Wednesday, January 21, 2009

Stimulus Gift Card

A little over a month ago, ThinkOOB suggested offering stimulus checks in the form of gift cards that expire after some period of time. They claim it would prevent people from saving the stimulus money. And they are right. Well, sort of. Can you spot the economic fallacy? These folks couldn't...
nerdrevenge Says:
December 1st, 2008 at 1:13 pm
I was a fan of this website before this idea showed up and now I am an even bigger fan. who comes up with this stuff and why isn’t anyone doing anything about it? This seems like something that someone should know about

policywonk Says:
December 2nd, 2008 at 6:46 am
This is why I alwyas check this site every week, because of stuff like this — We need to do this right away! Why didn’t they do this the first time? [...]

philr Says:
December 2nd, 2008 at 9:04 am
this is a GREAT idea. how do we get it “out there” so that it gets noticed other than by people like me who pore through policy blogs? You should have a links so that people can automatically forward these things to their congressperson

jimcalhoun Says:
December 4th, 2008 at 6:40 pm
the problem is that there is no way of getting the right people to listen. Anybody who reads this is going to say, duh, we should do this. BUt who is reading it? I see a lot of what looks like students and policy wonks but no one who can make it happen
Personal favorite:
bceconomist Says:
January 5th, 2009 at 5:05 pm
anyone see the Globe today? Ed Glaeser was lamenting that no one had come up with an idea to get people to spend their stimulus checks. Those Harvard people have to read this website before they mouth off in the paper. You don’t see us making that mistake.
Fortunately, someone eventually spoke up.
Will Says:
January 21st, 2009 at 3:23 pm
You have overlooked an important fact: MONEY IS FUNGIBLE. (Go look that word up, kids.)

So while soccer moms buy groceries on their stimulus cards, they reduce spending from other sources of income. The net effect of the stimulus card is probably comparable to a stimulus check. At best, you’ve made it minutely more difficult to save the additional income provided by the stimulus.

Although gift cards would prevent people from saving the stimulus money, they would not accomplish the actual goal of boosting aggregate demand. Remember: you cannot assume that people will not react to change. They usually do.

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