Doughnut Recovery Plan has no hole in itWritten by Steve Hartman | | email@example.com
When I was in business school getting my MBA, one of my economics professors said, with absolute certainty, that any recession, no matter how bad, could be ended almost immediately if everyone in America would simply go out on the same day and buy a doughnut.
Once you’ve stopped rolling your eyes or chuckling about that, consider my professor’s fairly sound reasoning. If 300 million people went out on the same day and spent a few dollars, it would be an enormous cash infusion into the economy. It would cause a lot of money to change hands, and that is what the economy needs in a recession.
All the experts talk about loosening credit markets, juggling interest rates, cutting taxes and buying “toxic assets,” and they are all really trying to find ways to make more money shift back and forth between us all. That is a hallmark of a healthy economy, but there is a much easier way to get there than what Washington is attempting.
Of course we need to prop up some of our largest banks, because allowing them to fail would have catastrophic consequences, but we shouldn’t also be giving them part of this $825 billion bailout package to stimulate the economy, because it’s only going to have an indirect impact, at best, on spending.
It didn’t work with the first round of funds because the banks just used it to buy other banks and shore up their cash reserves, so why would we possibly think it is going to work this time? What the government needs to do to directly stimulate the economy is give a large portion of that money to us.
I can hear you saying “that wouldn’t work.” It didn’t work before when the Bush administration tried it by sending $600 rebate checks to millions of taxpayers.
Why didn’t that work to stimulate the economy? Those people (I didn’t get one of those checks) didn’t spend the money. It was too much money per person. If I got a $600 rebate check today, I would pay off some debt for the inevitable rainy day, just like the people who actually got that money did. If we want to be sure that the money we spread around gets spent, then it has to be the right amount.
My proposal is that everyone in America get money. Rich, poor and middle class alike, the government should send money to every single one of us. However (and here comes the important part), they should only send us $27 each.
Think about it: $27 isn’t enough to pay a credit card payment or the finance charges on that plasma TV you bought. Heck, right now it doesn’t even put a dent in your monthly gas bill. So what are we going to do with that money? We are going to spend it. How do we know, you may ask, that people won’t just deposit the checks in their bank accounts, mix this with all their other money and still pay off debts rather than spend? Well (here is the really beautiful part of my plan), we don’t send them checks.
That’s right — we send cash. Everyone in America, or at least everyone 16 and older, would get $27 cash in the mail from Uncle Sam. It would be in small bills, too, so it doesn’t seem like anything but pocket money. We should get three 5-dollar bills and 12 singles, or some combination like that. Think about it, what would you do with that money except slide it in your pocket or wallet to spend the next time you go out and need cash.
To really drive the point home, we shouldn’t send out any new bills. Give everybody $27 in wrinkled, old fives and ones, and I guarantee that money will get spent. It will buy gas, dinner, coffee and groceries. It may, for those of you who pay attention, pay your turnpike toll, and yes, it may even get spent on a doughnut or two.
Say there are 250 million Americans age 16 and older. If we send them all $27 dollars, we’re only going to be spending $6.75 billion. That is less than 1 percent of the total amount of the bailout package ($825 billion) that the Obama administration is proposing. But nothing they will do would have a more immediate impact on the economy than our $27.
Laugh if you must, mock if you want, but I defy anyone to come up with a more effective and efficient way of infusing a large amount of cash into the system to stimulate our economy.
Now, where is my $27?
Steve Hartman is an attorney in the Toledo firm of Kerger and Hartman.