The government sometimes issues stimulus checks in the hopes that the windfall will induce people to spend and stimulate the economy. Regardless of the merits of this idea generally, the effectiveness is partly reduced because people choose to save the money rather than spending it.
So: What if, instead of issuing stimulus checks, the government issued “exploding debit cards”, which have to be spent in a given time period or the cards cease to work?
This would seem to have several advantages over stimulus checks:
- Rather than cutting checks knowing that some of it will be spent, the government is handing out cards knowing that almost all of it will be spent. This means the dollar amount can be less in order to achieve the same stimulus effect. (Even though this is a political consideration, not an economic consideration.)
- It gives the government more fine-tuned control over when the money is spent — you can issue the cards to different subgroups at different times and require the groups to spend the money in separate time frames.
- Since the card balance is difficult to convert to cash, this reduces the chance that the money will be spent on illicit purchases the government may want to prevent.
Some people would still find ways to work around it — perhaps by buying goods they could re-sell for cash, or selling their cards for cash (if merchants are lazy about doing ID verification), or buying goods and then returning them for store credit — but, given the effort required, the number would be much lower than the number who would simply save their stimulus checks instead of spending them. (Many people would prefer to save, but the goal here is to achieve a specific economy-wide outcome, not to give every person what they would prefer.)
Not everyone agrees with the merits of issuing stimulus checks. But it seems that any argument in favor of stimulus checks would be an even stronger argument for using exploding debit cards instead. Am I missing something?
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