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"Cash Pour" -- The Discovery Files

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Researchers at Princeton University and NYU find that for economic stimuli to be more productive, payments should extend beyond the poorest households.

Credit: NSF/Karson Productions

Audio Transcript:

Stimulating a stimulus.

I'm Bob Karson with the discovery files--new advances in science and engineering from the National Science Foundation.

Government stimulus programs like those in 2001, 8 and 9 are designed to get cash into the hands of the poorest Americans. The reasoning is they'll spend it, and quickly get the money into the economy. But a study from Princeton University and NYU shows that approach may not get us the biggest bang for our stimulus bucks. It suggests that to maximize the amount spent, those programs should be extended into segments of the middle class.

The research team analyzed information on the finances of American households from 1989 through 2010. About 40 percent of U.S. households live paycheck-to-paycheck. Each month most or all of their liquid money gets spent. Two-thirds, of that group, are described as "wealthy hand to mouth"--cash poor, even though their income or net worth would not classify them as "poor." Its all about cash on hand if a large amount of their money is tied up in retirement accounts or a house, this group reacts to swings in income more like the poor than the wealthy.

One caveat: As the size of the payment increases, the wealthy hand-to-mouth are more likely to begin to save.

Social science that could help policy-makers, determine the best use of stimulus funds--a little 'stimulating' conversation.

"The discovery files" covers projects funded by the government's National Science Foundation. Federally sponsored research--brought to you, by you! Learn more at or on our podcast.

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