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Stimulus certificates?

Sunday, January 25, 2009

A former advertising giant says the current approach to stimulating the American economy won't work. His idea: government certificates.

Philip H. Geier, Jr., chairman emeritus of the Interpublic Group and chairman of The Geier Group, a marketing communications and venture capitalist firm, placed a full-page ad last Thursday in the New York Times. Such non-editorial items are why I still get the old-fashioned paper copy thrown onto my driveway every day.

It starts out:

Geier rebate suggestion1 (3)

Geier then goes on to explain his proposal:

A three-tiered, across-the-board tax cut for folks who make up to $250,000. But the cut would be in the form of government certificate checks to be used only for a consumer discount against the purchase of certain categories of goods and services. A book of certificates would be delivered to be used over a four-month period, and all four months of certificates could be combined to be used against a large purchase, lease, or down-payment commitment. The certificates would work as cash in paying for 50% of certain purchases (such as automobiles, clothing, computers, domestic travel, home furnishing, household appliances, restaurant meals, sporting equipment, etc.). They could also be applied to subsidize 20% of the cost of supermarket and grocery story items.

Expensive proselytizing: Geier paid for the ad out of his own pocket, according to Advertising Age. It was not approved by Interpublic, which declined comment.

Geier told the trade publication he published the ad because "we've got a new government, they're looking for fresh ideas and this is the way to communicate it quickly."

The ad asked readers to contact lawmakers to urge them to support his plan. Even if Geier's ad energizes folks, any grassroots effort is going to be uphill. The day the ad ran, the House Ways and Means Committee signed off on the an economic stimulus plan that has the Obama Administration's OK.

The full House is expected to vote on the proposal next week, with Senate consideration soon thereafter. The goal is to get the proposal into law by mid-February.

Bad idea: But timing isn't the only issue, at least in the view of one advertising industry watcher.

Jim Edwards at BNET Advertising, calls the Geier's proposal ludicrous and says, "Phil, the government already has 'checks' that can be exchanged for goods. It's called 'money.' The difference between 'money' and 'checks' is that money is free to process, whereas checks create a wealth-destroying processing/clearance fee. So your 'checks' idea is wasting money before it’s even printed."

Posted on Sunday, January 25, 2009 at 04:27 PM in Finances, Politics, Taxes | | Comments (2)

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taxrascal

One way to make cash work the way he's suggesting would be to just allow more inflation (or cut interest rates to zero). In other words, the way things work right now, hoarding dollars makes very little sense (except for people outside the US).

Posted by: taxrascal | Wednesday, January 28, 2009 at 11:36 PM

Goose The Tax Dog

Not that I'm a huge fan of Mr. Geier's proposal, but Mr. Edwards seems to be misconstruing the point. The purpose of such a scheme would be presumably to overcome Keynes' paradox of thrift and encourage recipients to go out and spend. This is something that a cash transfer probably could not accomplish.

Posted by: Goose The Tax Dog | Sunday, January 25, 2009 at 08:03 PM

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