Wait for some clarity?

Have you noticed that:

The same people who a month ago failed to predict that the Western world would go into a coronavirus crisis and the stock market would crash . . .

And the same people who a month ago failed to predict that China and some other parts of East Asia would see community transmission quickly fall close to zero . . .

Are now confidently telling us how things will be in 6 months, and also that life will be radically different 10 years from now?

I wonder if it makes sense to wait another month or so to get some clarity on whether the pace of new cases will fall sharply (due to recent social distancing), before passing multi-trillion dollar “stimulus” that might look wildly excessive or wildly inadequate a few months from now? Why not just pass a bill that addresses needs for a month or two, and then revisit the situation when we know more?

Why send 100 million people who still have jobs a check for $1000? The cost of living will fall this year, so I don’t see how people who are employed need a huge bailout. (The unemployed are different—yes, throw money at them.)

Monetary policy is a bit different. Unlike fiscal policy, it is not costly. If the Fed buys $10 trillion in bonds, it can sell them a month later if the situation improves unexpectedly. The long run commitment we need is level targeting; the rest is just a means to an end.

The bills now being debated in DC only make sense if the US is not able to do what China has done.  I’m willing to concede that we might not be able to achieve the same success.  I’m even willing to concede we probably won’t be able to achieve the same success.  But is it impossible that we could achieve a similar outcome?  You’d have to have a pretty low opinion of the United States to assume we could not possibly achieve a public health outcome that China has already achieved in a very short period of time.

PS.  I’m one of those people who failed to predict how things would play out.  But at least I’m smart enough to be agnostic on what things will look like in 6 months.



32 Responses to “Wait for some clarity?”

  1. Gravatar of Michael Sandifer Michael Sandifer
    22. March 2020 at 21:58

    I agree that it probably doesn’t make sense to go beyond two months with fiscal support right now. That said, I’d like to see a negative income tax, but a UBI would be nice too. I wouldn’t mind if people got used to a $1000-per-month check and we decided to keep it. I don’t think it’s likely though.

  2. Gravatar of Student Student
    22. March 2020 at 22:31

    I agree. Let’s take this week to week or month to month fiscally and legally. Scott, I trust your judgement with respect to monetary policy. You have convinced me over the last 10 years or so.

    If the national guard isn’t rolling down the streets of New York by noon tomorrow, then our leaders are even dumber than I thought they were. What the fuck takes them so damn long.

    This thing was readily apparent through basic logic in mid February (we knew there was a virus with a fatality rate of 1-3% and an Ro of 2-4, that told you everything you needed to know). They didn’t figure it out until mid March even as the data were one google search away and a 9th grader had all the math they needed to produce accurate projections.

    They still haven’t figured out that Congress (what like 80% are at risk populations) should not be meeting in person. They need to be thinking about what to do if 1/2 of Congress gets sick and 5% of them die in the next month. I don’t think this has even occurred to them yet.

    I can’t even sleep tonight. It’s so upsetting how bad of a job we have done as a society. And I am including everyone (even myself). The bruh’s boozing it up in Florida like 5 days ago. The idiot neighbors of mine a couple of houses down letting their kids run around in a group of like 10 kids to-freaking-day….

    What do we do now. Implement NGDP level targeting. Have companies start producing PPEs now (even if you have to force them to), call in the national guard to NYC and have them roll in with humvees and helicopters and megaphones tomorrow freaking morning.

    Avg joes, pray the Rosary for our leaders, those fighting the virus, and for us to get this thing contained this week.

  3. Gravatar of dtoh dtoh
    22. March 2020 at 22:46

    I’ve been thinking about this from a practical perspective. Here’s my idea.

    1. Immediately send every adult a check (or wire) for $1000. Anybody who makes/reports more than $40k of income for 2020, has the full $1000 deducted in additional taxes next year. (Or some variation with increments for different income levels.) Simple, fast, reasonably fair, targets the right people. Repeat for as many months as necessary.

    2. Cut a check to every firm that employs less than 500 people (or every unlisted firm) equal to $500 per employee. Repeat as necessary.

