mad anthony

Rants, politics, and thoughts on politics, technology, life,
and stuff from a generally politically conservative Baltimoron.

Saturday, August 22, 2009

Giving people money for being at the right place at the right time...

I saw this article posted in the off-topic section of a forum I read pretty regularly. The article is about a NY state program that gave money to food-stamp recipients to buy school supplies for kids - but that many suspect was spent on video games and other items instead of school supplies. I'm not going to debate the merits of that program, but rather a quote from the article:

hough all the grants may not be used for school supplies, getting cash into the hands of those who don't have it stimulates the economy faster because they spend the money sooner than wealthy people, said economist and social worker Irwin Garfinkel, a professor at the Columbia University School of Social Work.
"In terms of the stimulus, you couldn't do better," Garfinkel said.

Yup, that's what "stimulus" has become - it's better to take money from people who want to save it for future wants so that you can give it to other people who don't have as much money, because it's better they spend it on stupid shit now than have the people who earned it spend it on what they want to spend it on later.

Now, while I'm not a fan of welfare or unemployment, I tend to see them as necessary evils. They provide negative incentives - if people can get paid to not go to work, or put off getting a job until benefits run out, some people will take advantage of it. But the reality is that those programs also help make sure kids don't starve, and that probably offsets the negative incentive - at least you are giving money out based on an actual need.

But of late, it seems like we are just handing money out to people for being in the right place at the right time. Cash for Clunkers, where we destroyed perfectly good cars in the name of saving the environment, was a handout to people who happened to own a vehicle that fit the government's definition of a clunker. The first-time homebuyer tax credit is a handout to people who happen to be ready to buy their first house during the right year. The mortgage relief program, Making Homes affordable, was a handout to people whose mortgages happened to be underwritten by certain agencies. The newest one is the Appliance Cash for Clunkers program, a handout to those whose fridge is up for replacement at the right time. We are no longer even redistributing wealth from people who have "too big" a share of the pie to people who have "too small" a share of the pie - we're just picking numbers out of a hat and giving them extra pie.

Now, you might be thinking that I'm bitter because I don't qualify for any of these programs. And you are right. And if I did, I would be taking advantage of them. But I think that redistributing wealth in general is a bad idea, and redistributing wealth to random people who happen to be in the right place at the right time is even worse.

And the other big problem I have with much of the stimulus programs, including the ones above, is that the government is expressing a preference for immediate consumption over saving - which is exactly the opposite of what they should be doing. Sure, immediate consumption might be good for the economy short-term, but long term we are punishing savers and rewarding spenders - and too much spending and use of credit, and not enough savings, is exactly what got us into the current financial crisis.

And quotes like the one I started out this post with make the assumption that money that is saved is wasted - that it's hidden under the mattress - when in reality savers put their money in the bank, or invest it in stocks and bonds and other financial instruments. That means other companies and people can borrow that money and spend it on things they want. At least, that's what happened before the government started throwing piles of money at the banks, which made them need depositors a lot less.

I'm not a fan of government stimulus in general - I'd rather just endure the pain and let the economy recover on it's own. But if the government is going to do something, I'd rather see them do things that benefit everyone - like lower taxes or road construction projects (since almost everyone drives, and even those who don't still consume products that are carried by trucks on roads), rather than just hand out money to people who happen to be lucky enough to be in the right place at the right time.



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