My Stupid Stimulus Bill - What's wrong with it?

[Meadmaker]

I'm going to describe an incredibly stupid plan to stimulate the economy. At least, it seems incredibly stupid to me. Maybe you will disagree. I want to hear comments on exactly what is stupid about it.

My plan is to take a certain amount of your income, proportional to your current taxes, and replace it with gift cards. Those gift cards can be used at retail stores, restaurants, or all the other sorts of places you use gift cards now. However, they couldn't be used on unprepared foods (i.e. restaurants are ok. Grocery stores are not.) Nor on medicine. Nor on rent or utilities. Nor on gasoline, etc. Consumer goods only, please. If you are subject to withholding, you would start getting gift cards immediately. Those of you who pay estimated taxes would see an extra boost in your taxes, and you would get the gift cards in the mail after you file your estimated taxes.

Of course, the "gift cards" would be renamed "stimulus cards".

Stimulus cards could be applied toward major purchases, such as automobiles.

The purpose of this plan would be to stimulate demand again. Get people spending money. Wal-Mart would have to hire more employees, and those employees would in turn spend more money, and the economy would be rolling again.


I hope everyone would agree that that plan would be very, very, stupid. But, why? More importantly, why would it be any stupider than the last two brands of stimulus we have tried? Bush borrowed money and sent checks in the mail in the hope we would spend it. His last stimulus package was seen as largely ineffective because many people paid off debts with it, instead of buying more junk. That wouldn't happen with stimulus cards!

Obama is taking a different approach. Instead, we'll hire people, put them to work on ......something. Who cares what? Then, they'll spend their paychecks. That's fine, but you could accomplish the same thing with a mandatory stimulus card, and would not be running up the national debt at the same time.


The more I think about things, the more I think that any plan that depends on manipulating consumer behavior is just stupid. If we really want to stimulate demand, it seems to me that Meadmaker's stupid plan would be the ultimate way to do just that. Despite that, it still seems awfully stupid to me. Maybe any attempt to manipulate consumer behavior is misguided from the start.

I don't want the Stupid Stimulus Plan to be taken seriously. However, I would like to hear why that plan is much stupider than other attempts to stimulate the economy via tax cuts, rebate checks, or public works spending. If you think there is a good way to stimulate the economy, I would like to hear why your plan is superior to the Stupid Stimulus Plan.

And if you can't think of one, I want the contract to run the datacenter to support the IT infrastructure for processing the stimulus cards.

 

[drkitten]

I'm going to describe an incredibly stupid plan to stimulate the economy. At least, it seems incredibly stupid to me. Maybe you will disagree. I want to hear comments on exactly what is stupid about it.

My plan is to take a certain amount of your income, proportional to your current taxes, and replace it with gift cards. [snip]
The purpose of this plan would be to stimulate demand again. Get people spending money. Wal-Mart would have to hire more employees, and those employees would in turn spend more money, and the economy would be rolling again.

Okay, several problems. In no particular order:

* Money is fungible; just because I can't spend this $100 on anything but clothes doesn't mean that I will spend $100 more on clothes. I'll just use the card for the $100 I would have spent anyway and spend the $100 cash on anything I like, including "disapproved" transactions such as paying off debt. So it's not likely to increase demand as much as you think.

* It would be quite expensive to carry out (cards and postage aren't free); while spending money is a goal of the stimulus plan, that doesn't mean it should be done stupidly.

* Spending money is not the only goal of a sensible stimulus plan. Part of Obama's plan is indeed to spend money, but he's specifically spending -- or trying to spend -- in a way that creates long-term jobs and longer-term infrastructure. Spending $100,000 to create or repair a bridge means that you now have a bridge you didn't before, which enhances the transportation infrastructure, which will be an improvement for the next fifty or so years.

* The money behind the stimulus cards would still have to come from somewhere (i.e. long-term debt).


It makes perfect sense that you need to spend money to make money, whether you're talking about an investment, a business, or a government. I may be able to become a millionaire from my photography -- but I need to buy a camera to do it. Building a new university will generate thousands of jobs and might pay for itself in improvements to the local economy --- but will also require millions in startup costs.

