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Economics : Should the government give handouts of 2,000 Baht?

โดย Dr Kriengsak Chareonwongsak

 

 

 

 

Should the government give handouts of 2,000 Baht?
 
It was the talk of the town when the new government approved a 115 billion baht stimulus package, with one measure in the limelight being a cash handout of 2,000 baht per worker whose salary is less than 14,999 baht per month, thus costing the government an annual sum of 19 billion baht overall.
 
While this measure, known as direct consumer subsidization (though often called negative tax), has been launched for the first time in Thailand, it is not new in developed countries. Similar measures are implemented in many countries in North America and Europe in order to reduce poverty. For example, the USA grants Earn Income Tax Credit (EITC) to low income earners every year. Negative tax is also implemented as one program in a stimulus package, for instance, early last year the Bush government granted $300 - $1,200 in cashier cheques to many American families.
 
It would not be strange to say that Bush’s cash handout measure in the early part of last year and Abhisit’s cash handout measure are very similar.
 
I agree to the cash handout measure in principle. However, I have one recommendation for improving its implementation in some aspect, and I will elaborate on this in my next article. The measure can be supported for at least three reasons, which are:
 
First, a direct money injection to the household sector may stimulate the economy faster than would any other approach, for example regular government expenditure may possibly involve a long succession of small payments. In addition, as government expenditure must pass through companies working for government projects, any money aimed for injection at grassroots level would be delayed and not arrive in full amount.
 
Secondly, the cash handout measure is aimed to reach low income earners, who tend to spend their handouts, unlike high earners, who tend to save their money. A key to stimulate the economy is to increase private consumption, which in an economic crisis period will plummet, leaving the business sector unable to operate without buyers. For this reason, a money injection to the grassroots is a sensible and efficient approach to stimulate the economy, because more than any other policy stimulation measure, it will be efficient in boosting private consumption.
 
Lastly, a cash handout must be transferred to a household bank account, which is a  transparent method of administration relying on clear beneficiary data and with traceable evidence of payment. Therefore, unlike a government investment project, corruption would not be easy.

Although this cash handout measure is agreeable in principle, its administration still requires improvements, and I will elaborate on these in the next article.

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