  4. Gravatar of Benjamin Cole Benjamin Cole
    22. March 2020 at 22:55

    The US does better than China? And when was the last time that happened?

    In building housing or infrastructure? Developing an industrial base? China is a nation that can do things, for right or wrong. Their economy grew through to 2008-9 Global Financial Crisis, something no other major country accomplished. The US was a basket-case, a financial Wrong-Way Corrigan.

    I am surprised China has “contained” COVID-19. But it is China. BTW when I went into a mall yesterday in Thailand, they let me after pointing a light beam at my head, and reading temperature.

    The US will not match China, unless through luck. Maybe hotter weather. The best hope is that we stop going hysterical over the elderly with co-morbidities dying. But have you seen any US “news” programs? Our top health official is trying to frighten young people that they may die too.

    US futures down about 4%. The first two legs of the bear are in, and now the next two…I hope. Could get worse. Utility stocks down 25%-30%. People are not going to pay their electric bills, and not get cut off either…you see where this is leading? I don’t either.

    The only problem with sending a check for $1,000 to everybody is that it is probably not enough, Needs to be $2,000. Monthly.

    Will the home- and apartment-renting public declare a “rent jubilee” ? How many county sheriffs and how many renters are there?

  5. Gravatar of David Tomlin David Tomlin
    22. March 2020 at 23:48

    My opinion of the US fell significantly when it elected Trump.

  6. Gravatar of Ray Lopez Ray Lopez
    23. March 2020 at 00:56

    A brilliant post by Prof. Sumner. I must say, despite my constant and often silly trolling of him (and I think that’s obvious) I admire his logic, hysterics and stoicism (yes both qualities!). In this post Sumner made an interesting admission, that dovetails seamlessly with my stance that money is (largely) neutral: (ssumner) “Monetary policy is a bit different. Unlike fiscal policy, it is not costly. If the Fed buys $10 trillion in bonds, it can sell them a month later if the situation improves unexpectedly”. This statement is true. And it’s 100% consistent –in affect, in practice–with money non-neutrality. Printing money (helicopter drop) will only raise prices and not real output. Likewise, buying or selling paper by the Fed will only play around with nominal interest rates and will, largely, have no real effects (pension funds, insurance companies and little old ladies who depend on interest aside).

  7. Gravatar of Ray Lopez Ray Lopez
    23. March 2020 at 01:13

    @myself – I meant in my last post: “And it’s 100% consistent –in affect, in practice–with money *neutrality*” not non-neutrality.

    Question for the class: the US Treasury in the US Civil War printed money NOT backed by assets (more radical than what Sumner advocates the Fed do, but arguably not much more radical, depending on the quality of the assets the Fed accepts). Pure MMT. The Union won the Civil War and these ‘greenbacks’ were paid off 25 years later. Did ‘printing money’ help the Union cause? How is printing such greenbacks no different than an I.O.U? Did sticky prices exist in a supply shocked war economy like in the US Civil War? Money illusion? Seriously?

    Paging Dr. Selgin. Paging Dr. Sumner. I have my own answers but I wish Sumner would do a post on this theme.

  8. Gravatar of Tony Ashwin Tony Ashwin
    23. March 2020 at 02:39

    I do a lot of business with China and I am encouraged to see confidence returning. I have also travelled the country extensively over the last 3 years and I and respect the technology and the culture.

    ‘You’d have to have a pretty low opinion of the United States to assume we could not possibly achieve a public health outcome that China has already achieved in a very short period of time”

    My brother, who runs a large medical practice in AU suggested that I needed to look at the US GOVT CDC website for COVID 19 reporting, which many people internationally rely upon: COVID-19: U.S. at a Glance*
    Total cases: 15,219
    Total deaths: 201
    Jurisdictions reporting cases: 54 (50 states, District of Columbia, Puerto Rico, Guam, and US Virgin Islands)

    He said – check out the John Hopkins reporting:
    Total Confirmed
    US – 35,224

    99 deaths
    New York City New York US
    75 deaths
    King Washington US
    34 deaths
    Unassigned New York US
    15 deaths
    Orleans Louisiana US
    12 deaths
    Suffolk New York US
    10 deaths
    Santa Clara California US
    10 deaths
    Unassigned Georgia US
    10 deaths

    So what’s true…CDC or John Hopkins? Sorry Scott, the US is in for a rough period ahead.

