Before adjourning for the year, the House passed a measure that would increase the amount of stimulus checks Americans receive from $600 for an individual earning under $75,000 a year to $2,000. President Donald Trump also issued support for higher checks, but the enthusiasm failed to carry over into the Senate — and that’s good news, according to former U.S. Treasury Secretary Larry Summers.
“It is far from clear what problem would be solved with universal checks reaching 94% of the population,” Summers said, referring to $2,000 stimulus checks, which according to one estimate would benefit 94% of U.S. households.
That’s because as it stands Americans have been maintaining disposable income levels that are “15% higher than it normally would be relative to the scale of the economy,” Summers said during a presentation Monday at the Allied Social Science Associations’ annual meeting. Meaning that increasing the amount of stimulus checks likely would not induce an overwhelming increase in spending, he added.
Last week, Summers referred to the possibility of $2,000 checks as “a pretty serious mistake” that could end up causing the U.S. economy to overheat.
“There is no solution to the inequality or the macroeconomic distress associated with COVID that does not run dominantly through containing COVID and putting it in the rearview mirror,” he said, “and that needs to be the overwhelming priority for expenditures.”
John Taylor, a Stanford University economist, agreed with Summers, saying that the “$2,000 check issue doesn’t really solve the problem” of getting the U.S. out of the current recession.
Going forward, he argued that economic policy makers ought to consider the rising debt levels in the U.S. “It’d be better if we find a way, conducive with the private sector growth, to constrain fiscal policy,” Taylor, a former Treasury Department official, said.