Why Not Another Stimulus Check, Obama?

I have avoided writing about Obama’s economic stimulus bill for the most part.  This is partly because it’s already so well-covered in the mainstream media and on other blogs, partly because I don’t feel like I have much to add to the debate, and partly because I really have no strong feelings on it one way or another (unlike everyone else, it seems).  However, Curt wrote an interesting post earlier in the week about how he would prefer a stimulus check to a tax deduction, and it got me thinking.

The Proposed Tax Deduction Won’t Stimulate The Economy

I am not particularly a fan of this year’s stimulus payment for the same reason I did not approve of last year’s plan:  I don’t believe it will work and even if it did, I don’t think it’s worth the additional debt.  Actually, I believe this round of stimulus payments will be even less effective than the last round, and here’s why.

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The main complaint many people had with Bush’s stimulus checks was that it stimulated the economy temporarily in the quarter they were issued, but had no sustained impact.  To mitigate that and attempt a more sustained stimulus effect, the current administration has opted to structure the stimulus as a tax deduction rather than a one-time payment:  instead of seeing a one-time lump sum check, eligible tax-payers will receive a tax deduction, worth about $12 per week.

So what’s wrong with that?  For starters, most consumers are unlikely to notice an extra $48 per month in they bank account.  Sure, $48 is a God-send when you’re struggling to put food on the table, but it isn’t enough to stimulate spending and prop up the consumer economy.  Think about it, when you received that $600 check last year, many of you probably thought “Great!  Now I can afford to book that cruise/buy that DVD player/buy new rims for the Dodge Charger.”  It was a sort of mini-wealth effect in action:  you suddenly have an extra $600 in your pocket and seek ways to deploy it.  You very well may decide to simply pay down debt or invest, but there are a lot of people out there who couldn’t resist a shopping trip.  After all, if Americans were responsible with money we wouldn’t be in this mess to begin with.

Will an extra $48 per week stimulate additional spending?  I don’t think so because it’s not enough money at a time to make me feel wealthier.  I’m just not going to consciously think “I can afford to eat out at a nice restaurant this week because of that extra $12 in my paycheck” the way that I might if I received $600 all at once.  And I don’t think anybody else will, either.  Mr President, can’t you just write me a check and be done with it?  I promise to spend it foolishly!