New Mechanisms for Fiscal Stimulus
May 3, 2020
Idea: A Direct Payments System to Eligible Citizens with Built in Spending Conditions. Essentially, direct payments to individuals that can only be used to pay for services and certain goods. Creating greater control over what people spend their money on, allows for targeting of sectors and products to maximize each stimulus dollar and promote a greater multiplier effect for each dollar.
Problem: Ideas around Fiscal Stimulus by the government are based and built off of the ideas of John Maynard Keynes, specifically the idea of the Keynesian multiplier. In a gross oversimplified explanation, Keynes’s main goal was to jump start consumer spending to aid the economy. Keynes advocated for the government to spend when consumers could not or were unwilling to spend. Government spending would employ more people or keep more people employed and earning an income. They would intern spend the money they earned on goods and services therefore supporting business and industries, who intern employ people. So when a person buys a shaving razor or a radio, purchase helps the company making that item and the American workers they employ to make that item. This is the basic logic of the Keynes multiplier, government spending with have a multiple effect on the economy. Keynes' ideas worked very well for decades.
