My new stimulus plan idea

[jIM_Ohio]

Bear with me on this one.

New idea to stimulate the economy:

Have the government provide 3 new one time tax exemptions for 2009.

1) Give a 3k one time deduction for couples which get married for first time.
2) Give a 3k one time deduction for a family which has their first child
3) Give a 3k one time deduction for medical expenses related to childbirth in addition to current deductions for all of above.

My logic- the two times spending has been highest for me is when I got married and we "needed" to complete the gift registry and today when we went to BabiesRUs and completed the baby registry.

We spent our entire stimulus package ($1300+) on baby stuff we "needed".

If enough other people did the same thing, the economy would rebound in no time at all. I am sure of it.

The $1300 included:
diaper genie
the thing for under the matress to detect babies heart rate (x2)
the other crib thing we needed (the 4 piece bumper-fitted sheet set to match what wife got at baby shower)
the matching decorations for nursery
second baby swing
second baby bouncy seat
bottles/nipples and similar
the safety things for around house (plug covers, power strip protectors and cupboard locks)
extra fitted sheets for bed
burp cloths
and more

The back of my honda ridgeline was full on the trip home.

There are more editorials on this which I will post to my blog. Thoughts? Think the stimulus packages will work?

[sweeps]

But Jim, as you just demonstrated, the people in those situations are going to spend their money if they have it, even without the stimulus.

The most effective stimulus is for those who want or need to spend the money but don't have it to begin with.

[jIM_Ohio]

Originally Posted by sweeps

But Jim, as you just demonstrated, the people in those situations are going to spend their money if they have it, even without the stimulus.

The most effective stimulus is for those who want or need to spend the money but don't have it to begin with.

And that is the great part of this plan. We all know the costs of having a kid are HUGE. A 3k deduction is hardly noticed compare to sales taxes and similar the spending generates.

Especially if you consider the costs of 18 years vs the one time deduction. If someone was going to already have a kid in 2009 regardless, the government loses money, but if someone was waiting to do one thing or another- cha ching! the sales taxes on the spending kick start things.

I know my plan is a simpleton way of looking at things, at the rate babiesRus was busy, I can say that is a good investment in good times and bad.

[disneysteve]

Well, we bought many of the items on your baby list at yard sales, so that wouldn't have worked as well in our case. As for getting married, other people bought the things on our registry, not us, so giving us the deduction wouldn't help anything. We didn't rush out and buy the things on the list that we didn't receive as gifts.

[Broken Arrow]

As a general rule, I'm not too fond of the idea of simply handing over money. Sometimes, even people who have genuine need for certain assistance may end up blowing their money on something else.

If memory serves me (and it may not), WIC only works for certain items, like infant formula. I like that idea better. So, I believe handing out specific government coupons for baby formulas and other essential items may be better than simply a deduction....

I realize the idea isn't perfect, but at least it'll make it a bit harder for dishonest people to be dishonest without hindering the honest ones.....

[Joan.of.the.Arch]

I can't tell if you are kind of joking. Rather than deductions for weddings, baby stuff, and baby medical expenses, how about if I get my deductions for other important expense which have cost me more than my wedding, baby supplies, and birth expenses. I have spent more on things like car purchases and new roof. Heck there are several things I have spent more money on than the three you name, and there will be more of them in the future.

[jIM_Ohio]

Originally Posted by Joan.of.the.Arch

I can't tell if you are kind of joking. Rather than deductions for weddings, baby stuff, and baby medical expenses, how about if I get my deductions for other important expense which have cost me more than my wedding, baby supplies, and birth expenses. I have spent more on things like car purchases and new roof. Heck there are several things I have spent more money on than the three you name, and there will be more of them in the future.

I was not kidding.

The point was that kids cost more than 3k to raise, but a one time incentive to have kids in 2009 might cost government some money, but the increased spending kids bring to picture more than makes up for any lost tax revenue. If I dropped 1300 in one shopping visit for a kid, imagine what would happen if 100 people in my city did that the next 12 months. Lots of revenue for the stores for sure. Plus sales taxes on those purchases.

