by Caitlin Kenney

Larry J. sent the White House this letter after hearing our interview with Priya Raghubir on Friday's podcast. He writes:

At the end of the interview, the professor theorizes that if the government issued government rebates as travelers checks that would be accepted by retailers, then there would be a greater likelihood the money would be pumped back into the economy rather than left in the bank where they go to deposit a standard government check. Says Priya Raghubir, "the minute [the tax stimulus] goes into the bank account it becomes savings, it becomes real money".

 

I will go the professor one better: The IRS should issue all refunds as Visa Debit Cards instead of government checks. In 2007, 114 million people received tax refunds totaling $248.6 billion. This is 63% more than President's Bush's Tax Rebate program which went out in the form of checks and ended up as "real money" in people's checking accounts. The private sector has already initiated similar programs. Recently Verizon and Staples sent my earned product rebates as Visa debit cards. This $120 ended up back in circulation instead of deposited in my checking account, which was the fate of rebate checks that I used to get.

So, if Professor Raghubir's studies are correct, 114,000,000 taxpayers with Visa debit cards could help overcome the Keynesian "paradox of thrift" (which I also learned about from Planet Money) that our current economic environment is fostering. And the best part: this solution is free and does not burden the taxpayers.