He believes that “a ‘helicopter money’ stimulus of direct payments to individuals, as in the US, would be neither well targeted nor transformatory in Europe“. Probably because the social security net is way better than in the US and, though he does not explicitly mention it, helicopter money is something of a difficult sell in Germany.
He suggests this stimulus should be well targeted and here he thinks “special attention should be paid to those sectors — hotels, restaurants and the stationary retail trade —hardest hit by the lockdown, alongside many self-employed people: hairdressers, masseurs, artists“.
The US recovery programme transferred $ 1,400 per person directly into their bank accounts, while “in Germany, this model was taken up by the Retailers’ Association, which called for a payment of €500 per citizen.
But on the above-mentioned criteria general government transfers do not score well. The biggest weakness is targeting. Chastened citizens may simply save the money, so the intended consumption effect will fizzle out. But even if the money is consumed, it is far from certain it will arrive where it is most urgently needed“, he says.
He instead suggests a voucher model. This is unfortunately not well thought through. Here is why. Cash is freely fungible, can be spent anywhere and almost at any time and spontaneously. Ask yourself, how many times did you go out without the intention of buying anything and came home with a purchase.
Now enter the voucher system. It should be time-limited, he says and that is important as we later see!
Let’s stick with three sectors he mentions for the sake of simplicity, hairdressers, masseurs, artists. Let’s even add restaurants and hotels. You now have received vouchers form the government for these services. There are many people who do not use the services of hairdressers, masseurs, artists, hotels. Quite a few people have electric hair cutters. Do you know anybody who visits a masseur? Visiting concerts in post-Corona times is also not exactly hot on the agenda of people when the way of transmitting the virus is still not clear and there is still a general anxiety. But you still do have these vouchers which are worth money and that is what Bofinger seems to have forgotten.
His voucher system will open a secondary market where people offer their voucher/s they do not need. That is the offer side. On the other side is the bid side. Remember, the vouchers are time-limited. So obviously a bidder would wait till the last moment of the validity of the voucher he is interested in and place his – low – bid. On Ebay, any social network, FB and what not. This is not what you want. This is anything but straightforward. It is a clumsy system where vouchers need to be printed, shipped to millions of recipients. Expect lost vouchers on the way. Sure, you could do it somehow digitally via the smartphone and be absolutely sure of hacks, fraud and scams.
The US way is sleek, fast, direct, controllable and the government just needs one ordinary thing, a keyboard. BTW, that’s what central banks use.