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FUN WITH REBATES….Felix Salmon thinks the Obama economic team is showing its behavioral economics roots. Why? Because their proposed tax rebate will come a little bit at a time by reducing tax withholding in paychecks:
The point of a stimulus package, of course, is to boost spending. And hiding a tax rebate in slightly higher take-home paychecks seems like a good way of doing that: even people who save a certain amount of money every month still tend to spend the rest.
I guess that’s true. Send me a $1,000 check, and there’s a good chance I’ll use it to pay down my credit card. Reduce my withholding by $20 a week for 50 weeks, though, and I’ll probably just blow it on beer and fritos. And that’s consumption, my friends!