[disneysteve]

But Jim, is it really an "economic stimulus" to give people money that they'd be spending anyway? Nobody is going to go out and have a baby or get married just to get that $3,000. Those are things they'd be doing anyway.

I thought the point (if there is a point) to the current stimulus package is to get people to spend money they wouldn't otherwise be spending.

[sweeps]

Exactly. The idea is to get the money spent quickly, and not saved. Giving money to those who were going to spend their own money anyway (and then just pocket the stimulus money) defeats the purpose.

I hate the idea of a short-term stimulus anyway. It only works if you target the "right" people, and then by targeting the "right" people you're being unfair to others -- particularly those who are good with saving and budgeting their money.

We should be investing more in long-term stimuli. Education, training, infrastructure, things that will make us more productive in an increasingly competitive world. Blowing some fun money on a Korean or Japanese big-screen TV is not going to help us get out of this long-term mess.

[jIM_Ohio]

True- my point was that we waited to have kids- waited close to 5 years. If such an incentive existed earlier would the money be spent earlier? YES, and the 3k deduction is far less than the taxes our spending on diapers, education and vacations will generate. I think families account for more spending that single people, so my plan is geared towards that population anyway.

It was an idea. I think I knew it was not a good one, but it's still good discussion regardless. I did my part to stimulate the economy. If we did not have the stimulus check coming, we might have spent $600 instead of $1300, but the stimulus check helped convince me to spend more.

[noppenbd]

I'm not sure that is fair to say that people with babies would "spend the money anyway". True, you would need to buy a crib anyway, but mightn't you spend more if you were getting a big chunk of change that year? As a new dad, I can verify that there is almost no limit to the amount you can spend on a new baby. So maybe you would normally spend $1500 getting the nursery together, but with a stimulus you might spend $3000 or more. This goes double or triple for weddings, where the sky is the limit on spending.

The only problem I see is that most people do not understand their taxes to the level that people on this board do. So they may not really get that the money they are getting is due to the new child/marriage, etc. How about the idea I read about where instead of a check, we get the funds in the form of a prepaid debit card? That way the money really does have to be spent rather than saved.

Obviously this is a terrible idea for the savers among us, but I'm sure we are resourceful enough to figure out ways around it (i.e. pay for necessities with the card and save what would normally be spent). But it would answer the critics who feel that the stimulus will not work properly.

[FrugalFish]

Wait until you do your taxes next year and you get to have 2 new deductions and 2 beautiful, bouncing credits. It will feel like you've found your own stimulus plan!

How are the babies doing?

[jIM_Ohio]

growing and stable in ICU. One is 3 lbs and other 2-14

[bjl584]

I wonder if this kind of policy would cause a large number of people to protest the government, since it would in a sense be encouraging people to marry and have children? There is already a considerable amount of debate in this country when it comes to these subjects. A tax policy like this would probably really people talking. I personally don't have a problem with it, but I'm sure a lot of people would.

[disneysteve]

Originally Posted by jIM_Ohio

we waited to have kids- waited close to 5 years. If such an incentive existed earlier would the money be spent earlier? YES

Not sure what you mean here. Are you saying that you would have had kids earlier if there had been some type of financial incentive?

If we did not have the stimulus check coming, we might have spent $600 instead of $1300, but the stimulus check helped convince me to spend more.

Originally Posted by noppenbd

True, you would need to buy a crib anyway, but mightn't you spend more if you were getting a big chunk of change that year?

So maybe you would normally spend $1500 getting the nursery together, but with a stimulus you might spend $3000 or more.

I guess I'm in the minority (big surprise). Getting that stimulus check wouldn't alter what I was willing to spend. If my budget was $1,500, that's it. Handing me an extra $1,500 wouldn't change my plans. I wouldn't go out and spend double what I had planned to spend. If I think $100 is fair for a item, the stimulus check wouldn't encourage me to go out and buy one for $200.

