Thread by @heyitsbradw, There are arguments for and against, but America's economy really does need [...]

There are arguments for and against, but America& #39;s economy really does need another stimulus package. Jay Powell says we will not "overdo" stimulus, and he& #39;s right! There is more need for it than most will ever know.

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There are valid arguments for no additional stimulus:

1) Too much can devalue the $USD - we& #39;ve already seen record lows from the past couple years. This has rippling effects domestically and internationally as a reserve currency, and overall means a weaker dollars buys less.

2) Tax revenues have collapsed, due to lockdowns and uncertainties around the virus. That means we& #39;re bringing in less money while increasing spending. @USCBO reported a record $3.1 trillion deficit for the fiscal year. That& #39;s the highest deficit on record yet.

3) National debt continues to skyrocket. Our current debt-to-GDP ratio is projected to hit 120% by the end of 2020--we& #39;re borrowing more than we& #39;re producing. Economists say this isn& #39;t an issue short-term while debt servicing costs are low, but will be a major problem long-term.

Governments before used to take a Laissez-faire approach, a policy of letting things take their own course. This has been an economic theory that was generally thrown out after the 1929 stock market crash, popularly referred to as "Black Tuesday."

Since then, government intervention in the market has become a common practice in modern economic theory, developed by John Maynard Keynes and referred to as "Keynesian" economics.

Keynes says markets don& #39;t recover quickly, and require active government intervention to boost demand in the short-term. We should not wait for "market forces" to recover in the long-run, because, as Keynes famously wrote, “In the long run, we are all dead.”

This is the economic theory that Congress took when they passed the first round of stimulus, including direct payments to households. There are plenty of reasons why additional stimulus measures are so desperately needed in the US economy right now:

1) It is strange to adopt Keynesian policy in April, and then immediately retract to the Laissez-faire approach, being anti-intervention. Congress cannot make up its mind, creating uncertainty in the market, which makes us worse off in the short-term. Markets hate uncertainty.

2) The CARES Act seems to have largely worked. Long-term damage in businesses dropped, with closures falling even below pre-pandemic trends. Direct payments & unemployment gave households cash flow to avoid defaults. Banks are reporting less loan losses than originally projected.

3) Even though the CARES act worked, there is still great need with high unemployment and businesses struggling with low-demand, or facing the effects of additional lockdown measures in our largest economies (CA, NY, etc), or slowed / staggered reopenings.

A proper follow-up to the first would go to great lengths for our economic recovery -- there are still businesses bug and small that could use necessary funding. Small businesses are the engine of America, accounting for over 50% of GDP per year.

Because of high-unemployment, extended unemployment funding plus direct payments would go to great lengths at backstopping defaults and creating demand / spending in the economy, which ultimately helps with business relief.

We are hesitant to bailout perfunctory states, but state and local relief is needed nationwide due to pandemic spending in the midst of collapsed tax revenues. That is why a stimulus designed specifically to plug pandemic holes would be a happy-medium, rather than large bailouts.

Additional funding for testing, tracing, vaccine development, plus liability-protection for businesses would help create resiliency, plus confidence in the market that things can start to get back to & #39;normal& #39; without much blowback.

The list of arguments for stimulus are endless. Refusing to negotiate relief only hurts those that are least able to bear the burden of this crisis. The rich can generally make their way through because they have the cash flow - most households do not.

Speaking to the effects on the larger economy, if more relief is not passed, Goldman Sachs Research estimates that Q4 economic growth will be cut in half, only further delaying digging our way out of this economic recession and public health crisis.

Short-term, we should not be afraid of more stimulus when financing rates are near zero, especially when businesses still face the threat of closures, and unemployment is still high. Debt & deficits are something we can figure out long-term, protracted economic damage, not so.

If you enjoyed this thread, give me a follow! I plan to do more of these threads with economic analysis on a range of topics on a regular basis!

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