Gift Cards as an Economic Stimulus

A discussion of classical and Keynesian economics was taking place on the subject of government spending and the stimulus package(s) arose.  Many people received a stimulus check in the mail this year for $600 dollars or some other amount greater or less than that depending on how many dependents they had or income, etc.  The basic idea of the check is to get people to spend money, boosting they economy.  This idea is derived from Keynesian economics.  The problem is, people use the check to pay off debt or they put the check into savings since it is not a permanent increase in their wages/salary, they don’t necessarily want to spend it frivolously.  This results in a failure of the principles of Keynesian economics.

A tax cut would work just as well as the proposal that follows, allowing people to have more after tax income resulting in more spending, but I like my way better.

Gift cards.

Instead of writing everyone a stimulus check, the government would offer gift cards to it’s citizens.  

1. People would have a choice of what gift card the would like.

The government could give everyone a choice of whether they would like a gift card to Walmart, Target, Lowes, Home Depot, The Gap, Sears, Dick’s Sporting Goods, JC Penneys, Khols, or ten of other places.

2. The cash is already stimulating the economy.

This is the largest fallacy of stimulus checks that I mentioned above.  People were not necessarily spending them.  If the government would offer citizens gift cards, they would have to purchase the gift cards from the retailers first, putting money directly into the economy and bypassing non-stimulating actions citizens can do with cash.  However, the citizen is still rewarded.  

3. What if people just save the cash that they would have spent, by using the gift card?

Yes, on some occasions this will happen, however, it is more likely to increase spending on a whole.  I think it is some what of a psychological trick when you receive a gift card.  From personal experience, I have gotten 20 dollars to Target and I go in and look at what they have for sale.  Suddenly items that I wouldn’t dream of spending 30 or 40 dollars for are “subsidized.”  I only have to put 10 or 20 bucks towards them out of my own pocket to get that item.  It seems a much better.

Now think of that on a larger scale.  The government gives it’s citizens gift cards worth 500 dollars.  One of the choices is say, for Circuit City or Best Buy.  You walk in with a 500 dollar gift card and look at televisions.  Suddenly that 750 dollar TV that you wouldn’t every pay for using your own cash, is now more attractive because all you have to do is put 250 dollars of your own money towards it and the government has given you the rest.

4. What stops people from stealing the gift cards out of your mail box when the government sends them?

This is simple–security checks.  The government can use the same philosophy as the major credit card companies.  When a gift card is received by a citizen, they have to call a telephone number and type in their social security number and/or perform some other task to activate the card.  The government could either set up a system to do this–creating jobs–or outsource it to one of the major credit card companies or a series of them, since they already have large amounts of information on citizens already.  

How many people receiving a stimulus gift card, already have a credit card?  I would wager that many do.

5. What if I don’t like any of the places the government offers gift cards to?

This can also be addressed relatively simply.  The government can provide you with vouchers that have no cash value to citizens, but act as cash for businesses.  Think in terms of the government subsidizing the digital converter box.  They send you a card that you take into Walmart or wherever, and it reduces the price of the converter box.  Vouchers would use the same concept.  The government would issue citizens who do not want a gift card to a certain store/business a series of vouchers.  Vouchers would come in some smaller increment as to allow for flexibility and to encompass smaller purchases.  If everyone is getting a 500 dollar gift card to Walmart, but you want vouchers, you can receive ten 50 dollar vouchers.  

The vouchers would:

• allow for smaller purchases
• allow for use at small businesses 
• have to be completely consumed at the time of purchase (which is why they are in smaller increments)
• have an expiration date (With gift cards, the money is already in the economy.  We don’t want hundreds of thousands of people taking out vouchers and just holding onto them–that would defeat the point of the stimulus)

The vouchers would not:

• allow for change in cash
• be usable outside of the United States (the whole point is to stimulate our economy)

Obama, McCain, Kanye West, Jesus

I was getting ready for bed and had already turned off my computer for the night when it hit me why I don’t care anything about Obama and McCain but feel connected with Kanye West or Jesus.  

Look at it this way.  Obama and McCain are out there struggling to sell themselves to you by any means.  They are trying to find that one hand hold on you and they will grab on and never let go.  For Obama it’s lowering taxes for the middle class, for McCain it’s energy indepence or whatever.  It’s not really important to the point of this post or to me.  And that is the point.  Their messages are so forced, that I can not relate to them.  I don’t really care, it is of little consequence.

Sure I will be met with some annoyances later in life–taxes, laws, other policies that I will have to abide by.  But it is a pitance compared to the influence the other two men have on me, and will continue to have on me.  Why is it they have such an influence you ask?  It’s because I can actually relate to them.  They aren’t out their ruthlessly promoting themselves, their message brings followers.  

Look at these quotes:

“Everything I’m not made me everything I am.” - Kanye West from his song “Everything I Am”

“What He has seen and heard, of that He testifies; and no one receives His testimony.” - Jesus from John 3:22

Kanye’s can be looked at from a stand point of less is more.  He didn’t need to promote himself once his message was out there.  People just agreed with it and boom, he rocketed up the charts and now has an epic following.

The passage Jesus said from John 3, I like because it can be applied to politics of today.  Obama and McCain are just rehashing what they have seen and heard.  They try to force what they think the public wants into their message and hope they get some votes.  The problem is that everyone knows that not all the “change” they speak of will be acted upon.

For a message to be good, it needs to be simple and move people on the most primative level.  Politics will never be that, and I for one can’t relate.