“USE IT OR LOSE IT” ECONOMIC RECOVERY

Spend it quick

I’m not an economist, but even I can see it all boils down to one thing.  The only thing of true value is labor.  Without labor nothing happens.  The way out is to create jobs.  During the Great Depression under FDR it was jobs to build infrastructure like the Hoover Dam and the Tennessee Valley Authority (TVA).  If you watched “Walton’s Mountain” you saw how in West Virginia a system of localized labor exchange emerged.  Neither of these solutions were a “quick fix”, so recovery drug on slowly.

Today we’re talking about immediate cash infusions, direct cash payments to individuals and cash to businesses to continue paying employees while they are laid off or idle.  Corporations might use cash to buy back stock or pay dividends.  Prudent individuals will hoard as much of this cash as they can, preparing for the worst.  Neither of these solutions contributes to GDP.  Without labor there is no output and only output and jobs will provide the traction needed to pull us out of recession.

It seems to me these are not the right solutions, but they are close to the right solutions.  Suppose instead of doling out cash (which probably means cash cards anyway), we divided it into biweekly coupons.  It’s still money, it’s still on a cash card but it expires after the two weeks and is lost if you fail to spend it.  You can’t hoard it, you have to spend it. 

Spending it produces demand and demand inspires hiring and hiring produces legitimate income.  Nothing gives us the confidence to spend more than a reliable and “continuing” flow of income we get from a job.  Receiving a single cash payment does and should make us cautious; make it last as long as you can.  With a job you only need to know it will last to the next payday.  Consumers need to be forced to spend it. This becomes all the more important as business are coming back on line.

We can provide an option for those who don’t need it and don’t want to spend it.  Use it to buy government bonds that cannot be cashed out for five years.  You can’t complain folks; it’s a gift.  The government could use this for badly needed infrastructure projects meaning more hiring.

Economics is not just about money, it’s about money in motion. ed