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Source link: http://archive.mises.org/9394/more-stimulus-silliness/

More “Stimulus” Silliness

February 7, 2009 by

Move over, Mr. Obama — Dan Newman has figured out the solution to all our stimulus woes:

When I’m struggling, a small reduction in costs isn’t going to persuade me to create a new position. At a huge company, that might add up to another job, but for me the choice of whether to create a job rests on only one thing: customer demand.

That’s where the government can help right now. Investment in infrastructure and education may pay off in the long run, but those jobs and projects take time to create. What small businesses need, immediately, is healthy demand for their goods and services.

The rebate checks of last year aimed to provide just that, but most Americans saved the money or used it to pay down debt. Less than 20 percent went to bolster consumer spending. There’s little reason to expect more from the proposed $1,000-per-household tax cut in the current stimulus bill.

A reduction in sales tax has still bigger problems. In 2001, there was a Senate proposal to reimburse states for lost income, but the legislation collapsed while lawmakers were trying to gain cooperation from each state legislature.

A better choice would be something Americans are likely to spend, and without huge logistical headaches: a gift card. By sending every taxpayer a $2,000 debit card, the government stimulates spending directly. The card doesn’t get deposited with a bank, a step that greatly reduced the use of last year’s rebate checks for new spending, and with a defined expiration time, perhaps a year, the program could help precisely while other programs get underway.

The American Gift Card could bear a picture of Lady Liberty, since it may be used for whatever taxpayers wish: smarter clothes, dinners out, a weekend away, a new heater. And as gift cards tend to be used in person, they are of particular interest to local businesses.

Gift cards have a nationwide redemption rate of 80 percent. If such debit cards were used at the same rate, the cost of the program would be $270 billion, for a greater effect at less cost than the proposed tax breaks.

And such cards allow people to spend where they find it most valuable, obviating debate about where the government “should” spend money. Consumers will choose what things they need most, and, whatever those are, they would be more affordable.

So, the government won’t tell tell consumers where to spend money — but they’re not allowed to save it (or — Heaven forbid — pay off their existing debts!) Spending is always a social good. Of course, it would be simpler to abolish sales, income and payroll taxes altogether, but that won’t drive demand the way a massive “gift card” orgy will. And it goes without saying that the government would never use its control of a gift card program to, say, monitor consumer spending habits and exploit that information for political purposes. That would be downright nutty,

{ 23 comments }

Mark February 7, 2009 at 9:47 am

The gift card stimulus might be silly, but I still think that it is better than what our government is currently planning. The current stimulus is chock full of things that will be extremely difficult — from a political standpoint — to cut in the future. Our politicians are using this economic downturn as an excuse for a permanent massive increase in government.

severin February 7, 2009 at 10:19 am

If the government sent me a gift card for $2000, I would spend it in places I would have spent my own money and then I would save or pay off debt with my own money.

shaneinwy February 7, 2009 at 10:33 am

So now the politicians really WILL be Santa Claus.

Bill R February 7, 2009 at 10:53 am

Surprisingly enough NYT has a pretty even handed article up on how the Japan experiment worked out.

One Austrian friendly point was even made:

“In the end, say economists, it was not public works but an expensive cleanup of the debt-ridden banking system, combined with growing exports to China and the United States, that brought a close to Japan’s Lost Decade. This has led many to conclude that spending did little more than sink Japan deeply into debt, leaving an enormous tax burden for future generations.”

http://www.nytimes.com/2009/02/06/world/asia/06japan.html?_r=1&partner=permalink&exprod=permalink

Deefburger February 7, 2009 at 11:10 am

This sounds just like my “Fed Credit Card” prediction I made back in Dec!

Doug Thorson February 7, 2009 at 11:42 am

In the short run, it may or may not save a few jobs. In the long run it does nothing to create wealth or private sector jobs by encouraging investment. While our corporate tax rates remain the highest in the world investment in new business moves across the pond looking for a reasonable ROI.

