With trillions of stimulus dollars raining down on America already, how much more of them does the economy need? Mnuchin and Powell differ on this, which, fortunately for taxpayers, is an argument playing out in Congress that has put any further sums on hold.  The Fed chief thinks a recovery will be at risk if additional funds are not forthcoming. Treasury’s Mnuchin is on record with a prediction that U.S. growth will bounce back sharply in 2021 and says there has already been stimulus enough. If Powell’s argument prevails, what kinds of things could the Fed do to open the money spigot even wider?

Wonder no more. Here’s a prospectus from one Abhishek Shrma, writing in the Financial Times about the threat of deflation from falling commodity prices  and the steep plunge in consumer spending. Fortunately, he notes, “the Fed and the Treasury are far from being ‘out of ammunition’. They should take the following steps. First, the interest rate that the Fed pays on bank reserves should be reduced to zero (from 0.1 per cent now). Then payroll taxes should be eliminated for the rest of the year (and all those already paid this year by workers and employers refunded) until the deflation abates. This is much more efficient than more federal spending.

Social Security Can Play the Market

“The Treasury,” Shrma continued, “should also be authorised to swap T-bills for the non-marketable Treasury securities in the Social Security Trust Fund, so that its trustees can sell them and buy common stocks. If this had been done during the 2008 crisis, Social Security would have reaped a gain of trillions of dollars, based on the rise in US share prices over the decade. Share purchases should be done via an exchange traded fund, so that the government has no corporate voting rights.”

If Elizabeth Warren, Bernie Sanders and their hero, leftist French economist and author Thomas Piketty, had put their heads together they could not have come up with a better plan for the Democrats to pursue. Let’s hope Pelosi, Schumer et al. don’t read the Financial Times. ______ UPDATE (May 21, 5:53 p.m. EDT): There was not a single Fed-related news story on the front page of  Bloomberg.com or The Wall Street Journal‘s online edition Thursday, implying Powell & Co. decided to maintain a low-profile ahead of the Memorial Day holiday. The markets will be closed on Monday, and there was no reason for the spinmeisters to risk stirring up traders ahead of a three-day weekend. The strategy will have paid off if stocks finish the week quietly on Friday, but we shouldn’t bet too heavily that they’ll remain mellow when trading begin again on Monday evening.