Malling the economy — a counterproposal

[Bill Becker says that a better stimulus than a rebate check would be vouchers for energy-efficient products.]

This is the week that all patriotic Americans will begin hitting the malls to rescue the U.S. economy — a redo of the Bush Administration’s appeal after 9–11 that we boost the economy by going shopping.

By the end of this week, nearly 8 million taxpayers will find rebates automatically deposited in their bank accounts. By July, the Treasury Department will distribute 130 million more rebates by mail — typically $600 for each individual taxpayer, $1,200 for couples filing jointly and $300 for each child. The talk in Congress is that another round of rebates may follow later this year.

In my neighborhood in Colorado, spring has sprung and the neighbors are out on the sidewalk catching up on a winter’s worth of gossip. The main topic of discussion, however, is how they’re going to spend their rebate checks. If the rebates are meant to help taxpayers forget, just for a moment, their rising energy bills, the home mortgage crisis, the recession and the layoffs at work, then they seem to be working.


Beyond the power of rebates to distract, however, economists are debating whether sending taxpayers on a spending spree really will boost the economy. In its coverage this week, the New York Times cites a study by University of Michigan economics professors Joel Slemrod and Mathew Shapiro, who found that when similar rebates were sent to taxpayers in 2001, most people saved the money or used it to pay off debts. If that happens again, says Prof. Slemrod, it would dull the impact of the money as a stimulus.

But there should be no debate about one thing: The American people are being bribed into thinking that Congress and the White House are doing something meaningful for the health of the economy. The truth is, our economy is built on a foundation of sand and a one-time gift to the malls of America isn’t going to fix it.

Even Prof. Slemrod seems bamboozled. As the Times reports:

He (Prof. Slemrod) said it mattered little to the economy what type of purchases — whether groceries or a new washing machine — were made with money from the rebates. What is important, he said, is that the money does go into the economy.

On the contrary, Professor. It matters a lot how the money is spent. If the federal government has $168 billion or more to stimulate the economy, it should be used on a national investment in energy efficiency. Why? Because the American economy is leaking wealth at every level — homes, communities, factories — with the wasteful use of energy. And because an economy cannot long endure if it’s fueled by disappearing resources that are rapidly becoming more expensive (oil and gas) and by a carbon-intensive resource (coal) that is pushing the country inexorably toward the budget-busting impacts of global climate change.


Encouraging Americans to go out and buy something — anything — doesn’t make sense as a stimulus strategy. A consumer who invests his $600 rebate to make his home or office more energy-efficient will continue receiving “rebates” year after year on his energy bills. Energy efficiency is the stimulus that keeps on stimulating. It produces the equivalent of tax-free income year after year. It helps insulate us all from rising energy bills. It plugs the leaks in the economy.

The rebate checks should be going out in the form of vouchers for compact fluorescent light bulbs, or insulation, or furnace and car tune-ups, or Energy Star appliances, or caulking and weather-stripping, or replacing some old leaky windows with new high-efficiency varieties.

If that’s too difficult to administer, then the White House and Congress should at least be calling on the American people to do the really patriotic thing: Make America stronger by shopping for energy efficiency.

And if our national leaders are too timid to suggest how people should use their rebates, then the many groups working so hard on energy and climate security should launch a real “Invest in America” campaign. The message: “Shop ’til Your Energy Bill Drops.”

That way, we not only stimulate the economy in the short term; we help stabilize it for the long term. Is that so hard to figure out?