Or so say Larry Summers and Mark Thoma who argue that we can have a bailout and a stimulus package and still have tax cuts and more spending on energy, health care, education and all the other goodies that we have been promised. Salesman Summers explains:
Just as a family that goes on a $500,000 vacation is $500,000 poorer
but a family that buys a $500,000 home is only poorer if it overpays,
the impact of the $700bn programme on the fiscal position depends on
how it is deployed and how the economy performs. The American
experience with financial support programmes is somewhat encouraging.
The Chrysler bail-out, President Bill Clinton’s emergency loans to
Mexico, and the Depression-era support programmes for housing and
financial sectors all ultimately made profits for taxpayers…
Does this sound familiar? I can hear it now. A vacation sir is consumption but a home, ah a home, that’s investment. Investments pay off. Just look at the American experience. Rising home prices! Never a downturn. Isn’t that encouraging? Hell, at prices like these you can hardly afford not to buy. Yes sir, a home that’s a wise investment. And that makes you sir, a wise investor. And a wise investor, well a wise investor can certainly afford a nice vacation.