Why not just give everyone a million bucks?

So I have been kicking this little gem around for a while now. What would happen if the Federal Government gave out a 1 million dollar stimulus to everyone? With the attached condition that all entitlement programs, grants, loan forgiveness and other programs are dissolved.

Sounds crazy- Why would anyone go to work? That may be a problem for some industries (e.g. fast food and other service industries) but it would stimulate the retail, real estate, auto industries. Also, state tax revenue would go up, helping to decrease state debt and increase funding for better infrastructure.

Take it a step further and encourage saving and debt repayment by creating a tax incentive to spend the money wisely. Creating a significant luxury tax would effectively encourage saving and debt repayment. For money invested and used to pay down debt it would remain tax free.

Between the decrease in entitlement spending and the increase in tax revenues, the stimulus would cost very little.

I also realize that a million dollars per individual would be a bit excessive. It may encourage people to quit their job and "retire" until the money runs out. Since the stimulus would be likely issued by the IRS, making the stimulus per family would be more likely. Say $750,000 per family filing jointly and $350,000 per single filer. Add $200,000 per child to be placed in a trust or similar arrangement to be paid out at 18.

With a "super-stimulus" like this, Americans could dig out from the recession, pay off their homes, and invest for retirement. Those who want to open a business could do so, creating jobs for many.

Am I crazy for thinking this could work?

 

Many respected economists like Paul Krugman are in your company and some have even made this suggestion, "dropping money from a helicopter". You made an interesting about how this would encourage people to quit work, that would certainly happen in a lot of cases.

This is the consumption model of wealth creation, the money multiplier effect whereby $1 of spending leads to $1.50 of productivity.

I can't believe that in the 21st century that someone hasn't been able to create a virtual world with real human actors (avatars) where these theories can be tested in real time. That being said I have to envision a scenario and play it out in my head.

Suppose you had a village with 5,000 inhabitants. 75% of the population was actively employed in production (children and elderly exempted) and/or trade. Planting of crops, harvesting, manufacture of tools, housing, buying/selling goods, etc. All this is facilitated by money in the form of coin.

The government steps in and gives each villager (on average) the equivalent of several years of wages in one fell swoop. As a seller I would have to raise prices immediately as demand grows exponentially. The earthquake in Haiti lead to a massive influx of capital from the rest of the world and a lot of it was concentrated in the capital (Port-Au-Prince). I have friends who are Haitian and they reported back that prices rose very quickly.

The other component is debt. The government has to go out and borrow money from the markets in order to finance this stimulus. The taxpayer is on the hook for the interest which now commands an ever larger portion of the national budget.

 

I see inflation of prices as being the greatest crux of this type of stimulus. I believe this would be a short term issue, leveling after a period of time. The items I see most susceptible to inflation would be housing and luxury goods. Even these items would generate tax revenue at the inflated rate.

My ulterior motive in this scheme is to wean America of its dependence on entitlement programs. These programs would be nearly impossible to eliminate. A super stimulus would be in essence a buyout. Freeing that revenue stream in future years to pay down debt or fund infrastructure improvements. Without Medicaid and SSI expenditures the cost of the stimulus would be recouped over time.

This generation of entitlement users will likely never change but by breaking the cycle, hopefully the subsequent generations would be self reliant.

 

Inflation, yes. More specifically, the devaluation of the dollar. If everyone has a million dollars, then a million dollars won't be a lot of money.

 

Ah, but the devaluation of the dollar will be localized to America. Globally, or currency should remain stable. And if the stimulus works, or economy and currency will strengthen.

 

Yes you are crazing for thinking it could work. $500k per household would cost $50 trillion dollars. Where's the Govt going to get the money? Print it? Hyperinflation.

 

Most of those people would be broke again in a very short time. Having money doesn't keep you from being broke. Managing your money does.

 

True, but who cares. Ending entitlement programs is the goal. Some people would bee productive and create jobs, others would need those jobs in a short time. Win win

 

You may be well intentioned. . .but do you do any math at all?

Do you realize what given "$1 million" to each American means?

Let's say you give $1 million to 300 million Americans. . .or let's even say you give $1 million to 150 million families.

This would come to $300 TRILLIONS (or $150 trillions if you give it only to families). So, what's the problem?

Where does that money come from?
Because, you see. . .the WHOLE of the wealth of the US, including personal and corporate wealth comes to LESS than $100 trillions.

Because, you see. . .given $1 million to 300 million people doesn't come to 1 X 300, or $300 millions. .but it comes to $1.000.000 X 300.000.000!

THINK!

 

You are dreaming. By saying you will give a person $750,000 (thats equal to 15 years of the median gross income in the USA), you are letting them win the lottery. Most will quit their jobs and work on their hobbies or goof off, few will do the difficult labor required to run a society.

