Pandemic economics: Stay weird

When conventional wisdom really, really doesn't work.

View in browser|nytimes.com Continue reading the main story February 16, 2021 People wait in line at the St. Clements Food Pantry in Manhattan in December of last year.Carlo Allegri/Reuters By Paul Krugman Opinion Columnist Back when the 2008 financial crisis struck, some of us tried to explain — with, I'm sorry to say, only limited success — that conventional notions of sound policy needed to be set aside. "When depression economics prevails," I wrote, "the usual rules of economic policy no longer apply: virtue becomes vice, caution is risky and prudence is folly." It was time to set aside the usual concerns about rolling the printing presses and running big budget deficits. But it proved very hard to sustain the mind-set needed to deal with the crisis. For a few months after the fall of Lehman Brothers, policymakers seemed open to Keynesian policies to limit the depth of the slump, although even then they were too cautious; but all too quickly they reverted to inappropriate notions of soundness, obsessing about debt despite very low interest rates and mass unemployment. Many influential people now seem to concede that the obsession with debts and the premature turn to austerity after 2009 were big mistakes. But now we're in a new crisis. And the economics of this crisis are, if anything, even weirder than those of 2009, in ways that even knowledgeable people often don't seem to grasp. What happened last time was the emergence of a huge "output gap" — an economic shortfall from what we could and should have been producing, caused by inadequate spending. What we needed to close that gap was "stimulus" — measures to boost expenditure, by both the government and the private sector. And policy should have aimed at providing enough stimulus to close the gap. Continue reading the main story ADVERTISEMENT Many economists are still working with that framework. And when they compare the proposed spending in President Biden's American Rescue Plan with conventional estimates of the output gap, what they see is overkill: much more spending than the economic situation seems to require. But that's the wrong diagnosis. True, G.D.P. is lower than we would have expected given trend economic growth, but we aren't experiencing a conventional output gap. Instead, we're facing something more like a natural disaster: The economy is depressed because the coronavirus is temporarily keeping us from doing many of the things we would normally be doing. In this situation, the purpose of government spending isn't to provide stimulus, it is to provide disaster relief, money that helps those hurt hard by the pandemic make it through until widespread vaccination makes it possible to resume our usual lives. And this has one perverse implication that even very good economists are, I can report from personal interactions, having a hard time grasping. Namely, it's OK if a lot of pandemic spending is pretty poor stimulus. In fact, it might even be a good thing. Continue reading the main story ADVERTISEMENT Here's the story: I've argued that relief spending can be usefully grouped into three categories. There's direct spending to fight the pandemic — shots in arms and related. There's income support for hard-hit groups, notably enhanced unemployment benefits. And finally there's more diffuse support, mainly those $1400 checks and aid to state and local governments. The problem with the more diffuse support is that it isn't well targeted. Some people badly need those checks, because for whatever reason they aren't getting enough support from other measures, but many don't. Some state and local governments are in desperate straits because of the pandemic, but others have seen revenue hold up pretty well. So a lot of the outlays will go to players who don't especially need the money. This could be a problem if we were worried about debt, but with interest rates so low, we aren't. It could also, however, be a problem if people and governments getting money they don't badly need spent a lot of it, creating inflationary pressure. The good news, then, is that a lot of those diffuse outlays won't be spent! Financially secure households will probably save their $1400, or if they spend it much of it will probably go to imported goods, which doesn't create inflation here at home. State and local governments that are in decent financial shape will probably add much of their aid to their rainy day funds rather than boost spending, which again reduces inflation pressure. Continue reading the main story ADVERTISEMENT In the jargon of economics, a large part of the relief package is likely to have low multiplier effects. This is normally a bad thing, but right now it's actually a good thing: it means that we can aid those in need without worrying too much about the side effects. The point is that weird times call for weird economic thinking. This is no time to be conventional. Quick Hits Larry Summers and yours truly debate pandemic relief. The last round of pandemic checks were mostly saved. State and local budgets in the pandemic. Why we aren't worried about debt. Feedback If you're enjoying what you're reading, please consider recommending it to friends. They can sign up here. If you want to share your thoughts on an item in this week's newsletter or on the newsletter in general, please email me at krugman-newsletter@nytimes.com. Facing the Music Remember live music?YouTube As vaccinations gather pace, I'm looking forward to CONCERTS! This was the last one I attended before life closed in. IN THE TIMES Biden and the Fed Leave 1970s Inflation Fears Behind Administration and Fed officials argue that workers not getting enough stimulus help is a larger concern than potential spikes in consumer prices. By Jim Tankersley and Jeanna Smialek Inflation Isn't Lurking Around the Corner. This Isn't the 1970s. Democrats need to shelve the memory of stagflation. By Binyamin Appelbaum I Actually Like Teaching on Zoom There may be less human warmth. But there can be more human connection. By Viet Thanh Nguyen Biden Administration Moves to End Work Requirements in Medicaid It is a reversal of the Trump administration's policy of allowing states to tether work to health insurance. By Sarah Kliff and Margot Sanger-Katz Read the full Opinion report here. Continue reading the main story Need help? Review our newsletter help page or contact us for assistance. You received this email because you signed up for Paul Krugman from The New York Times. To stop receiving these emails, unsubscribe or manage your email preferences. Subscribe to The TimesGet The New York Times app Connect with us on: Change Your EmailPrivacy PolicyContact UsCalifornia Notices The New York Times Company. 620 Eighth Avenue New York, NY 10018

On Tech: The state house versus Big Tech

Plus, how to unlock an iPhone while wearing a mask.