[jIM_Ohio]

We bought decorations which were "nice to haves" and not necessities. Yes we bought more than we needed, but at same time my wife loves to coordinate colors and rooms, so the babies bathroom matches the babies room, and that is important to her.

As for first comment, my point was the spending people do for kids is more than enough to stimulate economy. So people having kids sooner generates that sales tax revenue sooner for government, and generate revenue sooner for the merchants. If it also creates a population boom, there are more things to be said for 25 years down the line when the population increase is starting to fund more payroll taxes.

[jc3900]

No your plan will not work at all! What we need is to end all social welfare programs. Then we need to introduce new legislation to get rid of social security and retirment benefits. My solution would be to let anyone who wants to drop out of any government retirement programs at the gain of not paying the tax and at the cost of losing the benefit. What would then happen is that an equilibream age where benefits =costs would set up somewhere in 40 year old age group. Then I would also put forth an innitiative to force the government to take no more loans and to start paying off their accumulated debt. Oh also I would pull our troops out of Iraq and afghanastan and end the united states empire and the role of world policemen. This would most likely downscale the military to 50% its current $ level.

Basically I would end all the long term entitlements and thus end the dependency of the future generations on government. I would cut government spending and then cut taxes so as to provide enough money to start paying off our debt and running government. Each year as more and more people would be taken off entitlements taxes could again be lowered further and further. This is the plan our country needs, not some wimpy one time tax relief that keeps our country in debt and heads us ever faster into a financial crisis. You need more to save an economy than a spending frenzy. You need to fix the fundamentals instead of just trying to keep a sinking ship floating.

[noppenbd]

Originally Posted by disneysteve

I guess I'm in the minority (big surprise). Getting that stimulus check wouldn't alter what I was willing to spend. If my budget was $1,500, that's it. Handing me an extra $1,500 wouldn't change my plans. I wouldn't go out and spend double what I had planned to spend. If I think $100 is fair for a item, the stimulus check wouldn't encourage me to go out and buy one for $200.

You are most definitely in the minority. I think most people's spending is limited by their credit limit and/or checking balance (and some not even by that). ESPECIALLY when it comes to spending for Baby.

Interesting thread hijack that is tangentially related. I am currently reading "Predictably Irrational" by behavioral economist by Dan Ariely. One chapter is about how people establish price "anchors" and that controls how much they are willing to spend on such a item going forward. He did some experiments which basically showed that people are highly influenced by suggestion in establishing this anchor and that it pretty much dictates what they feel is a fair price afterwards.

One experiment that was telling is that they asked people to write down the last 2 digits of their social security number, and then later asked them to judge the price of a variety of items, including a trackball, a mouse/trackball combo, and some bottles of wine. Invariably, those with the higher last 2 SS digits priced everything higher. This was due to having that number in the forefront of their minds right before they were asked to do the pricing estimations.

I think this has some relevance to spending on first weddings and firstborn babies. Since you have no prior frame of reference, it is difficult to decide what is a fair price. When we were shopping before our baby was born, we were fortunate to find a book called "Baby Bargains" which is very good at sorting the wheat from the chaff, but I remember a lot of people at the time saying things like "I bought X because I didn't want my baby to be deprived" and such.

[noppenbd]

Originally Posted by jc3900

Then we need to introduce new legislation to get rid of social security and retirment benefits. My solution would be to let anyone who wants to drop out of any government retirement programs at the gain of not paying the tax and at the cost of losing the benefit.

What would you do about all the people currently collecting social security? If you suddenly allowed younger workers to opt out, you would have nothing coming in and all of the elderly who are on fixed income including social security would be hung out to dry?

[Scanner]

I agree - we are having our 3rd baby next month.

Sweeps et al will be thrilled that I am strengthening our country's Medicare and SSI system by having more kids than we can handle.

We are re-priming the pump.