Many times, things that are easy to measure are unimportant, and things that are important are hard to measure.

~Michie Slaughter

The above quote was made in reference to understanding the impact of charitable investments (i.e. grants, research and programs) by the Kauffman Center for Entrepreneurial Leadership for which Slaughter served as its first president.  I was reminded of this warning as I watched the on-going congressional deadlock over the size of COVID-19 stimulus checks.  My first epiphany was I had often paid attention to only half of what my colleague and friend was trying to tell us.  Being a trained empirical social scientist, my focus had been on data collection and analytical methodology.  But that was just one side of the equation.  Too often I assumed I already knew what was important.  But in this case I was not so sure.  In other words, one needs not only to establish the method by which something is measured, but the why.  Why would anyone want to expend time and effort measuring something in the first place?

As is so often the case, coming up with the right answer depends first on asking the right question.  In this case, the debate in Washington centered on the size of the checks, the current $600 per eligible recipient versus the proposed increase to $2,000 per recipient. In both the initial CARES Act last March and the recently passed COVID Relief Act, eligibility was defined as $75,000 of total adjusted income for a single individual and $150,000 for a married couple filing jointly for the 2019 tax year.  This information is easily obtained from Line 8b of the 2019 IRS Form 1040.

If this was the only available metric one could argue it makes sense.  Unless you ask another question.  Does this data point tell you who is most in need of supplemental income during the current economic recession?  To answer that question you need to examine the range of revenue streams which make up total adjusted income.

• Line 1: Wages, salaries, tips, etc.
• Line 2a: Tax-exempt interest
• Line 3a: Qualified dividends
• Line 4a: IRA Distributions
• Line 4c: Pensions and annuities
• Line 5a: Social security benefits
• Line 6: Capital gain (or loss)
• Line 7: Other income

Now, think about which of these subcategories are most likely to be affected by an economic slowdown.  The stock market has more than recovered from the March 2020 crash; so your qualified dividends and capital gains more likely rose in 2020.  Mandated 2021 IRA distributions should also increase as the value of an IRA account also grew this past year.  Social security payments are unaffected, increasing one percent for 2021.  And most pensions and annuities are likely to remain relatively stable.

This information already exists for every American taxpayer and is readily retrievable with a flick of a switch.  So, if the goal is to help the most vulnerable, we now have both the desired outcome and a trove of data.  The final task is to determine the weight of each data point to achieve that outcome.

This is not rocket science, but I find it hard to believe if mathematicians and analysts can program a reusable rocket to land on a platform at sea or instruct a space probe to retrieve dust from an asteroid traveling at  63,000/hour, there is not an algorithm that would match the mission of aiding those most in need of supplemental income.  Consider the following as one approach.

The $600 stimulus checks are history; so, let’s leave them out of the equation and focus on the currently proposed $1,400 per eligible recipient which is projected to cost $460 billion. Let’s call that the “relief pool”.  Using the established benchmarks for total adjusted income of $75k/individual filer and $150k/joint filers, approximately 153 million Americans would be entitled to a “share” of the “relief pool.”  However, not all shares would have the same value.  For example, someone whose entire total adjusted income came from wages or salary (Line 1 of their 2019 return) would receive a full share.  At the other extreme, the share of someone whose total revenues resulted from other than earned income (e.g. dividends, pensions, social security) would have no value as they are likely unaffected at all by the downturn.  For the record, our household falls into this second category, and we are fine with that.

The shares of all other filers would be equal to a percentage of income derived from all non-earned income sources (Lines 2a-6) divided by total adjusted income (Line 8b).  If the $460 billion appropriation is used, each non-zero shareholder would get a proportionate share of the pool with one exception.  No individual would be entitled to more than their total earned income in 2019.  For example, even if a full share was worth $5,000, an individual or joint filer with $3,000 in wages and salaries, would only be eligible for the latter amount.

Is the formula perfect?  Probably not.  The specifics should be subject to the usual policy debates.  The amount of the total “relief pool” can also be addressed.  What is not arguable is the fact the data to test this formula and alternatives is readily available.  All we need is the right people developing the corresponding algorithms.  Where are Dorothy Vaughan, Mary Jackson and Katherine Johnson (the original “hidden figures”) when we really need them?

POSTSCRIPT:  I cannot leave this discussion without commenting on Miser Mitch McConnell’s description of the $2,000 stimulus checks as “socialism for rich people.”  In the style of a Shakespeare sonnet, “How wrong can Mitch be; let me count the ways.”  There is no coordinated production, public or cooperative ownership of capital as Karl Marx described.  There is no redistribution of wealth based on the principle “to each according to his need, from each according to his ability.”  If anything, Mitch is the leading proponent of reverse socialism, cutting the social safety net while giving massive tax breaks to the rich.  This morning’s news featured a number of stories about food lines where volunteers were serving holiday meals.  I wonder how many of these aid recipients asked,  “Do I get tax-deductible martinis with this?”

For what it’s worth.
Dr. ESP