It doesn't take a genius to understand that part of the current stimulus package is about a return to spending by the citizens.
Most of us are trying to save money like mad, because:
1. The banks are not lending as easily or as readily as they once were
2. Invested fortunes have disappeared
3. Gas prices, food prices, all prices, have gone up considerably.
4. Jobs can disappear without a moments notice
The list above is not the problem, but a symptom of the problem. Our government and its financial advisor's believe that if you treat the symptoms, you cure the ill. This does not work. But for the sake of this ongoing blog, we will NOT debate the cause of said symptoms. Instead, we will roll out implementation, offer up alternate approaches, and cut to the bone.
The biggest part of this Economic Stimulus Package puts money back in people's pockets through payroll relief. The idea appears to be that an extra $9 in your paycheck will be used on something like a movie, going out to eat, etc...
RATIONALE and PROBLEM: The idea of timed distribution instead of one lump sum supposedly encourages usage over time. With that "pay raise" mentality, the psychology is that people will use up to their means. And in normal times this might be true, but we are in the "hoarding" mode. Which lacks complete rationality to begin with.
People will still save the money instead of spending it.
SOLUTION: The solution is truly a no-brainer and can be found in a recent government program. Over the last year, the government issued hard plastic discount cards for the highly anticipated (and poorly conceived) switch to digital TV. Each discount card was actually a credit card with an expiration date. (sample on right)
Using this model, the Fed can issue Tax Rebate cards the same way. Why rebate cards?
Cards offer a certain control/flexibility engine:
1. The cards can expire after a certain amount of time (say 1 year) returning the unused balance directly to the Fed)
2. The cards could not be redeemed for cash
3, The cards could be used for anything that you could pay with a credit card
4. There may be a mechanism in place to make certain that they can only be used domestically. This may include a ban on internet purchases which would also help local economies.
I am also pretty certain that once you activate your own card, it may be possible for the Feds to create a refill date. For instance, you get $200 for the first six months of the year and $200 for the second six months. But even the full amount WHICH HAS TO EXPIRE, would force citizens to spend it.
Spending is the key here folks.
A tax break to a failing economy is only good if people use the money.
Now, our consumption of durable goods is a conversation for a different day, but this part of the stimulus package was ill-conceived. My plan is better because it forced usage within a time frame or forfeiture.
The other elements will be discussed in full, but for now, it is time to break one element apart at a time and redesign it.
Oh, and the goal is not to argue, it is to brainstorm, so if you have any out-of the box approaches like mine, please post them here.