On the debate over new ‘stimulus,’ retaining the Bush tax cuts vs. allowing them to expire, or increasing unemployment benefits by $1.00, Alan Blinder states in today’s Wall Street Journal:

“…consider three different ways to add a dollar to the budget deficit: increase unemployment benefits by $1, give a $1 tax cut to someone earning $50,000 a year, or give a $1 tax cut to someone earning $5 million a year.”


“The unemployed worker struggling to make ends meet will likely spend the entire dollar right away. The $50,000 earner probably will spend the lion’s share of it, saving just a bit–that’s what most Americans do. But the $5,000,000 earner probably will save most of the new-found dollar.”

Horrors! Blinder assumes, a la Keynes, that money saved is (for all intents and purposes) money buried forever in the backyard, tossed into the fire, or simply vanished out of existence. This because he sees only the short run intent of the $1, doesn’t choose to understand that money is perhaps most importantly an intertemporal instrument of exchange: not just a medium of exchange in the short run. So if I want vegetables in my diet from now on, I can buy them all now and warehouse them as best I am able into the indefinite future, or I can put aside some money so that each week I can buy fresh vegetables then and there. True, the vegetable market now gets no giant ‘stimulus,’ but why should that be the point? If I am a competent individual (and there’s the deliberate Keynesian Blind spot, and the rub), I can decide over time what actions best coordinate my plans.

Blinder’s attitude that denies that the rich guy deserves to save instead of spend–because he’s impoverishing the rest of us, hoarding wealth and ruining the stimulus, presumably?is exactly the elitist stance that he condemns. But of course money saved is not money hoarded, it’s invested and made to grow wealth. Noticed any differences in Americans’ standards of health and living since 1800? 1950? 1990? Of course, and that was not government stimulus, guys. Get your blinders off.