USA Today had a new poll out yesterday that found, among other things, that only 18% of the country says the Obama administration's stimulus "has done anything to help improve their personal situation." And I thought Matt Yglesias made a good point about this: The most widely dispersed elements of the stimulus -- the almost $300 billion in tax cuts, distributed to far more than 18% of the population -- were designed to be inconspicuous. Consumers were not supposed to realize what the tax rebate portion of the stimulus was going to "improve their personal situation."
I think this is a charmingly counterintuitive point, and worth lingering over. If you, the hypothetical dictator of a country mired in recession, were going to offer a tax rebate in the hopes of boosting consumer spending and aggregate demand in your fiefdom, you would have two options. First, you could issue a big lump sum check at the end of the year, or perhaps several smaller checks over the course of the year. Second, you could decrease tax withholding on each employee's paycheck. Both methods would boost short-run incomes by the same amount; the only difference is that, in the second case, most people wouldn't notice the boost -- it would come as a small, unmarked addition to their regular paychecks.
Obama opted for the latter method, on the theory that people are more apt to spend "regular income" than dollars that come bundled as specially marked, one-time, lump-sum "stimulus spending." The whole theory -- backed by lots of behavioral research from Richard Thaler and others -- is that people shouldn't notice the money, and file it in a separate "mental account." And sure, there are limits to the counterintuitive charms of this point: The simple fact that people don't notice the stimulus dollars is not affirmative evidence that the stimulus is working. (Since it's possible to imagine people saving money they don't notice.) But the mere fact that most people tell pollsters they don't notice the stimulus is not evidence one way or another. Relax, USA Today.