Sandwichman's KEYNESIAN Stimulus Plan
Source Tom Walker - Sandwichman
Date 08/12/06/06:05

Sandwichman's KEYNESIAN Stimulus Plan
by the Sandwichman

THE CONCEPT OF the Sandwichman's stimulus plan is extremely simple: a basic income guarantee of $145.68 a week combined with a voluntary annual cap on hours of work at 1,600 hours. The rationale for this approach is that this is not your grandfather's depression. The nature of work has changed. It is not feasible to continue treating the environment as if it was an economic "externality". Historical evidence and real economic theory (as opposed to textbook lore) support the strategy outlined in the Sandwichman plan.

The Sandwichman plan would create an estimated 12.5 million jobs! Yes, but is is Keynesian?

Although the total cost of the stimulus plan is indeterminate, a maximum is easily calculated at $1 trillion for an annual payments of $5,827.20 to 200 million non-retirement age adults. As the payments themselves will be taxable income, the actual outlays are reduced by, say 15 percent. But even that amount would be reduced again by the fact that some of the payments will act as replacement for current income support payments such as welfare, unemployment insurance, disability pensions and so on. The $5,827.20 amount comes from basing the figure on the median wage ($18.21) times eight hours for 40 weeks (assuming 10 current statutory holidays and two week vacation).

Part-time workers and low-wage earners would get an income boost from the median wage supplement. Similarly, it is proposed that other income support payments should not be reduced by the full amount of the basic income guarantee.

Furthermore, because the hours cap will be voluntary, a portion of the total will be clawed back as the result of higher-income earners choosing to work longer hours. The cap on annual hours of work will provide for a deduction of $18.21 for each hour worked beyond 1,600 a year. Some flexibility could be added by a provision enabling banking of, say, a maximum of 200 hours a year for up to seven years. In such cases the clawed-back amount could be reserved in a registered sabbatical saving account.

The 1,600 hour cap is based on an assumed four-day, 32-hour work week, with two weeks annual vacation. But those 40 freed days could be taken in a block as extra vacation time.

Job creation in the Sandwichman plan results from the massive volume of hours of work "released" back into the labor market through the reduction of the annual hours of work. The raw numbers (from the 2007 American Community Survey) are mind-boggling. There are somewhere around 240 billion hours worked a year in the U.S. Obviously, not all of those hours can be spread around. But according to Bosch (2000) "most studies" find an employment result in the range of 25 to 70 percent of the "arithmetically possible effect."

The Sandwichman, however, is skeptical about the job creating potential of overly long work weeks. In the ACS survey, some people reported working 99 hours a week or more. I don't consider such statistical noise as productive work that can be parceled up into three pieces. To get around that problem, I've marked down to 2400 hours all current annual hours in excess of that amount. That reduces the "arithmetically possible effect" of the stimulus plan to a mere 31,000,000 jobs!

Assuming Bosch's estimate of 25 to 70 percent of that effect, that suggests somewhere between 6.5 million and 18 million jobs, with 12.5 the happy medium between those two figures.

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