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Bill Freehling is a business writer for The Free Lance-Star and Fredericksburg.com. This blog is on Fredericksburg-area business. Send an e-mail to Bill Freehling.

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In stimulus logic, less can be more

UNDERSTANDING how people’s minds work when it comes to money is critical in shaping an economic stimulus plan that can produce real results, argues columnist James Surowiecki.

Surowiecki, a talented financial writer for The New Yorker, had a column titled "A Smarter Stimulus" in the magazine’s Jan. 26 edition.

The topic was the economic stimulus package that is currently being debated in Congress. Part of the proposal is to give a tax credit worth $500 per person.

The Bush administration tried that in 2001 and last year with mixed results. It provided a small boost to the economy, but much of the money was saved or used to pay down debt.

President Obama has proposed paying out the $500 gradually by reducing people’s paycheck withholdings. Critics say that will result in most people having just $40 or so more a month, which they say won’t be enough to affect the economy.

Surowiecki argues just the opposite, and in doing so gives an interesting lesson on the psychology of money.

Click here to read this week’s Business Browser column.

Permalink: http://news.fredericksburg.com/businessbrowser/2009/02/08/in-stimulus-logic-less-can-be-more/

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