>Preventing thousands of job losses and helping small businesses stay afloat during crises that they should not reasonably have to expect does have a positive return on investment for taxpayers.
Why do you say this with such certainty?? I am for efficient government and savings to the taxpayer, so I would absolutely support such a measure if I agreed.
Just because the government provides help, it is not given that it will ultimately be positive ROI for the taxpayers. What is the payback period here and when can I expect to see the savings on my tax bill going down? If it takes 50B to make depositors whole, how many jobs will be saved, how long will it take to recoup that from taxing those jobs, and what will the profit in excess of cost be?
Reasonable people would agree that 1 billion to save a single job would never pay itself back, so clearly there is a threshold somewhere. No economist would refute that one exists.
People seem to assume or treat it as an axiom that any help the government provides is a net positive investment, independent of cost or analysis.
The idea that this is known or calculated here is absurd. We don't know what % the deposits will be written down, How many jobs that will cost, or how successful those companies will ever be at generating tax revenue.
I am not strictly opposed to aid in a crisis. It is clear that in some cases government action saves the taxpayer money. For example, a cheap medical treatment might prevent lifelong government disability payments, with tax savings that vastly outweigh the initial cost. That does not mean that every medical treatment at any cost translates to tax savings.
There are also questions of moral Hazzard and incentives, but I put those secondary. Regulations can and should be fixed, independent of how we respond to this crisis. However, that does not factor into question of if an account holder bailout is a profitable venture for the taxpayer.
Does this make sense and do you understand where I am coming from?
> Why do you say this with such certainty?? I am for efficient government and savings to the taxpayer, so I would absolutely support such a measure if I agreed.
I'm not certain, but my life experience and limited formal training in economics suggests that it's a possibility at least worth considering, and I have a strong positive prior on it for many circumstances.
> Just because the government provides help, it is not given that it will ultimately be positive ROI for the taxpayers. What is the payback period here and when can I expect to see the savings on my tax bill going down? If it takes 50B to make depositors whole, how many jobs will be saved, how long will it take to recoup that from taxing those jobs, and what will the profit in excess of cost be?
This is literally why government agencies like the BLS, Treasury, et alia exist and hire economists and statisticians to address such questions.
Whether or not Congress listens or allows them to do their jobs is another story.
> Reasonable people would agree that 1 billion to save a single job would never pay itself back, so clearly there is a threshold somewhere. No economist would refute that one exists.
Sure, see above.
> People seem to assume or treat it as an axiom that any help the government provides is a net positive investment, independent of cost or analysis.
I don't. You don't. Ignore the people who do.
> The idea that this is known or calculated here is absurd. We don't know what % the deposits will be written down, How many jobs that will cost, or how successful those companies will ever be at generating tax revenue.
The FDIC does. They had a pretty good idea about this on Friday, too, even before they put the bank up for sale.
> I am not strictly opposed to aid in a crisis. It is clear that in some cases government action saves the taxpayer money. For example, a cheap medical treatment might prevent lifelong government disability payments, with tax savings that vastly outweigh the initial cost. That does not mean that every medical treatment at any cost translates to tax savings.
I am proposing that this is one such scenario, where both the costs and benefits are relatively easy to quantify, and that on its face we should expect it to be net positive.
> There are also questions of moral Hazzard and incentives, but I put those secondary. Regulations can and should be fixed, independent of how we respond to this crisis. However, that does not factor into question of if an account holder bailout is a profitable venture for the taxpayer.
This seems backwards to me. Moral hazard and (lack of proper) incentives are the root cause. If you don't like the government needing to step in to help people, then you should consider these your top priority.
Thanks for the productive discussion. I think I got my general point across but I want to make a couple clarifying comments.
>This is literally why government agencies like the BLS, Treasury, et alia exist and hire economists and statisticians to address such questions. Whether or not Congress listens or allows them to do their jobs is another story.
Most policy and politics isn't decided on the basis of financial ROI, even when it is available. I think it should be more of a central driver. Basically nobody is making serious arguments that student loan forgiveness will lower taxes. Same with SVB. Im sure the FDIC has an idea of what the deposit write-down is, and maybe the total number of employees at those companies. They have no idea what the long term impacts and ROI would be. Even the founders of those companies don't know if they will be successful and the total taxes paid over the future lifetimes of their corporations. If you think this is simple and known, we simply disagree on the facts.
>This seems backwards to me. Moral hazard and (lack of proper) incentives are the root cause. If you don't like the government needing to step in to help people, then you should consider these your top priority.
I think I could have been clearer here. I'm saying moral hazard and incentives are secondary when deciding if account holders in this specific instance should be made whole.
I agree fixing the root issue is probably a more important problem, but again separate from what to do with the account holders.
By way of analogy, if you have a car crash on a dangerous road, what to do with the car and how to fix the road are separate questions. Maybe the ROI on repairing the car is bad so you write it off, but it still makes sense to fix the road so you don't have more crashes.
Why do you say this with such certainty?? I am for efficient government and savings to the taxpayer, so I would absolutely support such a measure if I agreed.
Just because the government provides help, it is not given that it will ultimately be positive ROI for the taxpayers. What is the payback period here and when can I expect to see the savings on my tax bill going down? If it takes 50B to make depositors whole, how many jobs will be saved, how long will it take to recoup that from taxing those jobs, and what will the profit in excess of cost be?
Reasonable people would agree that 1 billion to save a single job would never pay itself back, so clearly there is a threshold somewhere. No economist would refute that one exists.
People seem to assume or treat it as an axiom that any help the government provides is a net positive investment, independent of cost or analysis.
The idea that this is known or calculated here is absurd. We don't know what % the deposits will be written down, How many jobs that will cost, or how successful those companies will ever be at generating tax revenue.
I am not strictly opposed to aid in a crisis. It is clear that in some cases government action saves the taxpayer money. For example, a cheap medical treatment might prevent lifelong government disability payments, with tax savings that vastly outweigh the initial cost. That does not mean that every medical treatment at any cost translates to tax savings.
There are also questions of moral Hazzard and incentives, but I put those secondary. Regulations can and should be fixed, independent of how we respond to this crisis. However, that does not factor into question of if an account holder bailout is a profitable venture for the taxpayer.
Does this make sense and do you understand where I am coming from?