  9. Gravatar of Benjamin Cole Benjamin Cole
    23. March 2020 at 03:25

    Ray Lopez: When Japan occupied various regions pre-war and during WWII, they usually issued script that was accepted as currency, and people would work for it.

    Of course, I deplore brutal colonization. But printing money can be effective, to spur real economic growth. Of course, Japan printed money for domestic use through the Great Depression and sidestepped that downturn, unlike the rest of the developed world.

    The trick is to get the cash into the real world—on Main Street—and not limit it to Wall Street. Overdone, you will get inflation. The problem with the present-day Bank of Japan is that it is doing helicopter drops on Wall Street, while the national government raises the national sales tax. They might consider modifying their approach.

    I suggest, in mild and dulcet tones, this is not the time to worry about inflation.

  10. Gravatar of John Hall John Hall
    23. March 2020 at 03:31

    “I’m one of those people who failed to predict how things would play out. But at least I’m smart enough to be agnostic on what things will look like in 6 months.”

    I like this.

  11. Gravatar of Mark Mark
    23. March 2020 at 04:00

    Tony, I believe the CDC website just doesn’t update over the weekend.

  12. Gravatar of Scott H. Scott H.
    23. March 2020 at 04:33

    I saw what the FED said this AM. Congratulations!

  13. Gravatar of Ray Lopez Ray Lopez
    23. March 2020 at 04:58

    @Scott H. – yes, Sumner wins. Details below on this breaking news for those of your too lazy to Google it. This is going to be an interesting real world experiment. – RL

    3/23/20 – morning, EST –

    With turmoil continuing in corporate financing markets, the Fed expanded the scope of its asset purchases under its quantitative easing program and announced four new measures to grease the commercial paper, corporate bond, and even ETF markets.

    The Fed announced that it was suspending its previous guidance on quantitative easing, which sought to buy “at least” $500 billion in U.S. Treasuries and $200 billion in agency-backed mortgage-backed securities “over coming months.” The Fed now says it will purchase securities “in the amounts needed,” and will also expand the scope of those purchases to include agency commercial mortgage-backed securities.

  14. Gravatar of dlr dlr
    23. March 2020 at 05:03

    I am confused. Don’t people who get laid off sign up for unemployment compensation? Why do they need more money than that? I can see how the government might need to extend unemployment compensation, if 6 months or so, if things are still rocky, but why is there a need to do anything now?

  15. Gravatar of Stuart Stuart
    23. March 2020 at 05:14

    I think both are needed.

    Monetary: because I think they have better longer term impact
    Fiscal: because that is what the public knows and understands, and you need them to engage fully to get the optimal response to this crisis given the current circumstance. They are either afraid for their immediate financial situation, near term financial situation, or completely convinced they are invulnerable while shedding virus every where they go.

  16. Gravatar of BB BB
    23. March 2020 at 05:51

    Great post. I think Trump is only concerned with November, not any of the other months. I agree that helping those who can’t work is the top priority.
    Love that idea. Simple and addressing the immediate need of helping those most in need.

  17. Gravatar of derek derek
    23. March 2020 at 06:22

    That Fed stance is great news. They are finally admitting they have ammo and that they are just going to use it.

  18. Gravatar of Steve Steve
    23. March 2020 at 06:25

    There’s a virus policy debate between two camps: the “Burners” and the “Containers.”

    The burners argue we should infect the young, give out antivirals, and get back to business asap.

    The containers argue we should test everyone, quarantine the sick, and get back to business once we can.

    The burners are winning the policy debate by default; by spreading the infection rapidly and widely, they raise the cost of containment. There’s no need for burners to persuade or be right or be a majority, only to spread optimism while infecting the masses. This is the Iranian approach, and it is why I said the US would follow Iran.

