If we’ve decided: (i) we have to assist the auto industry (can’t let them fail), but that it’s important it not look like we’re just throwing money at them, to win the faith of the American public/taxpayer; and (ii) that in this recession we have to worry about somehow keeping up consumer demand / economic activity (even as we very much want people to start living within their means over the longer run) – thus making a large stimulus package inevitable for early in the Obama Administration…
…then couldn’t we start thinking of ways that we could combine these goals into a “twofer” type of fiscal policy tool? Could we consider the possibility of, just for example, including in the fiscal stimulus package a federally-financed rebate for purchases of American (Big-Three) automobiles purchased within the next (say) six months (maybe even with larger rebates for more fuel-efficient vehicles), combined with federally-financed extended warranties on such vehicles? And couldn’t we even structure this to be more of a loan program than a pure subsidy program by specifying that a certain portion of the implicit federal subsidy to each of the Big Three could be paid back to the federal government by each of the Big Three;if they return to profitability?
This is not my original idea but that of a reader of my blog (thanks, Joseph Hare), but it strikes me that when money is precious and we can’t afford to waste it, it doesn’t hurt to have ideas like this that might serve as a “twofer.” What do you think?
