely to increase spending.
Eichengreen
Barry Eichengreen
Berkeley
Agree
5
Bio/Vote History
Einav
Liran Einav
Stanford
Strongly Agree
1
Bio/Vote History
Fair
Ray Fair
Yale
Agree
8
Bio/Vote History
Finkelstein
Amy Finkelstein
MIT
Strongly Agree
6
Bio/Vote History
Goldberg
Pinelopi Goldberg
Yale
Strongly Agree
6
Bio/Vote History
Goolsbee
Austan Goolsbee
Chicago
Agree
7
Bio/Vote History
Greenstone
Michael Greenstone
University of Chicago
Agree
6
Bio/Vote History
Hall
Robert Hall
Stanford
Agree
8
Bio/Vote History
Subsidies to higher income households don't raise spending significantly, but go into saving.
Hart
Oliver Hart
Harvard
Agree
7
Bio/Vote History
Holmström
Bengt Holmström
MIT
Strongly Agree
7
Bio/Vote History
Hoxby
Caroline Hoxby
Stanford
Agree
4
Bio/Vote History
I agree w the question as asked, but this is also a crude way of targeting compared to what could be attained by using available data.
Hoynes
Hilary Hoynes
Berkeley
Uncertain
8
Bio/Vote History
The problem is that the phase out is based on *2019* income - many with higher incomes in 2019 could be in financial stress now.
Judd
Kenneth Judd
Stanford
Agree
8
Bio/Vote History
This is always true for recession policies. Economists have failed to develop policies that are properly targeted. Why?
Kaplan
Steven Kaplan
Chicago Booth
Strongly Agree
9
Bio/Vote History
Kashyap
Anil Kashyap
Chicago Booth
Strongly Agree
5
Bio/Vote History
we will have to pay off the debt and there are lots of pressing other needs. so conserving fiscal space is desirable
Klenow
Pete Klenow
Stanford
Agree
3
Bio/Vote History
Levin
Jonathan Levin
Stanford
Agree
4
Bio/Vote History
Yes, but might think less in terms of stimulus multiplier and more about aiding at-risk families
Maskin
Eric Maskin
Harvard
Agree
7
Bio/Vote History
Nordhaus
William Nordhaus
Yale
Strongly Agree
8
Bio/Vote History
Both on equity and efficiency grounds, this is appropriate approach.
Obstfeld
Maurice Obstfeld
Berkeley
Agree
7
Bio/Vote History
Saez
Emmanuel Saez
Berkeley
Agree
8
Bio/Vote History
Samuelson
Larry Samuelson
Yale
Strongly Agree
1
Bio/Vote History
The brunt of the pandemic has fallen on those at the bottom of the scale, and relief is most needed and will be most effective there.
Scheinkman
José Scheinkman
Columbia University Did Not Answer Bio/Vote History
Schmalensee
Richard Schmalensee
MIT
Strongly Agree
8
Bio/Vote History
High-income households are more likely to save the money.
Shapiro
Carl Shapiro
Berkeley
Strongly Agree
9
Bio/Vote History
This seems very clear, but there is nothing magic about using $75,000 as the upper limit.
Shimer
Robert Shimer
University of Chicago
Agree
7
Bio/Vote History
Wealthier households have been building up their savings and would likely do the same with any new "stimulus" checks
Stock
James Stock
Harvard
Agree
7
Bio/Vote History
Higher MPC especially those liquidity constrained.
Thaler
Richard Thaler
Chicago Booth
Strongly Agree
5
Bio/Vote History
Udry
Christopher Udry
Northwestern
Agree
1
Bio/Vote History