As we at JPGB have been arguing for many months and in many posts, giant federal bailouts are unlikely to have any beneficial effects and may well do harm. (See for example here, here, and here.) But if we have to have a new $800 billion stimulus package on top of the already adopted $700 billion financial bailout on top of the trillions in implied or explicit loan guarantees via the federal takeovers of Fannie, Freddie, AIG, Bank of America, Citi, etc…, there might be a smarter way to do it.
So I would like to offer my modest proposal for the new $800 billion stiumuls package — voucherize it. Give every man, woman, and child in the US a check good for an equal portion of the $800 billion. With 300 million people that works out to about $2,667 dollars. A family of four would get a total of $10,667.
If it’s true that the federal government needs to tax, borrow, or print the money to stimulate the economy (a theory that makes no sense to me), can’t we at least empower everybody to use the money in the way they think best rather than the way that a bunch of log-rolling, pork-eating, back-slapping politicians think best?
If schools really need to be rebuilt, let local communities pass a bond referendum and raise their taxes,whose cost could be defrayed by the extra cash we just put in everybody’s pockets. If the community thinks that they need better roads instead of better school buildings, they could direct their bailout voucher funds in that direction. If banks really need more capital, then they can earn the deposits from these bailout vouchers. If the consumer needs more resources to keep spending, the bailout voucher puts cash in their pocket. If people are having trouble paying their mortgages, the bailout voucher eases their burden.
Rather than having the priorities set in Washington, the bailout voucher lets the priorities of the stimulus package be determined by everybody. Do we have any reason to believe that Washington knows best which schools need to be remodeled or which bridges need to be built or which mortgages should be refinanced?
Much of the intellectual work over the next four years is going to be to reshape dumb policy ideas that are going to get passed even though they shouldn’t. Let’s start by urging that the stimulus package be voucherized.
(edited to correct typos)
Jay P. Greene's Blog 
Great. Leave it to the only Democrat on this blog to resurrect the Demogrant.
Not that the Demogrant wouldn’t be a better policy than a trillion-dollar bailout.
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