From last night’s All-Stars.

On whether Obama will keep his promise not to raise middle-class taxes:

If the president and his team start to parse words in a Clintonian way–and after the president had said last year, “I will not raise your taxes in any form”–all of a sudden says “I only meant income tax and payroll,” that’s not going to fly. That’s not going to work.
Look, of the four people who spoke [Obama, Gibbs, Summers, Geithner], we saw at the beginning of the segment, two of them are politicians and two are economists. The economists have said we have to leave the door open [to middle-class taxes]. The politicians understand that it would be fatal for Obama to raise taxes after the pledge he made. It was essentially a “Read my lips.”
So how does he square it? I think what’s going to happen is by the end of the year he will have a fallback. He’s not going to have Obamacare, because you cannot do it in the absence of new, massive taxes.
What he’s going to have is a health insurance reform, which will mean heavy regulation on the companies so there are no preexisting conditions, you can’t lose your insurance. Everybody will be happy, except it will bankrupt the insurance companies.
So the shortfall will come not out of the taxes but out of coercing the 18 million young people who today have no health insurance because they are young and healthy and calculate correctly it is unneeded. If you force them into buying health insurance, you have a revenue stream. Insurance companies will be happy.
So without taxing, [but] coercing the young and coercing insurance companies into giving unlimited insurance, it will work. That’s the only way it will work. And that’s where I think they will end up in December.

On the Cash for Clunkers program:

Well, it is very popular. It’s an artificial stimulus drawing from the future [demand] into the present. I don’t think it will have any real effect in the long run other than the temporary stimulus.
But at bottom, it’s bizarre economics. We’re paying people — what we’re forgetting is that all of these cars, tens of thousands of clunkers, are going to be turned into scrap. And the question is why? America is going to be destroying tens of thousands of perfectly usable cars, destroying essentially American assets.
A parody of Keynesian economics is to say that you pay half the population to dig holes and the other half to fill them in. This is worse, because we’re paying people with the bribe of cash to destroy huge numbers of assets. Why not put them on tankers, ship them into the third world, and get the cash for cars and parts?
So what you are doing is destroying a whole set of assets and replacing them. That’s going to be stimulative for a week or two or three, but in the end, it’s lunatic economics.