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Money and Main Street
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Why can't we split the money among taxpayers?
Why can't we split the money among taxpayers?
Colleen Hargis, 43, is a computer instructor at a local university.
Question: "I often hear, 'If they want to stimulate the economy, why don't they give every taxpayer $10,000?' People would buy cars, go on vacation, pay for college, buy TVs, etc. That sounds great to me. Would it work?" -- Colleen Hargis, Springfield, Mo.

Expert: Lakshman Achuthan, managing director, Economic Cycle Research Institute

Answer: "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.

For an individual, I would say it's a good idea to build up your savings and to tighten your belt, because there's so much uncertainty about how long the recession will last.

But the advice you give to policymakers when you want to revive the economy is to get people to spend money.

So I don't think that it would be a good idea to give everyone $10,000. That would preclude some very important triage from happening, such as funding unemployment insurance or getting state and local government financing needs met.

However, I would like the stimulus that comes out to have some support for households."

Expert: David Laibson, professor of economics, Harvard

Answer: "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."

NEXT: Give consumers debit cards instead of checks?
Last updated April 14 2009: 11:56 AM ET
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