Everyday Economy

Why not just give me $10,000?

This may be a little macro for this blog, but CNN.com has put together a good Q-and-A about the economic stimulus package. If you're trying to get your mind around some of this stuff, it's a good place to start.

The post starts with a question that a lot of us have asked: Instead of giving huge sums to banks, why not give $10,000 to each family in the country? Wouldn't that stimulate the economy?

Two economists answer. One, Lakshman Achuthan, managing director, Economic Cycle Research Institute, is dubious about the $10,000 plan.

"The government could give money to you or me, and that would create demand, which could be a very good way to break the recession. But you and I are not very confident about the economy, and if you think about what I'll do, there's a good chance I'm going to save it.

But the government is looking to have that money get spent and to have it multiplied somehow. Our economy is based on people spending money. So people saving money doesn't help."

The second economist, David Laibson of Harvard, sees it differently.

"Some economists believe that transfers to individuals will not stimulate the economy, since the recipients will save a large fraction of those transfers. The evidence is mixed.

In the short-run (a few months) it is true that a large percentage of the transfer would be saved. However, over the next two years, low-income households would spend most of the transfer.

A stimulus package should include both government spending and household transfers, particularly transfers and tax cuts for low-income households."

Read the whole thing here. There are a lot more questions answered.

What do you think? What would you do with your imaginary $10,000 stimulus check?

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Everyday Economy is a blog and weekly page in the newspaper dedicated to the way people are living their financial lives. Shawn Vestal, a longtime Spokesman-Review writer and editor, is overseeing the project.



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