The basic idea behind incentives is to motivate a specific action; you don’t complete that action, you don’t receive the incentive. While that all sounds simple, apparently our policymakers don’t get it.
Under the Bush administration rebate checks were doled out with the hope the money would be spent to stimulate the economy. Much of the money was saved or used to pay down debt. Now Obama wants to extend the tax reduction for payroll taxes, the savings for workers during 2011 apparently not used to buy stuff either. This isn’t surprising because if you give someone a chunk of money he is going to use it in a way that best meets his immediate needs (common sense not a degree in economics).
If we have money to spend (eh, that’s money to borrow first) why not use it so that the intended goal for the incentive is guaranteed to be reached. In this case if the goal is to stimulate spending and hence jobs, you don’t get the incentive until you buy something. Doesn’t that argue for sales tax holidays or perhaps some really quirky idea like national coupons (reverse ration stamps if you will – if you know what they are you may be as old as I am).
Working with private business the government could subsidize coupons for the purchase of a wide variety of products and services (but not necessities that must be purchased under nearly all circumstances). Businesses could add to the value of the coupon if it wanted to and run sales coordinated with the gradual release of the coupons to further boost sales Additional buying would likely be generated while people are claiming their coupons. And, some of the cost of the program would be recouped through higher tax revenue as a result of higher sales for businesses of all sizes. Talk about extreme couponing!
If you want to keep the left happy only give the coupons to families earning less than Warren Buffett.
QUINNSCOMMENTARY 