I received an advance copy of an article from the financial pages of next weeks New Yorker, "A Smarter Stimulus", where James Surowiecki describes the pros and cons of Obama's plan to include more than a hundred billion dollars in individual tax rebates in his stimulus package.
Although his promised tax cuts are a surefire political winner, he has also earned criticism from both ends of the political spectrum, Surowiecki writes, "Skeptics on both sides worry that most people will save the rebate rather than spend it."
In the past, as in 2001, less than half of the tax rebate was estimated to have been spent, the article says. And while the results of last year’s rebate seem to have been somewhat more encouraging, much of it still went unspent.
Surowiecki also explains how people will either on spend or save depending on where the money comes from, "Casino winnings are more likely to be spent than, say, money from an inheritance." he says, "A key factor is whether people think of a windfall as wealth or as income. If they think of it as wealth, they’re more likely to save it, and if they think of it as income they’re more likely to spend it."
The article concludes: "On its own, Obama’s rebate plan isn’t going to resurrect the economy. But it’s a policy that works with people as they are, rather than as we imagine they should be. And that’s a stimulus in itself."
Available from January 26th, "A Smarter Stimulus" by James Surowiecki, New Yorker.
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