Even at $2,000, ‘Walz Checks’ are still bad policy

Negotiations broke down last week between leaders of the state House, Senate, and Governor over whether or not to have a special session. This effectively ended the possibility of tax cuts or spending hikes resulting from Minnesota’s forecast $9.3 billion budget surplus this side of November’s elections.

With those elections in mind, Gov. Walz attempted to resuscitate his plan for ‘Walz Checks’ — he is actually calling them that — which will send a payment to each Minnesotan.

In December, Gov. Walz proposed checks of $175 for single tax filers and $350 for married filers, subject to an income cap ($164,400 for single filers and $273,470 for married filers); in March, he upped this to $500 and $1,000, and now he is proposing checks of $1,000 and $2,000. “Minnesotans need it,” Walz said, “We are seeing this both nationally and globally — inflationary pressures, especially on gasoline and food.”

While the problem is real, this proposed medicine would only make things worse. Simply put, our current inflationary problems come from an increase in aggregate demand that is greater than the increase in the supply of goods and services. The solution is to stop pumping up aggregate demand with newly printed money and increase the amount of goods and services available to spend that money on.

Sending out checks for thousands of dollars would boost aggregate demand. Of course, cutting tax rates instead might well have the same effect. But tax cuts would have another effect — increasing the incentive to produce goods and services — which simply posting out checks would not. In short, ‘Walz Checks’ are a demand-side measure entirely, while tax cuts affect the supply side too, and it is on the supply side that we must look for solutions to our current woes. Let us hope that this latest proposal amounts to nothing more than some election-year bidding.