While this idea sounds “better” than the current redistribution of wealth programs moving through congress it is still a Keynesian demand side “solution” to a larger problem of uncertainty as to where government will intrude next to confiscate corporate and individual incomes to fund their next hair brained ideas. The other uncertainties and the real problem with the markets today are the control and manipulation of money.

BTW, the $2000 gift card that will also end-up in the pocket of the 40 million Americans, who don’t pay taxes, will have to come from another’s pocketbook. This is just a redistribution of wealth and does nothing to grow the economy. It’s money that would have already been spent or invested. Enough already!

Doug Thorson February 7, 2009 at 11:42 am

In the short run, it may or may not save a few jobs. In the long run it does nothing to create wealth or private sector jobs by encouraging investment. While our corporate tax rates remain the highest in the world investment in new business moves across the pond looking for a reasonable ROI.

While this idea sounds “better” than the current redistribution of wealth programs moving through congress it is still a Keynesian demand side “solution” to a larger problem of uncertainty as to where government will intrude next to confiscate corporate and individual incomes to fund their next hair brained ideas. The other uncertainties and the real problem with the markets today are the control and manipulation of money.

BTW, the $2000 gift card that will also end-up in the pocket of the 40 million Americans, who don’t pay taxes, will have to come from another’s pocketbook. This is just a redistribution of wealth and does nothing to grow the economy. It’s money that would have already been spent or invested. Enough already!

prettyskin February 7, 2009 at 12:33 pm

“The American Gift Card…it may be used for whatever taxpayers wish…”

But, I can’t do what I really want to do with it, like save. This proposal is “welfare” anyway you try to bundle it which also redistributes wealth.

Government should stick to protect personal property and security of the nation. All else, banish government!

Eric February 7, 2009 at 12:58 pm

If the government gave out gift cards for people to spend only, I would startup a business that allows people to “buy” cash. Charge them a small percentage then let them do what the heck they want to do with their money.

Marc Sheffner February 7, 2009 at 1:00 pm

Gift-card, cheques, whatever. As long as it is something that prevents the consumer from exercising free choice. Remember: “the government is in charge and must make decisions for you”. This is the message that must be fed to the populace.

Kevin February 7, 2009 at 5:44 pm

Eric – you were close….if the govt issued such cards, expect lots of infomercials from companies who will buy your gift card for cash today. The notion that everyone would need some sort of consumer good or whatnot is just narrow-minded garbage. Those who need illegal drugs, or cash for other activities (such as, in this example, paying down a high-interest credit card, of all things!) would happily sell their $1K card for $1800 in cash.

Of course this whole program hinges on the popular belief that the government creates money out of thin air, with no negative repercussions.

If we could just figure out how to do that…..

Enjoy Every Sandwich February 7, 2009 at 6:20 pm

The basis of this scheme is the same as that of the stimulus: that the government can repeal the laws of economics. As several posters have already pointed out, the restrictions upon the use of these “debit cards” are easily circumvented by those who have the will to do so. Even if nobody does this it’s not going to work anyway.

It’s bad enough that the government has to be so immoral. They have to pile stupidity on top of that.

I Hate The Government February 7, 2009 at 6:46 pm

Prettyskin,

“”The American Gift Card…it may be used for whatever taxpayers wish…”

“But, I can’t do what I really want to do with it, like save.”

If I can spend this gift card in any shop I want, then why not spend this card in a coin shop and BUY GOLD !!!

Gold has intrinsic value and buy gold is like saving money. Gold cannot be easily manipulated by the government like money.

“Government should stick to protect personal property and security of the nation. All else, banish government!

It’s funny that you would want to hand over personal property protection to the biggest enemy of personal property in the first place.

It’s funny that you would want to hand over the security of the nation to those who failed to prevent Pearl Harbor or September 11 and who literally played chess with all our lives in the nuclear stalemate of the cold war.