Do you think that farmer spends days at a time driving a tractor, or that construction worker broils in the hot sun, or that truck driver spends weeks on the road away from family and friends, because they like it? They do it because they need a job. If they all had 15 years of pay dropped in their lap, they wouldn't be growing your food, building your roads, or trucking your goods to your local WalMart.

 

I know giving every American a million dollars is not feasible. I realize that even half a million per family is not possible. The initial post was not to test math skills, but to start discussion on what is possible.

Concrete thinkers need not apply.

 

Well, in any form, shape or situation, and as much as I would LOVE to get $1 million. . . this plan wouldn't work! For ALL the reasons mentioned by many posters (from over-inflations, to "losing it," to WE JUST DON"T HAVE that kind of wealth ANYWHERE in the US!).

It's nice to "dream," but one should dream with their head in the cloud and . . .their feet firmly planted on the ground. Sorry!

 

Didn't we already try this...I think the big difference was we funneled hundreds of millions to just a few people in hopes the excess would trickle down to the masses. Then we decided that was not enough and the government directly took out trillions of dollars in loans and shoveled it to even less individuals... I think the moral of the story is that the government should not be involved in giving away others peoples money. Not middle class money to the rich, or rich to the middle-class or poor. It never works.

 

They run those econometric computer models, but since they don't match real world effects, like comparing the models run for the Obama stimulus, the models must not be sophisticated enough to capture real human economic behavior. I think the multipliers used in the models are just too high.

 

There are smaller scale proposals like this from both the left and right. Charles Murray recommended a negative income tax that would pay everyone 10K a year and replace entitlements.

But your amounts would never work. If you've seen those TV specials on people who've won the lottery, you'll understand why.

 

I was thinking of creating an avatar based economy with real human participants as opposed to computer modeling, this would take into account the "animal spirits" that is missing from the equation.

 

If all that was required to create economic expansion was to hand out free money in the form of a stimulus wouldn't you think this would have been figured out a long time ago? Also, if the principle is correct why would increasing the handout to an absurd amount (say 100 billion per citizen) not work?

 

We've already tested this. We went into recession in December of 2007 and in the spring of 2008 Bush had a stimulus that was based on giving everyone an income tax "rebate." The cost was about 150 billion. Although low income people did spend more, I don't know of any evidence that this mitigated or shortened the recession.

Although I can see the attraction to a policy that is going to give me free money, from an economic perspective I'm not sure it makes much difference except adding to the deficit.

 

Part of this party's platform at one time was selling Canada to the US for 25 trillion bucks or 1 million for every man woman and child at the time, so every Canadian can afford to vacation in the sun for the entire month of February while being rich enough to still get all the hockey games and import all the beer required to sustain them.


[video=youtube;U-dtYleuQOM]http://www.youtube.com/watch?v=U-dtYleuQOM[/video]

 

I think a better idea is declaring American citizens landlord-bankers and then having everybody pay a small percentage on all their assets(Beyond a minimal exception for simple practicality) into a pool which would be distributed equally to each citizen with an account in some sort of national bank. This would destigmatize getting public money, be on going in case some folks blew it in a week, provide an alternative to public welfare and be a pick up point for getting missed child support payments etc.

A lot of this has already been partially modeled in Alaska which had a benefit of becoming the state with the least financial separation between rich and poor.

 

why not just free everything?

 

$1,000,000 a person for each of 315 million people would be $315 trillion. Not crazy, just naive. Even if we had it, the % of people who would leave the workforce would cripple our economy such that when the spending stopped the nation and all its people would be bankrupt.

 

to give everyone 1 million $ would place same amount on debt, which we all owe

I mean the money doesn't come from nowhere ......

A government simply takes it from one to give to other.

When gov prints money its stealing, since it can then use the money to buy property of others, who natually raise the price, causing inflation snowball effect.

The way to win is with unregulated capitalism, where prices fall and purchases are chosen by individual, and government has almost 0 budget.
As prices fall and wages go up due to everything being voluntary and all the welfare jobs and bs going away since no one is forced to purchase it, everyone quickly gets rich and all shortages disppear.
The opposite happens under socialism and big government spending, as witness current state or world.
A few get governmetn crony contracts and payouts and rest have shortages.
silly but politicians inevitably do it
solution? make budget of government so small that import tariffs pay for entire federal budget, and remove restrictions on action and yes let things like public school die

 

We saw how great unregulated capitalism worked in the 2006 housing bubble and 2000 Nasdaq bubble.

Pass.

 

Destroy the currency, destroy the economy.

Yes, U are crazy. Very big moral hazard u are creating. USD will no longer be the exchange currency of the world (Chinese Yuan will probably take its place), USA will become like Zimbabwe (2 picts below), an independent country with no currency of its own, USD will become like the Japanese banana currency... a fraud that collapsed just like the Japanese occupation of Singapore and Borneo at the end of WW2.
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Well said. in no time (/overnight), U will have an American government bankrupt, just like the Zimbabwean one.