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RE: A Win-Win-Win-Win Situation

We get results. The House this afternoon passed a bill transferring $2 billion from the Stimulus Bill money to Cars for Clunkers, 316-109. The Senate will take up the measure next week. The Journal pointed out this morning that there’s still another beneficiary from this program: state and local governments collect considerable tax revenues from sales and registration taxes.

There’s not a lot of evidence that Keynesian stimulus has more than a temporary effect on a national economy. But if we’re going to have stimulus (and given the need of politicians to “do something,” we always will), this is the way to go about it. The effect is immediate, little of the money disappears in bureaucratic red tape, no empires are built that cost money in out years, the public can’t use the money to pay down debt or increase savings (where it does do no good as stimulus), and the multiplier effect is obvious. Neither tax rebates (Bush’s stimulus) nor public spending (Obama’s — not to mention FDR’s) has been nearly as effective in getting people out buying stuff as the Cars for Clunkers program. And that is the whole point of stimulus: to put money in people’s pockets and get them to go put it in someone else’s pocket.



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