Current Affairs

The American Gift Card

[Update: Be sure to read Dan Newman’s comment to this post! Dan was the author of the op-end and has his own blog here.]

The American Gift CardSmall business owner Dan Newman writes an op-ed in today’s Washington Post advocating that the government issue gift cards to help stimulate the economy.

Unlike the earlier stimulus checks, Newman’s proposed American Gift Card couldn’t be deposited into your bank account and saved – you’d only have the option of spending it.

By sending every taxpayer a $2,000 debit card, the government stimulates spending directly. The card doesn’t get deposited with a bank, a step that greatly reduced the use of last year’s rebate checks for new spending, and with a defined expiration time, perhaps a year, the program could help precisely while other programs get underway.

The American Gift Card could bear a picture of Lady Liberty, since it may be used for whatever taxpayers wish: smarter clothes, dinners out, a weekend away, a new heater. And as gift cards tend to be used in person, they are of particular interest to local businesses.

A nice, creative idea!

The Feds could time the release of the gift cards – a Presidents’ Day gift card, Memorial Day gift card, Labor Day gift card, generic Winter Holiday gift card, and even one on your birthday! This idea has legs!

2 replies on “The American Gift Card”

That’s true: money is fungible, and people could effectively save at least some of the Gift Card amount. That significantly dampened the stimulus effect of last year’s rebate checks.
But if people save every penny of it, the program carries no cost: $2,000 goes to you, then back to the government years later. Even the interest goes to you and back. Despite the huge foreign reserves of Japan and China, foreign lending is s small portion of federal debt, as only one in six Treasuries is owned overseas; we borrow mainly from ourselves.
Such absolute saving is highly unlikely. Spending rates are far higher for credit programs than for funds received through rebate checks or deposits. If you hand $2000 to the man on the street, he’ll have strong incentive to spend a least a portion more than usual. The “marginal propensity to consume” varies with income – Bill Gates may change his habits less than I will – but it’s always more than zero.
Here are the other two most common questions about my article:
– Do we really want more consumerism?
Whatever your views on “consumer culture,” in the short term there’s one and only one thing that keeps businesses from folding, and that’s consumer demand. An immediate stimulus can keep us from adding to the millions of unemployed. bridging the gap until the necessary new jobs are created.
And yes, such spending will help your corner store. Despite the astounding number of goods “Made in China,” well over 80% of American dollars are spent on domestic goods and services.
– Will such a gift card increase our wealth?
No. Those of you pointing out that we’re just borrowing from ourselves are exactly right, and for now, that’s a good thing. While there may be benefits to a higher rate of saving in America over the long term, the swift drop in spending is causing substantial pain. We can start cheering about reduced consumption after people stop losing their jobs.
I see some Darwinists supporting this “purge of the weak,” but when good people and businesses fall along with the rest, the problem deserves urgent attention.
Tax cuts have proven themselves the wrong approach to such pressing trouble. They may have other benefits, and I support expanding exemptions from the Alternative Minimum Tax, for example, but we shouldn’t confuse them with immediate stimulus. When your house is on fire, there are things to do before choosing a new sprinkler system.
Don’t underestimate the burning need. The 600,000 jobs lost last month are most remarkable in that they represent only one sixth of the the total losses since the start of the recession. We need relief now, while all other plans take root.
The $2,000 gift card isn’t meant to be a full solution. It’s a tool we can put in the hands of every American, right now, this week.
I’ve posted more information on the idea and Scott’s thoughtful summary at:

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