The trick is to spend money in such a way that it gives both short and long term benefits. It should put people to work now (building the university building) and create jobs in the future (when people educated at the university create spinoff companies like Google).

 

[Dan O.]

Okay, several problems. In no particular order:

* The money behind the stimulus cards would still have to come from somewhere (i.e. long-term debt).

That's not a problem but simply an added benifit. Increasing long term debt will ultimately lead to inflation which adds an additional stimulus for individuals to spend their money before they loose it. (should there be a smiley here?)

 

[kevinquinnyo]

* The money behind the stimulus cards would still have to come from somewhere (i.e. long-term debt).

Yeah but this is what he said:

My plan is to take a certain amount of your income, proportional to your current taxes, and replace it with gift cards.

This isn't creating new money, it's transferring your current income into gift cards, that have less purchasing power than cash. They are only allowed to be used for consumer spending.

That's what you meant right, MeadMaker?

 

[Toke]

Sounds like it would create inflation here and now, might not be a bad idea, it will reduce the mortage and credit card debt that is holding back consumers.
As if you effectively raised all wages.
It might cause problems somewhere else.

 

[kevinquinnyo]

Sounds like it would create inflation here and now, might not be a bad idea, it will reduce the mortage and credit card debt that is holding back consumers.
As if you effectively raised all wages.
It might cause problems somewhere else.

I don't see how it would create inflation. All it would do is create another form of currency (gift cards) to compete with the dollar. Would it not strengthen the purchasing power of regular old cash?

What am I missing here?

 

[drkitten]

I don't see how it would create inflation. All it would do is create another form of currency (gift cards) to compete with the dollar. Would it not strengthen the purchasing power of regular old cash?

What am I missing here?

It depends on how the cards are funded.

 

[Furcifer]

I'm going to describe an incredibly stupid plan to stimulate the economy. At least, it seems incredibly stupid to me. Maybe you will disagree. I want to hear comments on exactly what is stupid about it.

My plan is to take a certain amount of your income, proportional to your current taxes, and replace it with gift cards. Those gift cards can be used at retail stores, restaurants, or all the other sorts of places you use gift cards now. However, they couldn't be used on unprepared foods (i.e. restaurants are ok. Grocery stores are not.) Nor on medicine. Nor on rent or utilities. Nor on gasoline, etc. Consumer goods only, please. If you are subject to withholding, you would start getting gift cards immediately. Those of you who pay estimated taxes would see an extra boost in your taxes, and you would get the gift cards in the mail after you file your estimated taxes.

Of course, the "gift cards" would be renamed "stimulus cards".

Stimulus cards could be applied toward major purchases, such as automobiles.

The purpose of this plan would be to stimulate demand again. Get people spending money. Wal-Mart would have to hire more employees, and those employees would in turn spend more money, and the economy would be rolling again.


I hope everyone would agree that that plan would be very, very, stupid. But, why? More importantly, why would it be any stupider than the last two brands of stimulus we have tried? Bush borrowed money and sent checks in the mail in the hope we would spend it. His last stimulus package was seen as largely ineffective because many people paid off debts with it, instead of buying more junk. That wouldn't happen with stimulus cards!

Obama is taking a different approach. Instead, we'll hire people, put them to work on ......something. Who cares what? Then, they'll spend their paychecks. That's fine, but you could accomplish the same thing with a mandatory stimulus card, and would not be running up the national debt at the same time.


The more I think about things, the more I think that any plan that depends on manipulating consumer behavior is just stupid. If we really want to stimulate demand, it seems to me that Meadmaker's stupid plan would be the ultimate way to do just that. Despite that, it still seems awfully stupid to me. Maybe any attempt to manipulate consumer behavior is misguided from the start.

I don't want the Stupid Stimulus Plan to be taken seriously. However, I would like to hear why that plan is much stupider than other attempts to stimulate the economy via tax cuts, rebate checks, or public works spending. If you think there is a good way to stimulate the economy, I would like to hear why your plan is superior to the Stupid Stimulus Plan.

