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I don't think the intent is to make everything go smoothly for the average American. Instead, it's to keep the gears of the economy turning. People who have mo
by adrianmonk 7y ago
I don't think the intent is to make everything go smoothly for the average American. Instead, it's to keep the gears of the economy turning.
People who have money saved will just dip into their savings and keep spending. At a reduced rate, but not at a rate that falls off a cliff.
But people who live paycheck to paycheck will just stop spending. Because they can't spend. And the money they didn't spend means reduced cash flow for someone else. Which means that other person (or business) won't spend.
In many cases, it will be a huge domino effect. Enough people take the paycheck-to-paycheck approach that there are essentially large numbers of people who have been moving synchronously, in lock step with each other. If one stops moving (spending), they all stop.
If spending stops, that means economic activity stops. Which is close to saying the same thing as saying recession.
Putting cash into people's hands counteracts this. The people who operate paycheck-to-paycheck are the main problem area that needs to be addressed to achieve the goal of keeping the gears turning. And when they receive $1K, they will spend every cent immediately, which is exactly what you need them to do. (People with savings aren't the main problem area, but they will also spend some of it.)
Economically, this is going to be very ugly for a lot of people, but putting $1K into people's hands could make it a lot less ugly compared to the alternative of not doing it, and I think that's all this is aiming for.