Thursday, September 30, 2010

King's Stimulus Plan

Everyone agrees we have to get this ecomony moving again.  Everyone has their idea on how to accomplish this.  Republicans think more tax cuts (especially for the rich) will do the trick.  Democrats think they can spend their way out of rough times.  I kind of lean toward the latter, but the problem with most spending stimulus plans is people don't spend.  We give tax rebates to people for buying new homes, appliances, cars and who knows what.  The problem, most people just put the money in the bank instead of spending it.

When I am King, all stimulus rebates from the federal government will be in the form of prepaid Vista cards.  You can use them just like cash and buy almost anything.  Here's the kicker.  If you don't spend the prepaid amount in one year, you lose it. 

I am pretty sure most people will spend the money.  More money spent, more products need to be made, more jobs are created.  Let's get things moving again.

10 comments:

  1. I'd like to add an additional caveat: These hypothetical cards can only be spent on services or goods manufactured in the U.S. It's about getting the local economy moving, right? So - in economic terms - buy haircuts, not widgets. I'd certainly spend that on getting my car fixed, which puts money directly in the pocket of the service tech and a locally owned shop.

    Or am I just being too local-centric?

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  2. Good idea -- but their isn't much made in the U.S. anymore.

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  3. This couldn't possibly work. It doesn't matter which pocket money comes from when you spend or save. It's just an accounting gimmick. If I buy my groceries with your card and save the difference from my salary nothing grows but my evil savings account and the bottom line of the bank issuing the prepaid cards.

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  4. donK has a point, but I think it could be possible with some thorough planning. People might be more likely to spend money that's on a card because it won't seem like it's coming out of their accounts.

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  5. Did you guys miss the part where you have to spend it or lose it -- No saving.

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  6. So, instead of putting the money in the bank and spending it from there, people will use the cards until they're zeroed out and then continue to spend money from their bank accounts after the cards are depleted. The only difference is that the prepaid cards won't generate interest before they're spent. I don't see how these cards actually encourage people to spend more, which is your goal.

    As rebates are now, most people don't get them from purchases because they either don't bother to fill out the necessary forms or they fill out the forms incorrectly.

    I think of rebates as being similar to tax returns. A lot of people will go out and splurge. A lot of people will put the money in the bank and draw on it gradually. In both situations, the money gets back into circulation in the end.

    I don't think that average families having a couple thousand dollars in the bank to cover emergencies/future expenses (kids' weddings/educations) is what's causing our economic difficulties.

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  7. If I use the card to purchase something I would normally purchase anyway, food or gas, instead of using my credit card, and make the payment to my savings instead of Visa, it's out of one pocket and into the other. Food Stamps can only be used for food, and likely will be by most recipients, and it frees money that would have gone to food for other things like clothes or rent, but that money could also be used for beer or drugs or evil savings accounts.

    If the lack of consumer spending is the problem and personal savings are making things worse, print money. Rampant inflation will cause people to draw on their savings and wipe out the value of money not spent on something tangible. On top of penalizing individuals and corporations for not spending every dime as soon as they can the government benefits from first use. Its dollars are worth more before they're spent than after. It's done wonders for Zimbabwe.

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  8. This works well if you're a fan of Keynesian economics. Of course, as mentioned above I can just spend your card and save extra money from my paycheck. Since some politicians (though few economists today) feel saving drags the economy down, perhaps we should just ban private savings accounts (along with periodic checks for money under the mattress), that will get people spending. :-)

    I would also add to donK's comment on Food Stamps -- while they are supposed to be spent on food, there are several ways to convert them to cash and a black market in cash for food stamps. If people really want to buy beer / drugs / whatever instead of food, they will do it.

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  9. The prepaid visa card had been implemented in Taiwan in 2009. People got a special kind of money where it can be used to purchase goods but cannot be deposited into a bank account. It did boost the economy a bit. It help clean excess inventory for some businesses. But tax payers will have to pay it in the future.

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  10. This works well if you're a fan of Keynesian economics. Of course, as mentioned above I can just spend your card and save extra money from my paycheck. Since some politicians (though few economists today) feel saving drags the economy down, perhaps we should just ban private savings accounts (along with periodic checks for money under the mattress), that will get people spending. :-)

    I would also add to donK's comment on Food Stamps -- while they are supposed to be spent on food, there are several ways to convert them to cash and a black market in cash for food stamps. If people really want to buy beer / drugs / whatever instead of food, they will do it.

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