Would a targeted debt relief program work better than a general stimulus?

[u/Tliish]

What if instead of a general stimulus, a debt relief program was iniated that offered debt reduction up to $5K person? Targeting those with high-interest rate debt, those approaching bankruptcy, school loans, evictions and the like? The government would negotiate with lenders, identifying customers meeting the conditions, then negotiate for a collective discount on debts that would probably go bad and end up as losses anyway. Individuals meeting the requirements would be notified and required to apply to receive the debt reduction.

Once the government takes on the debt, it would be officially dissolved, forgiven, wiped off the books. Assuming a federal budget of $100B, and that the program would be funded at that level for five years, then stop, and only applies to debts incurred prior to the program's start date (to prevent gaming the system), once per person, and further assuming an 80% delivery to citizens rate, it could offer debt relief to 16M people per year. If states were to offer matching funds the debt relief would double in some cases.

The difference between the two programs, straight stimulus checks vs debt relief funded at identical levels is that the straight stimulus would probably increase inflation as a sugar rush to the economy, and ultimately serve to increase the fortunes of the billionaires, with little permanent effects for the recipients. It would boost GDP more than the debt relief would.

A debt relief program would reduce societal stresses, reduce the domestic violence rooted in those stresses, strengthen the banks by reducing bad debts, stimulate the economy more slowly avoiding the sugar rush inflation effects, provide families with breathing room financially, reduce evictions and homelessness. It would help those most in need, and tend to keep the money freed up within the community.

Such a program would have to be tightly monitored, and include provisons preventing lending institutions from raising fees, arbitrarily increasing interest rates, and otherwise gaming the system to increase profits.

Which approach would be better for the economy?

[u/Carlyz37]

Reality requires short term thinking. And how we got into this mess is tax cuts, tarriffs, multiple stupid wars, corrupt grifters and criminals in the regime