And if you can't think of one, I want the contract to run the datacenter to support the IT infrastructure for processing the stimulus cards.

Sounds like this proposal: Windsor Professor suggests cash with best before date

Seems like a plausible way to sustain a local economy.

 

[Toke]

I read it as you would get gift cards on top of your wages, according to taxes paid.
Basicly a year with no income tax.

 

[Toke]

It depends on how the cards are funded.

The printing press would work, so would borrowing/defecit spending.
Guess the presses would cause inflation, the borrowing not.

Gift cards may work for distribution the money needed to stop a deflation.?

 

[Meadmaker]

That's what you meant right, MeadMaker?

Yeah, that's it.

 

[Meadmaker]

Sounds like this proposal: Windsor Professor suggests cash with best before date

Seems like a plausible way to sustain a local economy.

So there's at least one guy with an economics PhD with a plan just as stupid as mine.

 

[Toke]

No not stupid, innovative.
You must realise that economic science is not an exact science and there will be some trial and error involved in telling brilliance from bat **** crazy.

 

[Furcifer]

So there's at least one guy with an economics PhD with a plan just as stupid as mine.

At least 1

I like the idea of people telling the Government what they want and making them do it. If it fails, then we have only ourselves to blame. Sitting back and waiting for Government is an even stupider plan IMHO.

Even stupider than both of these plans appears to be throwing $300 Billion at the banking system in the US. They should have took note of the Canadian system at the time and went from there. Break up the large banks, infuse them with script, implement the rules and regulations from successful models (from wherever) and get back to a system that has tangible assets backing them.

 

[kevinquinnyo]

You gotta think,

If it made sense to do these stimulus plans, and inject money, and reacapitalize failing banks, shouldn't the government be doing it all the time?

Once the economy is running full steam again, shouldn't the government do another couple trillion dollars of 'stimulus?'

I mean, if the cost of doing nothing is so much more than the cost of the stimulus, then this should be true all the time? Right?

 

[balrog666]

It won't work for the same reason Food Stamps, ,which by law, can't be used to buy cigarettes and alcohol, are used to buy cigarettes and alcohol - they are convertible to sweet, untraceable cash, albeit at a steep discount.

 

[drkitten]

You gotta think,

If it made sense to do these stimulus plans, and inject money, and reacapitalize failing banks, shouldn't the government be doing it all the time?

Hmmm Lemme think.

If it made sense to take penicillin, shouldn't we be doing it all the time?

Answer -- no. It makes sense to take penicillin when we're sick, and specifically when we have some sort of bacterial infection that can be treated by penicillin. If we take penicillin routinely, like candy, that will actually make us worse off (and make all the nasty germs penicillin-resistant).

If it made sense to wear bikinis, shouldn't we be doing it all the time? Not in the dead of winter....

Inflationary measures make sense when the economy is at risk of deflation. Deflationary measures make sense when the economy is at risk of inflation. "To every thing, turn, turn, turn, there is a season, turn, turn, turn, and a time to every purpose under heaven."

 

[TjW]

My position is that there's plenty of Stupid in the world already. It doesn't need stimulating.

 

[Furcifer]

If it made sense to wear bikinis, shouldn't we be doing it all the time? Not in the dead of winter....

Stimulus Package, not Package Stimulus.

 

[Puppycow]

I actually don't think there's a big problem when people use their stimulus checks to pay bills or credit card debt, or even put it in a savings account. Sure, it doesn't stimulate the economy in the short term, but if it helps keep more people from going bankrupt it helps in the long term.

Do we really think it would be good for the economy for American Express, MasterCard or Visa to go belly-up?
http://www.npr.org/blogs/money/2009/03/contest_you_dont_want_to_win.html#more

I'd like to recommend last week's episode of This American Life. In particular, there's a part that starts at about 35 minutes into it about household debt. Here's the chart they're talking about:

Maybe the problem is that regular people are too deeply in debt, and so what they need to do is to start paying down the principle on their debt. Economic pain may be unavoidable and trying to defer that pain by propping up the consumer will only make it worse in the long run.