“Temporary and Targeted” Fiscal Stimulus?
To moderate economic downturns,
[g]overnments frequently issue stimulus payments … Economic theory suggests [such]… payments should be timely, targeted, and temporary, but elected officials usually decide whether to adopt or repeal these programs.
This means that political considerations likely play a role in the design and implementation of fiscal stimulus. New research on
Italy’s 80 Euro Bonus, which originally entailed a monthly payment to all middle-income non-self-employed workers, [finds] … that the bonus yielded large electoral rewards for the ruling Democratic Party that persisted for at least five years, which helps explain why a temporary stimulus policy became a permanent benefits program.
Plus,
targeting poorer voters would have maximized the economic benefits of payments, but electoral incentives pushed politicians to favor middle-income voters who were more likely to reward them at the polls.
So the stimulus was neither temporary nor targeted. Politicians maximize votes, not economic efficiency; the two goals do not consistently coincide.
A better economic theory suggests that relief (not "stimulus") paymets should be governem by the same principles as any other expenditures Net preset vlue >0. The fidderence about recessions is that becasue borrowing rtes are typically lower and many prices exceet marginal costs, some activities and transfers that wouuld bno pass an NPV test at full employment will pass in recession.
"Stimulus," restoring full employment, is the Fed's job, not fiscal policy's job.