Helicopter Drop

Ezra Klein suggests that the United States could use a dose of fiscal/monetary coordination:

The answer is obvious: “explicit (though temporary) cooperation between the monetary and fiscal authorities.” In practice, that would mean Bernanke gets John Boehner, Nancy Pelosi, Harry Reid and Mitch McConnell in a room and says the politics and specifics of this are their job, but the economy needs more fiscal stimulus if it’s going to recover, and the Federal Reserve stands ready to make that not only possible but also virtually costless. Inasmuch as Republicans aren’t big fans of further government spending right now, the best option could be the exact one that Bernanke recommended to Japan: a Fed-financed tax cut. Perhaps a payroll-tax holiday for the next year or two.

Politics aside, the best way to do money-financed fiscal policy is on the spending side. Identify some useful infrastructure projects—like the now-abandoned NJ/NY ARC Tunnel—and print the money needed to pay for them.

If you’re going to go the tax cut route, however, you almost don’t need congressional cooperation. A money-financed payroll tax cut is awfully close in spirit to the old Friedman/Bernanke thought experiment of dropping money out of helicopters. More practically, you could place the money in envelopes and put the envelopes in the mail. The postage involved would even help forestall US Postal Service insolvency.