View in browser|nytimes.com Continue reading the main story February 16, 2021 The state house versus Big Tech Patrick Savile By Shira Ovide This will be one of the inescapable threads of our digital lives: Government authorities almost everywhere are weighing whether and how to assert more control over the technology that shapes our future. What had been a relatively hands-off approach to regulating the technology industry is now being reconsidered from global capitals to smaller U.S. states. We're seeing this play out over taxes, novel forms of work, digital privacy, new applications of corporate power and the bounds of free expression. Some of the government efforts may be misplaced or counterproductive, but this clash is not going away, and its outcomes will be both unpredictable and momentous. I discussed these developments and why they matter with my colleague David McCabe, who recently wrote about U.S. states trying to impose new taxes on big technology companies. Shira: What are some of the proposed U.S. state or local tech laws that you're watching? David: The one that just passed in Maryland was a novel tax on ads that companies like Facebook and Google show to state residents. The state is trying to plug budget holes by targeting new taxes at rich tech companies, and it's not alone. Indiana and Connecticut are considering similar taxes to help fund rural broadband or online bullying prevention programs. Continue reading the main story ADVERTISEMENT There's a feeling, too, that these tech companies haven't been taxed enough relative to their profits and influence on the economy. Besides the tax measures, New York had proposed reforming its antitrust law to make it easier to sue tech companies. And there is a bill in Florida that would prohibit companies from suspending the accounts of political candidates. This may be one of several state proposals that we'll see in response to the unproven claims that social media companies are biased against conservative views. Those proposed bills — and North Dakota's bill on how Apple charges for iPhone apps in the state — seem like issues that Congress typically handles. Continue reading the main story ADVERTISEMENT Yes, but the state legislatures clearly don't believe issues like data privacy, online expression and tech monopolies are wholly federal matters. Congress also moves slowly or is completely gridlocked on many of these concerns. It is not clear, though, how far states are permitted to go in these tech regulations and taxes. The Maryland digital advertising tax will almost certainly be challenged in court. How do tech companies feel about this? We'll probably hear more from them that state lawmakers are in over their heads and will hurt their own states' economies with new taxes or regulation. That's often how any company responds to more government rules or costs. Continue reading the main story ADVERTISEMENT And on some issues — notably after California passed strict digital privacy laws — big technology companies are pushing for federal laws, in part to head off any future local or state rules that might be even harsher. Is there a common theme among new regulations that tech companies are facing in places like Pakistan, Australia and the United States? It's a sign of the new reality for Google, Facebook, Amazon and America's other tech powers. These companies started out as lightly regulated newcomers, but as they grew and went global, other countries started to become concerned about the companies' effect on their economies, workers and people's communications. Now the reconsideration of a laissez-faire approach to tech regulation has landed back in the United States, including in states and cities. If you don't already get this newsletter in your inbox, please sign up here. TIP OF THE WEEK How to unlock an iPhone while wearing a mask In the category of tiny victories, the New York Times consumer technology columnist Brian X. Chen walks through a coming feature for newer model iPhones that recognizes our faces when we're wearing a mask. Spoiler alert: This won't apply to everyone with an iPhone. A nagging annoyance for many iPhone owners in the pandemic is the inability of the device's face scanner to recognize us with our masks on. That means we can't unlock our phones while wearing a face mask, and we've had to resort to punching in a passcode. There are, of course, bigger problems this year. But still, this feels lame. There's a solution on the way — if you have an Apple Watch. In the next version of iOS (14.5), you'll be able to quickly unlock the phone while wearing a mask. The watch essentially becomes the way for the iPhone to verify that it's you. The new iPhone software is still in beta mode, meaning the official version has yet to be released to the public. I typically recommend against installing beta software because it can be prone to glitches. But if you're eager to unlock your phone sans mask, here's what you can do: Sign up for Apple's beta software program. Then click through the steps to enroll your iPhone and Apple Watch so that they can install the beta software. After installing the beta software on both the iPhone and Apple Watch, open the Settings app on your iPhone. Then scroll down to "Face ID & Passcode." In this menu, scroll down to "Unlock with Apple Watch" and toggle on the option to use your Apple Watch to unlock when the image scanner detects your face with a mask. Next time you're at the grocery store and you look at your phone, your watch will vibrate once and unlock your phone. Sweet relief. Before we go … From government lawyers to private lawsuits: David's latest article is about people — including "Mr. Sweepy," the owner of a small sweepstakes website — suing Google and Facebook with the same claims as the government antitrust lawsuits. What do Vanilla Ice, Roger Stone and Ai Weiwei have in common? They're on Clubhouse, the nearly year-old audio chatroom app. My colleagues Erin Griffith and Taylor Lorenz wrote that Clubhouse's rise has generated debate about whether audio is the next wave of social media. The start-up has also faced complaints about harassment, misinformation and leaky user data. Definitive evidence that you're not cool: The laugh-cry emoji is for old people, CNN tells us. The reporter also tweeted a teenager's list of youth-approved emojis. Hugs to this I'm terrible at ice skating, but look at how beautiful it looks on canals in the Netherlands. (Uhhh, but be careful on thin ice!) And the country has been waiting 24 years for perfect canal ice to hold a beloved 120-mile speedskating race. We want to hear from you. Tell us what you think of this newsletter and what else you'd like us to explore. You can reach us at ontech@nytimes.com. If you don't already get this newsletter in your inbox, please sign up here. Continue reading the main story Need help? Review our newsletter help page or contact us for assistance. You received this email because you signed up for On Tech with Shira Ovide from The New York Times. To stop receiving these emails, unsubscribe or manage your email preferences. Subscribe to The TimesGet The New York Times app Connect with us on: Change Your EmailPrivacy PolicyContact UsCalifornia Notices The New York Times Company. 620 Eighth Avenue New York, NY 10018