There's been some talk in the media about "How even Trump is Keynesian" and what not regarding this stimulus bill. Unfortunately, modern-day American media is all BS with almost 0 substance. So, let's take a crack at analyzing and understanding this stimulus bill.
Indeed, the typical Keynesian view is that fiscal policies can have short-term impacts to "stimulate" the economy during downturns because putting more money into people's hands = more spending. (If you think about it, the stimulus check is effectively a reduced tax rate).
But, while I consider myself a pragmatist, my macroeconomic views more closely align with the neo-classical views (I mean look my username). With some doubts on this rather Keynesian stimulus bill, I'm gonna make 3 claims. Hope we can have some thoughtful and emotion-free discussions.
1) The stimulus bill wasn't really a "stimulus" bill.
As we know, the stimulus targeted people with low to middle income taxpayers. The stimulus, which maxed out at $1200 per individual was either wired to people's bank accounts or sent as checks that people can cash in. Supposedly, this bill targeted people who were most impacted by this virus - either through being laid-off or through having emergency financial needs to take care of.
But what do we actually know about the financial standing of the people who received these stimulus checks? How many among this group are newly unemployed? How many have enough money saved up to last couple months? Essentially, the question we want to answer is, by how much the aggregate demand (or colloquially spending) decreased? And how much will it increase with this stimulus bill?
Surely, lots of people probably already have enough money to pay their rents, buy food, etc... Understanding the decrease in total spending offset by the stimulus bill would help us understand how effective the stimulus bill was. But as good neo-classical person, I doubt that this stimulus bill will significantly impact spending. Rather, most of it is gonna go into savings account and what not.
2) Small and medium sized businesses are hurt the most. There is no guarantee that the stimulus money will end up being used to pay for services and goods that these SMBs offer.
How do you control people's spending if you just give them money with no strings attached? You can't. Even if the stimulus checks turns into spending, who knows how they'll be spent. For all we know, this money can be used to buy products and services offered by resilient and financially stable companies and not those offered by enterprises most vulnerable to this crisis.
3) We can make sure that people spend their stimulus checks within a year.
Consider S.Korea's new stimulus bill (A friend of mine told me about this). Instead of sending in checks of wiring money into savings accounts, S.Korean government delivered pre-paid cards that can only be used to purchase goods and services offered by small and medium sized businesses. To me, this is Keynesian fiscal stimulus done right.
By literally giving people fiat money with usage limited to purchase goods and services (and with an expiration date) from the enterprises that were hurt the most, S.Koreans have no choice but to spend that money.
There is absolutely no evidence that fiscal stimulus will turn into spending, but these Koreans engineered a way to do so. Jerome Powell is a very capable person and I believe he is doing a good job and will continue to do so. But he's the head of the monetary authority. He has no influence over fiscal policies. Regardless of what people think, Mnuchin is also a capable person. But he doesn't seem to be the most creative.
Think we should all take a page from what the Koreans did - not just their COVID containment approach but also their rather "creative" spin on a typical fiscal policy.