I wrote this in response to a friend who said he agreed with Goldman Sachs that austerity is the biggest threat to the economy. After all, look at Britain (see, for example, “Why Budget Cuts Don’t Bring Prosperity”, David Leonhardt, The New York Times, February 23, B1):
Yes, this is not the right time for austerity.
The economy is not strong enough.
We should pare stimulus now with future spending cuts and tax increases.
I am sure Congress will be willing to cut back spending and raise taxes a few years from now when the economy is better.
All this pushback by conservatives makes no sense.
I would like to see another $1 trilllion stimulus program and QE3.
But for QE3, in addition to buying treasuries, I would like to see a straight money drop.
Bernanke and Obama could fly across the country in Air Force 1 and drop Benjamins by the billions on the population. They could have CNN reporters on the flight with them giving live interviews so the population can see them dropping money out of the plane live on their smart phones.
Imagine what this would do for consumer spending:
People would buy new TVs, cars, go out to eat at restaurants, apparel stores, etc…
It would create an economic boom.
It would also directly create new jobs.
Because the crowds would pummel each other in a scramble for the cash, there would be a need for security and medical care. The government could hire the unemployed as security guards and medical professionals. We could put construction workers back to work building make shift hospitals to care for the trampled upon.
I estimate 1.5 million new jobs from this new program. 500,000 jobs will be directly created.
In addition, there will be 2.0 multiplier effect for the spending by the security and medical professionals. That will create an additional 1 million jobs.
If that doesn’t work well enough, perhaps they could expand the money supply by creating digital money.
Put a Treasury App on the iPhone4.
For every 10 text messages you send, you get $100 digital cash. More for picture messages.
Not only would that create a burst in iPhone sales and data revenues for the telecom companies but additional consumer spending in the overall economy.
To protect the environment we would need a Cash For Cell Phones program so that people would not just throw away their old cell phones. This way the phones will not do damage to the environment and we can give them to starving children in Africa. Plus, the subsidy will help them to purchase iPhones.