Come to think of it, I think that personal property is best protected by a well armed individual willing to use his gun to shoot down looters or by private security forces.

And if we would let individuals and private organizations buy military equipment, well there would be more weapons in the USA than in the entire world.

Imagine owning a tank and a missile launcher. What army in the world would dare to attack us ?

Come to think of it, I think there is NO NEED for government and that government is the bane of mankind.

I Hate The Government February 7, 2009 at 6:51 pm

“Government should stick to protect personal property and security of the nation. All else, banish government! ”

Wolves should stick to protect the sheep herd and the security of the chicken coop. All else, banish wolves.

Bears should stick to protect the bee hives and the security of camper’s lunch bags. All else, banish bears.

Bank robbers should stick to protect the bank vault and the security of depositor’s personal information. All else, banish bank robbers.

If governments grew to become the monsters they are now, it’s because they were first trusted to protect our private property and the security of our nation, an look where this took us.

I tend to think that a crook invading someone’s property is more affraid of the owner’s gun than he is affraid of jail.

The best way to protect private property is to let owners shoot down mal-intent invaders.

Bruce Koerber February 7, 2009 at 7:09 pm

This idiocy can be blamed on Paul Krugman!

He goes into his own little fantasy world and comes up with fantastical ideas – vain imaginings and idle fancies – and spews them out via the popular media. There is nothing valid about his babble but because he slithered his way through the socialist educational system and hissed his way to a Ph.D. in Keynsian economics he is allowed to write nonsense and pass it off as ‘economics.’

If one journalist can be a nincompoop why not a host of them. Join the bandwagon Dan Newman.

Anthony February 7, 2009 at 9:37 pm

Debit card? You know you can buy money orders with them, don’t you?

bearing01 February 8, 2009 at 1:55 am

The Fed should just double the money in every private bank account. Make everyone twice as “rich”. Woudn’t it?

Damn fools……

Brian Macker February 8, 2009 at 8:27 am

I’d buy gold coin with my card. That’s not “saving”, right? After all it’s just a shiny metal with no value, the ultimate luxury good and thus the epitome of consumption.

Enjoy Every Sandwich February 8, 2009 at 8:34 am

Yep, I’d buy gold and ammunition. They’d love that, wouldn’t they?

Marcus February 8, 2009 at 10:00 am

When you beg the government to give you a stimulus check. They own you. when you beg the government to help out in the economic crisis. They own you. The biggest thing the gov’t could to to help us is implement the fair tax, let 12 trillion American dollars come back into this country from overseas accounts to be invested and spent. Quite braging us to hyperinflation and Communism. We are already a socialist state.

I agree with pretty skin. Protect personal property and national defense. Not be my daddy like they want me to be.

shaneinwy February 8, 2009 at 10:13 am

Could this be a precursor to e-ration cards?

Dick Fox February 8, 2009 at 11:15 am

It is amazing to me that after all the work of Adam Smith, J.B. Say, J.S. Mill, and Frederick Bastiat, to only mention a few, that mercantilism is still so much a part of what is considered enlightened thought.

Joshua Park February 9, 2009 at 12:18 pm

I may be calloused or used to the idiotic idea that “spending = creating wealth”… The most offensive thing I found in this quote was that he wanted to put Lady Liberty on the card! I know it’s silly, but government taking from the wealth-generators to give to the wasteful does not exactly sound like liberty.

Since this spending power is in the hands of all the people, I think a more appropriate icon is in order. We’re trying to build up the economy and our great country, so let’s use a symbol from carpenters or ironworkers or something. Maybe a hammer. Of course, we can’t leave out the little guy, the farmers and the ranchers. How about wool shears? No, no, no. Too specific. Wheat? Oh, I know! A sickle! Sure! Hammer and sickle: it shows both building up prosperity, and makes sure to mention the little guy. It’ll be great!

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