The WaPo's Catherine Rampell Offers A Critique Of The Unintended Consequences Of Pandemic Stimulus Payments

The issues of tax policy and the Pandemic-driven stimulus payments are mentioned frequently by the talking heads on mainstream media, but none touch upon the backstory of this fiscal phenomena — who is receiving assistance and why-or-why-not the assistance should be extended. Catherine Rampell fixes her economist's focus on the backstory and more — not less — of this analysis is needed as we begin the second decade of the 21^st century. If this is a (fair & balanced) call for sound thinking that requires sound thinking at the starting point, so be it. And, as long as The Loser in the 2020 election is plotting to declare martial law in Arizona, Michigan, Pennsylvania, and Wisconsin and stage a "re-vote" under military supervision prior to the Inaugural Ceremony on January 20, 2021...

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"The Liar Tweets Tonight" (Parody of "The Lion Sleeps Tonight")
By Roy Zimmerman and The ReZisters, featuring Sandy Riccardi

[x WaPo — DC Fishwrap]
A New Year’s Goal For Progressives: Stop Advocating Bailouts For Rich People
By Catherine Rampell

TagCrowd Cloud provides a visual summary of the blog post below

aid already argue auto-enroll benefits borrower cap care Catherine college contingent debt decile Democrats Earned enrollment example expense forgiveness give government help households income law means-tested Medicaid money needed party people percent policy poor president programs progressive represent rich safety-net SALT school Senate state student targeted tax top universal year

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Here’s a New Year’s resolution for the Democratic Party: In 2021, resist the far left’s demands to give more handouts to the wealthy. Instead, be more progressive in an old-fashioned sense: by helping the poor more than the rich.

One major party already offers plutocratic giveaways while claiming to help the working class. A second isn’t needed. Historically, Democrats have deserved their reputation for caring about lower-income families, thanks to the party’s advocacy for food stamps, Medicaid and other means-tested programs. Today, however, some on the left are prioritizing at least three major policies that represent indulgences for rich constituents.

One involves the limit on the federal deductibility of state and local taxes (SALT). This “SALT cap” primarily affects high-income households in higher-tax areas with heavily Democratic populations, such as New York and California. Democrats have tried, unsuccessfully, to repeal it. “One of the first things” a Democratic-controlled Senate would do is eliminate the provision, per Senate Minority Leader Charles E. Schumer (D-NY).

But lifting the cap would be even more regressive than the overall 2017 GOP tax law that put it in place. About 21 percent of that law’s benefits went to the top 1 percent of households, according to the Tax Policy Center; eliminating this cap would give almost three times as much of the benefit to that top percentile (57 percent).

Next, some Democratic lawmakers and left-leaning groups demand a massive student debt jubilee — to the tune of $50,000 per person, which they want Joe Biden to wipe out on day one of his presidency.

Such a policy would, perhaps counterintuitively, give the biggest benefits to those with high incomes. That’s partly because lower-income people are less likely to have gone to college. Additionally, many borrowers with the largest loan balances attended graduate and professional programs (medical, business and law school) that lead to higher earnings.

A recent study from economists Sylvain Catherine and Constantine Yannelis found that student-loan forgiveness of up to $50,000 for every borrower would work out to an average of $700 for people in the bottom income decile and nearly $5,000 for those in the top decile.

There are progressive ways to address the very real social and economic problems of burdensome student debt. For example, the government could auto-enroll students in income-driven repayment plans or set income caps on upfront debt forgiveness.

Instead, so-called progressives insist on a regressive solution.

Then there’s the ongoing push for near-universal $2,000 stimulus checks. This proposal at least gives more money to the poor than to the rich — but why help the rich at all? The bill the House passed Monday would send payments to 94 percent of households, including some making more than $300,000, regardless of whether they were hurt by the Pandemic.

Democrats could use their political capital to advocate for more aid to people who are actually struggling — for example, additional weeks of expanded unemployment insurance. But a growing contingent on the left seems to prefer less targeted, more universal programs. It’s the same contingent that wants free college and health care for everyone, including the ultrawealthy.

They argue that paying off the rich is the only way to get political cover for their true goal: helping the poor. But this sounds like the political-economy equivalent of trickle-down. There are in fact means-tested programs that target support to those who need it (Medicaid, the Earned Income Tax Credit) and that remain so broadly popular they have gained funding over the years.

Alternatively, some lefties argue that universality is the only way to ensure that enrolling in a safety-net benefit is not burdensome. I agree that the red tape barricading critical programs should be reduced, as I’ve written extensively.

But killing means-testing doesn’t necessarily equate to ease of enrollment. Medicare is a universal program, but its enrollment process is frustratingly complex. Other safety-net programs are restricted to the poor but still auto-enroll beneficiaries using records the government already has on file. Some states auto-enroll eligible children in the school lunch program, for instance. As a country, we could invest in the government capacity needed to shift more administrative burdens away from beneficiaries and onto the state, as scholars Pamela Herd and Donald P. Moynihan have argued persuasively. (Other countries already do this.)

At best, wasting money on benefits for the rich for the purpose of getting some aid to the poor represents a failure of imagination. At worst, it’s a ploy to indulge donors and allies at the expense of future generations. Making aid programs less targeted — and thereby more expensive — risks crowding out funding for other long-run “progressive” priorities, such as curbing climate change.

In the new year, under a new president, Democrats should remember their obligation to aim their fiscal firepower at those who need it most. ###

[Catherine Rampell is an opinion columnist at The Washington Post. She frequently covers economics, public policy, politics and culture, with a special emphasis on data-driven journalism. She is also a political and economic commentator for CNN and an occasional special correspondent for PBS "Newshour." Before joining The Post, she wrote about economics and theater for the New York Times. Rampell has received the Weidenbaum Center Award for Evidence-Based Journalism and is a Gerald Loeb Award finalist. She received a BA summa cum laude and Phi Beta Kappa (economics) from Princeton University (NJ).]

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