The problem is real: how to put money into our economy immediately. President Obama, Senator John McCain, former Fed Chairman Alan Greenspan, Ben Bernanke all seem to struggle with this fundamental problem. If people are sent checks or given extra deductions on their taxes, that money is used to pay off consumer debt or socked away in savings accounts or literally in sock drawers. On the micro-level this makes sense. People are worried they may lose their jobs or be forced to take “voluntary” pay cuts. Hours might get cut back, or spouse’s hours, roommates. The money might make the difference in a month or two between staying in one’s apartment, condo, home; it might mean the difference between plain beans and rice or beans cooked with onion, miso, tomatoes and smoky ancho peppers.
This is an extremely rational line of thought, but multiplied onto the macro-level saving money might exacerbate and speed the shrinking of our economy. Economists seem to think this is correct. A common solution offered, one that has never been possible until now, is an instant injection of money into the economic system. As I noted above, checks don’t do the trick because not all of the money is spent immediately (if ever). Public works projects are more of an intermediate solution: putting people to work, putting paychecks and buying power into the hands of people who will buy things they may not have necessarily bought before working on a public work project. But to inject money immediately there only seems to be one accountable way to do it: check cards sent out to everyone. They would have a $400 or $500 balance that would expire in four weeks. For a little added economic juice we could hire a few of our soon-to-be nationalized banks to administer the program. I ran this idea by a economists at Columbia University the other day to see what the drawbacks of a program like this might be. One concern was that gift card economics would play into these government stimulus check cards. Lots of people would end up with some or all of their balance remaining on the the card. Apparently this is why The Gap and Amazon.com and Barnes and Nobel love selling gift cards so much: they make a sale but don’t have to provide any product or service in return.
To answer this concern, the government stimulus cards could be dynamic. At the end of four weeks, the remaining funds would be redistributed using a weighted scale to the people who spent their money the fastest. If you went out and bought a flat screen TV on day one, you would get more money than someone who steadily used up their funds over the course of the month. The object is not to distribute money fairly, rather to kick start the consumer economy. Another economist I spoke with was categorically opposed to any rebate or stimulus system that encourages irresponsible spending, or that might disproportionately favor the middle- and upper-classes. Her thinking was that people living at or below the poverty line would be less savvy with credit cards and would likely spend the money on consumables that would be of no help to them in a month or two. My answer to the first part is that everything in our society is going toward paperless currency. Food stamps have even been mostly phased out and will be completely gone by June of this year. In their place is a debit card called an EBT. So there is already a system in place to administer this program. My guess is that people who already understand the program will be more likely to take full advantage of it than those of us lucky enough to not normally qualify for the EBT. With regards to the economist’s concern that irresponsible spending will be encouraged, I say: that’s the whole point. People are currently spending in a responsible way and we need them to be a little irresponsible. Go to a restaurant, hit up Best Buy, get those books you’ve been eying, buy a subscription to the Times, donate to Guernica, call some 1-900 numbers; use it or lose it and then I’ll use it . . . in a patriotic way.
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