    The mistake the burners make is 1) underestimating the seriousness of the illness 2) assuming antivirals work and are scalable 3) assuming the illness has no long-term medical consequences 4) assuming the public won’t come out with pitchforks when the realize what’s been done to them.

    The containers have a difficult job, though. Testing isn’t enough; the results must be used rationally. There should be temperature checks at stores and factories. People in high-touch jobs, like food prep or grocery baggers, should be tested daily. Idled service workers could be hired as temp checkers and grocery shoppers, etc. And harsh tactics like lockdowns and travel bans can be used for 1-2 weeks to ensure the asymptomatic reveal themselves, enabling more targeted testing and better epidemiology going forward.

    There’s a real danger that the burners bring us over the abyss. Eventually we realize the containers were right, but we are already passed the point of no return.

  19. Gravatar of Christian List Christian List
    23. March 2020 at 06:38


    what are you talking about? Close to no one follows the “burner” strategy anymore. Rutte and Johnson have given up.

    I assume Iran has never taken the “burner” approach, they were simply taken by surprise, which is not the same thing.

    The only other guy I know about who still makes strange remarks seems to be Bolsonaro.

    And in Europe Belarus. Belarus acts like nothing has happened. They didn’t even close their professional leagues.

    Hell, even Ray has given up. Mad Ray must have been murdered and was replaced by a partially sane, clone Ray.

  20. Gravatar of Steve Steve
    23. March 2020 at 06:40

    The virus is insidious in its spread. It follows the social graph, until it finds a high-touch node and then explodes in superspreader events.

    An introvert comes home from Wuhan, and self-isolates. This person infects only their child, who is asymptomatic.

    This child plays with the neighbors child, infecting them, but the neighbor’s child is only mildly symptomatic.

    The neighbor’s child then infects his father, who has an unexplained flulike illness.

    This father goes grocery shopping, and infected the bagging clerk at the store.

    The bagging clerk then infects two hundred other shoppers, in “community spread”. None of them realize they got it from the bagger.

    This whole process plays out over 6-10 weeks.

  21. Gravatar of Steve Steve
    23. March 2020 at 06:43

    @ Christian List

    Every outlet I listen to has someone pushing the burner strategy. WSJ, CNBC, Twitter, elsewhere, there are tons of people pushing the burner strategy. I’m not talking about the Boris Johnson types who expect to infect 70%. I’m talking about both ordinary people and pundits who say “it’s just the flu, let it run” and people who say “the costs of shutting down the economy are higher than the costs of getting sick”.

  22. Gravatar of Steve Steve
    23. March 2020 at 06:50

    @ Christian List

    I think containment is the right strategy, but I’m concerned that people don’t have an intuitive feel for how the virus spreads, and don’t know what to do with positive test results, nor the importance of testing people in high-touch jobs.

    With so much temporary slack in the labor market, and trillions in stimulus getting bandied around, we should be able to hire a million people to work as temp and virus checkers, or personal shoppers. That’s wartime ingenuity. I’m just here to throw ideas around.

  23. Gravatar of ssumner ssumner
    23. March 2020 at 07:18

    dtoh, Your first idea seems excellent. I’m not a fan of subsidizing firms.

    Tony, You said:

    “I do a lot of business with China and I am encouraged to see confidence returning.”

    Don’t you realize that that is fake news? 🙂

    Mark, Yes, take the weekend off, nothing important going on right now.

    dlr, We need to expand the program to cover more people—gig workers, unemployed small business owners, etc.

  24. Gravatar of Justin Justin
    23. March 2020 at 07:20

    It really is incredible that at a time like this, congress can’t get $2,000 out to everyone.They have to use it as an excuse for their usual graft.

    Keep it simple, give cash to everyone for March and April. Temporary UBI to bridge the gap to when expected +4% YoY NGDP becomes realized.

