So, economic stimulus

[fivemack]

VAT has gone down by 2.5% as of 1 December, which means the fancy camera I want to buy could conceivably cost 15 quid less in the New Year than it does now. Of course, fancy cameras being made mostly of microchips, it's likely to cost fifteen quid less anyway thanks to process optimisation in the silicon foundries of Taiwan, but hopefully these are cumulative.

But the purpose of an economic stimulus can't just be to move lumps of consumption around by a few months; I don't think that even in the current climate it's necessary to run a big sale in November purely so that you have the cash to pay the salaries for your shop workers in December.

So Alistair Darling's job is to make Britons more profligate than they are now for the next two years (despite the financial mess being, as far as I can see, a function of a decade of unbalanced profligacy) and more frugal than they are now for at least four years to follow. I don't see how subtle tweaks to the tax system can do this; indeed, I don't know if it can be done. Interest rates are the obvious instrument, but profligacy and frugality are functions of upbringing and circumstance in that order; after-tax interest rates on straight savings accounts are now below the rate of inflation, but this has meant that I grumble slightly, keep most of my money in just-as-insured short-term bonds, and devote slightly more to the stock market where there's a possibility of higher returns.

What government policy would make you go out and spend more in February?

Comments

[jiggery-pokery.livejournal.com]

A version of Taiwan's shopping vouchers (http://news.bbc.co.uk/1/hi/world/asia-pacific/7735027.stm), with a few alterations. Firstly, you would have to make the vouchers redeemable in February alone, which is hard luck for Britons on holiday throughout that month, but if you're able to holiday through the winter then a voucher is unlikely (though possible) to mean too much to you. Secondly, you would have to only be able to spend the voucher on things that you weren't otherwise going to purchase, so you can't merely use the voucher to buy essentials and displace the value of the voucher towards saving or debt repayment.

At this point, you may as well have the government start a bicycle enterprise and manufacture a bicycle to be given free of charge to every man, woman and child in the country - arguably more than one for every child.

[pavanne.livejournal.com]

I like the bicycle idea! And then we will have less bicycle theft. Though I suspect the economies of Cambridge and Oxford are actually powered by bicycle theft, so possibly this would not increase the amount of economic activity overall.

I expect I'll be spending more in February if my employer doesn't send me to Foreign Parts, which has two negative effects on my consumption: I'm not here to spend money, and I run up massive expenses which make me nervous until they're paid a month later.

[redbird]

Those vouchers sound like a more focused version of the "economic stimulus" checks the US government sent out back in the spring. I jokingly told people I was spending mine in Montreal, which is not exactly what they had in mind. Some people spent theirs on things they would have bought anyway (meaning, in theory, saving a bit of money, or not going further into credit card debt), but they do seem to have temporarily increased sales of things like new clothing and bicycles, which people sensibly want but in at least some cases could wait for or do without.

Since they were sent as checks (or direct deposit if people had that set up for their income tax refunds), the money could go anywhere, including savings, your favorite charity, or overseas. With vouchers, you couldn't do that, but you also couldn't get an annoying leak fixed, pay someone to paint your house, or get a massage, so it skews spending toward things rather than services.

[fivemack.livejournal.com]

I like the bicycle idea, but I'm not sure it's enough stimulus; bicycles made in that kind of bulk would cost no more than a hundred pounds each, which times sixty million is just over a third of what the government is spending to recapitalise RBS.