More Incentives to Borrow

The stimulus package contains so much it is hard to parse it all out. But there are several provisions to encourage consumer borrowing - notably to buy a first home and a car. The first-time buyer tax credit for homebuyers is actually an oldie but goodie. Every economic slowdown the Home Builders and allies promote such a credit. The tax deduction for 1 years worth of car loan--and deduction of sales tax for an auto purchase is a new one. Certainly it makes borrowing to buy a car more attractive, especially if you can pay off the loan in year two and avoid all that non-tax advantaged interest. Will consumers take the bait? Will lenders gin up loan volumes, or just make loans to prime credit borrowers? Don't be suprised if consumers and lenders still are conservative. If not, then the lessons of the last two years will have been too quickly lost. Ideally lending will return slowly and carefully on both the supply and demand side. There could be a real danger to an artificial boom...another lesson which may all to quickly be forgotten. We'll just have to wait and see.

Follow up: for fun (and sadly true):
http://www.hulu.com/watch/1389/saturday-night-live-dont-buy-stuff