  25. Gravatar of Christian List Christian List
    23. March 2020 at 07:47


    great post by the way. You got it exactly right again. Let’s tackle the next two to four weeks. What comes after that, no one can know. Especially not the experts and politicians who have been wrong every week so far.

    I’m talking about both ordinary people and pundits who say “it’s just the flu, let it run” and people who say “the costs of shutting down the economy are higher than the costs of getting sick”.


    Well, this will change completely in a few days, don’t worry. I can report from Germany, where it was the same in the beginning.

    Now it completely change in just a few days. All hospitals have been emptied as far as possible. The surgical wards are completely empty, nobody is performing operations anymore. My sister is actually a liver surgeon, even she has received a crash course in mechanical ventilation. Every retired doctor, every medical student, every nurse, who is doing something different today, was called up and kept on standby.

    From Madrid we receive reports that are downright nightmarish.

    There is currently an incredible, eerie silence. It gives me the creeps. We are in the eye of the storm and are waiting for a gigantic wave to hit us. Let us hope and pray that it does not come to that. But whatever comes, we are prepared for it now, as far as preparation was possible in the short time that was given to us.

  26. Gravatar of Ray Lopez Ray Lopez
    23. March 2020 at 09:28

    @Steve- there’s no “burners” strategy as you describe. What it is called is ‘herd immunity’. It’s, as you say, the de facto strategy in the USA (but not China, PH, GR and a bunch of other countries). The theory is simple: if at least 60% of the population gets Covid-19, then, just like with a common cold, for a while they are immune and the disease will die and go away (until it flares up in the future, just like the common cold). The anti-viral drugs you describe don’t really work that well to cure the disease, for now, for most people.

    @Christian List – you are not a very nice German. I tried to offer you an olive branch but you declined. Just like Hitler declined a negotiated peace with Chamberlain. Stubborn, like the Russians. And you lost to them btw.

    As for the adoption of some of Sumner’s policy at today’s Fed, well, I hate to say it, but the market is not taking the Fed seriously, and despite no doubt PPT working overtime in buying today’s futures long, the stock market at the moment is down. We’ll await what Sumner will say about these negative expectations.

  27. Gravatar of Christian List Christian List
    23. March 2020 at 10:04

    Sorry Ray, I gave you the best olive branch I had in stock.

    By the way, Greece has done about 8000 tests so far. What are you guys trying to do???

    Is this the Greek contribution against overpopulation and climate change. Well, then you’re on the right track.

  28. Gravatar of P Burgos P Burgos
    23. March 2020 at 10:16

    I am not very confident that the US will be able to do what China has done. China has spent decades trying to make its population more nationalistic and compliant to government directives, and has pretty ruthlessly crushed any institutions that could challenge the government in any way.

    The US, on the other hand, has an abundance of weird cults and anti-social individuals and has spent decades encouraging people to cultivate individualism as a value. My prediction is that the US is going to have lots and lots of people who are going to violate quarantines and spread the disease. I think that there will be a lot of people who get infected over Easter weekend.

  29. Gravatar of Ray Lopez Ray Lopez
    23. March 2020 at 11:08

    @ P Burgos – that’s an easy prediction of yours my friend, almost a sure thing I’m afraid.

  30. Gravatar of ssumner ssumner
    23. March 2020 at 11:13

    Justin, I can’t even imagine what the point is of getting $2000 out to everyone. What’s it supposed to accomplish?

  31. Gravatar of dtoh dtoh
    23. March 2020 at 15:22

    I’m not a fan of subsidizing businesses either especially big ones. Normally, I would expect firms to adjust and recoup losses by lowering real wages in a high inflation environment under a NGDPLT regime.

    Under the current situation however, I suspect the size of the output drop will put a lot of marginal firms out of business. Because of the longer time required for new business formation, the hysteresis effect on output could be significant and continue for some time.

  32. Gravatar of foosion foosion
    23. March 2020 at 17:00

    Scott, regarding “what the point is of getting $2000 out to everyone”

    It’s much faster and involves much less red tape than figuring out who should get the money. The government can get it back through the tax system from those who don’t need it (however defined) once things get back to normal.

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