One Economist’s View: Gift Cards for All

I attended a talk by economist Dr. Irwin Kellner this morning at an Association for Corporate Growth event. I have known Irwin for 20 years and have listened to many of his talks at various events over the years. He is super knowledgeable, clear and entertaining as well.

His bottom line: unless the Administration does something major, we are headed for a double-dip recession pretty soon. The stimulus has done little to help because only 20% has been spent and unfortunately, in his view, the projects were based on the needs of Congresspeople, not what will create jobs. Another stimulus would be just as difficult. And consumers drive 80% of the economy but have not been spending because jobs are lost, people are underemployed or stopped looking, and if they have a little extra money they are trying to rebuild savings lost when their home and stock portfolio values dropped.

What’s his idea? Use another $700 billion to give everyone who is not in jail or permanently hospitalized a $3,000 gift card to use at any retail establishment. It must be used within some short period, and presumably the multiplier effect would kick in. It is better than giving people cash, he states, because one cannot save it or use it for a non-stimulating purpose such as paying off debt.

Unfortunately, Irwin laments that politically such an idea would never fly because it does not help anyone’s district in particular. He is a non-political guy, is not a member of any party, but said for the first time in his career he has to admit that the Administration has not been handling things in the right way. I personally worry about any more spending that will increase the debt and deficit, but if they’re going to do it anyway, the gift card idea ain’t so bad!

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