The cash for clunkers idea can easily be extended to employment. It's just a fanciful way of packaging leverage. People wanted cars, they just needed an incentive to buy now.

Likewise, small companies want to hire, and they also just need an incentive.

Most jobs are created by small businesses. The SBA 7(a) program is currently out of cash for the low interest loans. I read about a massive surge in SBA loans that were issued in November. That clearly demonstrates demand.

The problem. How to get small businesses to use borrowed funds to hire people.

The idea is to create a new type of loan that requires borrowers to use an agreed upon portion of the loan, say 25-50% to hire US workers. The loan could be a floating rate loan with a floor and ceiling. The loan could be issued at the floor rate with the agreement that a portion will be used for hiring. If within one year that hiring obligation has not been met the borrower gets spanked at tax time with penalties and the loan defaults to the ceiling rate. Alternatively, the government can guarantee 90% of the loan initially to establish the floor and then reduce the guarantee to 50 or 60% to derive the ceiling rate in the case of non-compliance by the borrower.

Assuming 50% of funds are to be used for hiring:

$200 billion would employ two million people for a year at average annual salary of $50,000, and still leave the other 50% of borrowed funds for operating or investing purposes.

The great thing about this is the loans are guaranteed by the government. The banks lend $200 million of their own funds using solid lending standards with the understanding the government will absorb the risk. Most of the money will be paid back with interest. Only a small percentage of the loans will go into default. It should already be possible to project what percentage of the loans will go into default. This is leverage for government money.

Tax breaks would sweeten the deal, possibly a social security tax break.

Taking it a step future, the lowest rates could be reserved for borrowers that combine the public funds with private funds.

The key to making it work is branding. There is already a tax break for green cars. Is it $7000? That's probably comparable to the cash for clunkers program purely in terms of economic benefit, but it's boring. It's uninspiring. Make people chase money. Make it clear the funds are limited and only available for a short time. People want what is in demand or what is hard to obtain.

The program can be branded a "bail-out for main street". That should be popular because it has been a vocal complaint. A very low interest loan is like free money if the rate is at least close enough to the rate of inflation. The government would almost be paying small businesses to hire people--actually paying if the rate is below inflation.

These funds would be in addition to the existing SBA 7(a) loan. A simpler idea might just be to inform and educate people about the existence of the SBA 7(a) program and what it takes to qualify. I only discovered it myself this month. Prior to that I thought it was much more difficult to an obtain SBA backed loan.

Stick a folk in me. I'm done. No more ideas.