Thursday, 19 February 2009

How can $8 a week help?

The stimulus bill that President Obama signed Tuesday includes $116 billion in tax credits that will come largely through reduced tax withholding from paychecks, over two years. That will put $8 a week into most Americans’ paychecks. So if you’re getting an extra $8 each week, and as a good citizen you want to do your part to get the economy going, what should you spend the money on, and why? The answers from a survey of economists are here. But a few examples are:

Tyler Cowen's answer is
In my view, fixing the banking sector is more important than getting the stimulus right. So if you can afford to lose the money, go to a large bank (more likely to be insolvent), find their most overpriced service, and buy as much of it as you can. That way you are doing your part to recapitalize our banking system.

If you’re stuck for ideas, just keep on using ATM machines, owned by other banks, so you can pay large fees to take out small sums of money from your checking account. When you need to, take all of your withdrawals and deposit them back in the account once again and start all over with the process.
and Greg Mankiw's answer is
How about buying a good economics textbook?
Ethan Harris's answer
Get a haircut. It is a purely domestically produced service with extremely high labor content. This means no drain in spending power out of the country: it is “Buy American” without violating any trade agreements. It also has a high impact on employment due to the high labor content. Finally, an $8 haircut–as opposed to the $100 variety– is probably being done by a low income person who is likely to spend rather than save the 8 bucks, ensuring strong second round spending effects. We will groom our way to recovery ...

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