What About Stimulus Vouchers?
Individual grants of cash may not work because of fear. People will save the dollars or pay down debt. But if you made the grant in the form of script or coupons, you could force the money to be spent for goods and services. The value of the script could be limited to say 90-days. It could not be used to pay down debt. It could not be saved. Redemption by merchants of the script for dollars could be handled by commercial coupon redemption centers. Now, of course, it's possible that this idea has already been floated. But you never know.In my experience it's never safe to assume that everything has been considered. I haven't seen this idea anywhere. What about it, folks?
UPDATE 1/11 - Len Burman of the Tax Policy Institute wrote that he offered a proposal in this spirit in mid December on the NYT economics blog:
Finally, there will almost surely be some sort of consumer rebate. The last two times, this was done through cash payments from the I.R.S. and the results were somewhat disappointing. A significant fraction (40-50 percent) of the money went into savings or reducing debt rather than additional spending. While saving is a virtue, it does not boost the economy in the short run.
An alternative that might produce a bigger boost would be to send everyone with a Social Security number a prepaid card, like the ones offered by major credit-card companies. The money could be spent at any retailer that accepted the company’s credit cards. In principle, the card would be the same as cash, and might still allow consumers to save more. In practice, we know from behavioral economics that labeling matters. If people get a card that they can only use if they spend the money, their spending is likely to increase more than if they can bank a rebate check. And the experiment would produce fascinating data for economists to study.
There would be some administrative issues. To deter theft or fraud, card recipients should be instructed to activate their cards by telephoning an automated number and saying their Social Security number (which would not be on the card). Some people would not get cards because their addresses changed. Presumably they could apply for one on their income tax return or by filling out a form if they are not required to file. And card issuers should be required to compete to offer the new cards to minimize the cost to the government.
If nothing else, the proposal would create jobs in the credit card industry.
posted by Matt at 8:36 AM
9 Comments:
Marketplace's Rico Gagliano took this idea one step further in their infamous April 1st show last year:
http://marketplace.publicradio.org/display/web/2008/04/01/april_1st/
A few weeks later, Kai Ryssdal reported that this story generated more listener calls than any other Marketplace report -- ever.
You’d need heavy controls in place to mitigate the risk that the vouchers simply become a currency in themselves. Strictly speaking my Scottish bank notes are of value because they contain a ‘promise to pay the bearer on demand’ a fixed quantity of silver sterling – I’ve never visited the head office in Edinburgh to try to make good on this promise but I don’t imagine I’d be very successful.
Several aspects of the market have taken a hit in recent months but I’ve seen nothing to suggest that the ingenuity of it has been dented.
I think that people are so hunkered down in their bunkers, shell shocked by all the bad news and fearful for their jobs and their futures, that a check from uncle Sam right now would go either to pay down credit or into their mattresses. So this idea does have some merit.
However, as suggested below, I'd do my damnedest to find a way to turn a voucher into cash. After all, we've got all the cheap plastic crap from China that we need at my house.
What I need most is economic security, stability and hope for the future. When those vouchers come out, I'll want at least two.
I actually heard someone mention a similar concept after Tony Blankley advocated on Left, Right, and Center that the government should just buy things. They said a much more efficient and productive use of the money would be pre-paid, time-limited credit cards that could only be used on consumer goods. I think it is a much better idea than the tax credits that are being discussed right now.
I think that this is a terrific idea, and asked a friend why the gov't couldn't give out "gift certificates", but he thought I was joking, so I dropped it.
If a black or gray market for gov't coupons is a worry, then what about issuing something like a debit card (which can only be used by the card holder) that is only honored for particular goods and services?
This may be a ridiculous idea, but rather than have the government try to stop banks from foreclosing on homes- would it be feasible to allow them to foreclose but stipulate that they need to offer the occupants a lease for say 2-5 years or so? The banks could either keep the homes or sell them to some sort of rental agency. The properties would still generate income for the owners and people who are upside down would be less likely to abandon the property.
Barry Bluestone (Northeastern University) offered this idea in a class on "Advice to the New President" last fall.
I believe the Stimulus Vouchers idea has merit but doesn't go far enough to maximize the benefit to the US economy. This fact is born out best if you consider the large percentage of goods sold to the US buying public that are now foreign made. For instance, nearly 80% of the goods sold at Walmart today are made in China, and the remaining 20% are made in the US or in other countries. Bottom line, "Buy American" Stimulus Vouchers, would insure that each dollar of tax payer funded stimulus money would go directly into the U.S. Economy through the purchase of US goods and services. The Buy American voucher concept would also reduce the national debt and reduce the longer term threat of hyper inflation through increased sales and income tax collections for the US treasury.
I like 'Rangers' comment. I had assumed that the vouchers/coupons/debit-cards would be restricted to vital items (eg: food, diapers, medical and hygene items), but adding certain US made products that are non-vital is an excellent idea too. Perhaps school and office supplies, hardware, moderately priced textiles could be added. I'm not sure what else would be appropriate. Compact fluorescent light bulbs? :)
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