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

[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.