THIS STORY HAS BEEN FORMATTED FOR EASY PRINTING
The stimulus debate

One way to compel taxpayers to spend

February 15, 2009
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RE "TO a degree, rhetoric contrasts with stimulus plan" (Page A14, Feb. 11): Harvard economist Martin Feldstein is correct to question whether Americans will spend the tax cut proposed by the Obama administration. My research showed that most middle-class Americans would save it.

But there's a way to ensure spending. The US Treasury should issue time-stamped gift certificates, just like the ones consumers get from Amazon.com, Visa, and Macy's. The certificates would have expiration dates, would boost retail earnings, and would thus loosen bank lending. A few creative people would find a way to convert the certificates to cash, but the net effect on spending would be larger than simply adjusting the amount of withholding from paychecks. What's more, the Treasury would have to spend money to print and mail the certificates, and today, extra spending is not such a bad thing for the economy.

Hersh Shefrin
Santa Clara, Calif.

The writer is Mario L. Belotti professor of finance at Santa Clara University's Leavey School of Business.

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