Stimulus? What stimulus?
Kevin Drum reviews the schedule for the stimulus checks. It’s based on the last two digits of your Social Security number. He also dug up the online calculator to help you figure out the size of your check.
You really don’t need a calculator… you get $600/person or $1200/couple unless you make either very little money or lots’o'money. None if you owe back taxes.
Economists have pretty much unanimously concluded it will have only a modest impact. We’ll be buying gas and paying off debt!
Dan Ariely, the MIT behavioral economist and author of Predictably Irrational, was on Marketplace weeks ago arguing that we should be experimenting with how we give it out:
The U.S. government’s recently announced $153 billion stimulus package is supposed to rejuvenate the economy and stabilize the market.
Will the current plan achieve its goal? That depends.
The field of behavioral economics has rather convincingly shown that money given in different forms can have different effects. For example, paying for dinner in cash feels very different than paying the same bill with a credit card. And an increase in monthly salary has a different effect on a person’s spending than the same amount in an equivalent yearly bonus.
These results suggest that how you deliver the stimulus package will have a considerable effect on how the money is spent. Individual tax relief is different than tax rebates, which is different from giving money toward retirement saving, gift certificates, or pre-paid debit cards.
Given that the method of delivery could make a large difference, which approach should we choose? The reality is that we just don’t know. Which is why we should conduct an experiment.
We force drug companies to test the efficacy of their drugs before rolling them into the market. So shouldn’t we ask the government to first test its ideas before it invests billions of dollars of our tax money into some stimulus package?
Well, yes, we should. And maybe if the goal were really stimulus rather than the quicker and easier political benefit of a check in the mail to constituents, we would.
One Response to “Stimulus? What stimulus?”
Paying off debt indeed. That's where my “stimulus” is going to go. Creditors. I wish it weren't so.
Sadly, I believe that Joe is correct in his agreement with Mr. Ariely – the government should really test it's economic 'theories' before simply cutting millions of checks.
What I find humorous (in a sad kind of way) is that people think that this is 'free money'. Most folks that I have talked to don't realize that it's not free money – it's either their hard-earned taxes being re-returned to them, or it's a big-ass-loan from China or Dubai.
But, I would imagine that George W(ar). Bush will see an up tick in his approval numbers when so many Americans get their check and fill up their gas tank.
Ick.
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