Government Switches to Direct Deposit Checks

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It’s official: The Man is going digital.

The Treasury Department is set to announce that they are switching to direct deposit in order to pay out the majority of government benefits to Americans. This change, which should take full effect by 2013, will cut down on the cost of mailing millions of paper checks every year and should save Americans a significant amount of time that they would otherwise spend waiting in line at the bank.

“Americans receiving payments for Social Security, unemployment insurance, veterans benefits, railroad retirement, and government benefits will now find the money automatically deposited into their personal bank accounts,” ABC News reports. As with direct deposits in other businesses, Americans will be asked to provide their bank account information in order to make the switch. Alternatively, if you don’t have a bank account, the Treasury Department will provide you with a special debit card to access the money.

Currently, these government agencies send out more than 130 million paper checks each year. The St. Petersburg Times reports that switching to direct deposit will ultimately save taxpayers $303 million in the first five years, and more than $100 million each year after that. Much of this comes from the nearly $50 million in postage costs that the government will save each year by going paperless. Of course, this does raise the question of whether such a move will end up hurting the U.S. Post Office, which is already at risk of losing $238 billion in the next 10 years. From our perspective, it sounds like the government is trying to improve its own budget books by not paying for postage only to force the postal service to endure more lost revenue. Is this just a case of one hand stealing from the other?

According to ABC, Peter Orszag, the director of the Office of Management and Budget, praised this plan as a “win-win,” noting that it will make the process of doling out benefits “more convenient and cost-effective.” However, this plan also fits into the broader goal of making the government run more efficiently in order to reduce the deficit. Yet, as nice as it is to say we can eliminate $300 million and change in government spending with this plan, that seems like a drop in the bucket compared to the $1.4 trillion deficit we ran up in the last fiscal year.

Still, if the government is interested in pursuing a series of small fixes to chip away at the deficit, we might suggest they explore this whole digital thing a little more. The administration has initiated an effort to digitize medical records in order to cut costs and make things run more smoothly, but some have argued we won’t see the benefits of this until the system is “fully implemented” throughout U.S. hospitals. That sounds like something worth striving for, and fast. Similarly, since they may already be negatively impacting the Post Office, perhaps the government should just go all out and make good on previous proposals to get the postal service more involved with e-mails, and potentially cut down on the amount of manpower needed in order to actually begin reducing their debt.

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