Ok, Neat Idea

I think so anyway. Of course, it is mine (posted as part of a comment on this Ezra post), so...

The "problem" with quantitative easing is that it doesn't directly create jobs. It just makes money more available, and the idea is that those who have access will start spending more, which will increase demand, which means that companies will need to hire more to boost supply making nice positive feedback.

So how about doing things that more strongly encourage extra spending?

I would like to see a quantitative easing program that bought people's debt (especially student loans), then continued accepting payments as before but refunded some fraction--say 50-100%--into an account tied to a government issued debit card. The account would be cleared away each billing period, so if someone didn't spend it all, it balance would revert to the government.

Now, this isn't a dollar for dollar increase, as people could easily shift their normal spending to this account, but it has a few advantages. First, it allows people to have extra money each month, some fraction of which they are likely to sepend. Second, the account clearing out means that people will be motivated to spend more and faster so that they do not lose it. Third, and this is my favorite point, it directly helps people over banks...particularly if student loans are the purchase of choice.

On top of this, it could be done in a way to maximize spending. My student loan payment minimum is ~$350 /month, but I tend to pay it off faster than that would do. If the government plan stipulated that the accounts would only be active for one or two years, and that balances remaining would not be forgiven (i.e. you pay off the remaining debt as you would normally) then there would be an added incentive to pay it off even faster. This is true even at the expense of savings. With deposit interest rates low, I am much better off paying off extra student loan debt than I am saving extra. If the government were to buy that loan then pay me back my own payments that would become even more true. The incentive would be to pour as much money as possible into that debt, and then to spend as much of the return that I could manage. This would reduce my debt load much faster than I can afford to do now, and would also dramatically increase my spending.

The only real problems I see with this are 1) that it won't do as much to help rich people (they don't have loans because they can afford college) which I like, but the current political environment seems to equate not giving rich people more money with socialism, and 2) that it would not help many poor people (they don't have loans because so few go to college). It also doesn't help much for people that are unemployed as they don't have money to spend. Of course on those last two points: if it works well and leads to a large increase in demand, jobs would return.

These same things could be applied to other debt forms, but I have more of an issue with the fed buying people's (including my) houses than I do with them buying educations, which I think the government should provide anyway.