The president and Congress are falling all over each other to hand money out to Americans in some vague hope that we will spend it and thus avert a recession. Economists tell us that the only people who actually spend these “rebates” are people who are poor enough that a few hundred dollars makes a big difference to them. Unsurprisingly, the Bush administration is not interested in giving money away to poor people. The only way Bush can stomach the notion of giving people money is to call it a “tax rebate,” so, as in 2001, tax rebates are what we are going to get.
An op-ed by a behavioral psychologist in today’s Times reports his research demonstrating that when you give people money and call it a “rebate” they don’t spend it. When we hear “rebate” we think we’re getting back money we already spent, and we’re most likley to sock it away. On the other hand, if you call it a “bonus,” our wallets open — it feels like found money and can fuel a splurge.
It would indeed make sense to call the sort of bales-of-bills-out-of-helicopters stimulus that Congress and the president support a “bonus.” But then Bush and his party couldn’t clothe their handout in the protective coloration of a “tax cut.” “Bonus” sounds too close to what’s really going on — the government handing some cash to its citizens — and such forthrightness has certainly not been a Washington priority during the past seven years.
This is politics, not economics, and it matters far more to the Bush administration than the minor issue of whether or not the measure actually achieves its goal of boosting consumer spending.
“Bonus” also carries echoes of a distant time when Army veterans thronged the capital demanding that the government make good on its promises while banks collapsed and markets panicked.
And nobody in either party wants to think about that. They are fortunate, in any case, that the Depression is receding from living memory, and few Americans have studied its history.
[tags]recession, economics, tax rebate, stimulus plan[/tags]