Saturday, November 08, 2008

ANOTHER Stimulus Package?

Want to fix the economy quick? Here's how:

Everyone wants a new car!

What's the 1st thing lottery winners do?

They buy a new car!

Americans love new cars and will buy one given almost any excuse to do so.

We can fix the economy, and bailout Detroit by simply giving the car industry a good swift kick!

For starters - blowing cash around and running up the national debt even higher could well be less than bright, however this seems inevitable, so let's make sure it works this time.

The 1st stimulus package did nothing because it wasn't targeted, so the only thing that seemed to enjoy any product movement were flat screen TV's none of which are made in the United States.

Consider this:

The raw (manufacturing) cost of motor vehicles is around 65% total (including suppliers to tier 4) therefore the average unit produces an initial $13,500 in W-2 income which becomes up to $65,000 by years end due. (This isn't "magic" - it's simply how the economy works.)

Instead of a check, lets send everyone a voucher good for up to $1000 on the domestic content of a new motor vehicle.

Seeing as not everyone needs a new car, let us sell the vouchers, give them away, etc. (They would probably be all over EBay) and allow people to use as many as they could acquire, up to the full MSRP of a new vehicle.

This would freshen the national fleet;reducing emissions & increasing overall miles per gallon

Creates more employment than any other industry, while targeting the areas of highest unemployment and foreclosure.

Strengthens the Dollar
By decreasing the number of dollars going offshore, our dollar becomes worth more reducing what we pay for other imported goods, including gas!

Nothing happens in this country until someone sells something; that is when new money enters the system.

The economy would revive in under 180 days under such a plan.

If you've read this far, thank you!
Should you still have misgivings please consider the following:

The Democrats won, and they owe the UAW (either in part or a lot!) for their national victory and several house races too. They will do something to protect that constituency and you can be sure of that.

Should you be laboring under the impression that Detroit(inc) continues to build the junk they used to - well they just don't!
Read this -> Myths about Detroit's Big 3


  1. Why would you support proectionism? Do you have any evidence that reducing trade with our partners during downturns helps?

    Dan tdaxp

  2. We need no further evidence that Japan blocks both our products and produce; they are not a "trading partner" and certainly no ally.

  3. It would be nice if leaders in Washington were willing to try such a sensible suggestion as you make. It won't happen though - it has a fatal flaw.

    The flaw? It takes power from their hands and puts it in the power of the citizens. Good for the country, yes; good for the politicians, no. You know who wins on that one.

  4. Sorry I commented on the wrong thread. Please deny that one and approve this one.

    I like the scheme you are purposing better than the proposed bail out, it is quite a bite more clever than what Washington is purposing. However, it is a stop gap that does not address the fundamental issues.

    The issues that need to be addressed are:
    * Cost control in the US automotive industry regarding labor.
    * Cost control in the US automotive industry regarding executive and investor compensation.
    * Long term sustainable transportation solutions. Each person having their own 2000+ pound vehicle is not energy efficient regardless of type of fuel used.

    The first two issues require massive reform to how we go about organizing our labor and financial markets. This will happen over time but is very difficult to understand for most people who are focused the paradigm of quarterly earnings and GDP type figures because these kind of figures do not account for externalities. The long view is required to build fluid, dynamic financial and labor markets. This will be understood over time as countries that adopt the long view paradigm become relatively more successful. It is the difference of strategy versus tactics.

    Sustainable transportation solutions are much easier to conceptualize. It requires moving people and freight in the most energy and cost efficient manner possible. It means that people live closer to where they work and an elimination of urban sprawl. It means that most people have smaller vehicles: smart cars or motorcycles or bikes. And it means a higher availability of affordable transit: more taxis, buses, light rails and trains.

    ACR says: "1 in 10 Americans makes all or part of their income due to the automobile industry."

    I don't know if that is accurate, but if it is, that is an inordinate amount of people to be making their livings off just a slice of the transportation industry. If you add up all the "person miles" associated with automotive transit (1 person mile is 1 person moving 1 mile) and divide it by the total expenditure on automotive related costs you have the number of $ it costs to move 1 person 1 mile in automobiles. If you compare that to all the other forms of transit's per $ cost you will find that automobiles are completely inefficient cost-wise. And that does not even include the negative external consequences of driving (emissions, high rates of fatality, etc.) The one positive external consequence I can think of associated with automobiles is the sense of freedom one gets. Although, it does not compare to the sense of freedom one gets on a motorcycle or by taking taxis in an urban area so you don't have to worry about parking. Or the physical fitness benefits of a bicycle. Or the social benefits of mass transit. As a civilization automobiles are just not the future, sorry to say.

    All of these things require taking the long view which is not popular but it is the mature way of thinking. Sure, we all want new cars but not at the expense of our children's economic future.

  5. This program makes a lot of sense...and that is the exact reason it does not stand a chance.

    As regards other comments, this country made a decision to base its future on cars, to the detriment of all other forms of transportation, a long time ago. Unfortunately cars are the past, the present, and will continue to be for a good time yet. The die was cast 60 years ago.

    As far as our childrens' economic future is concerned, we trashed that a long time ago.
    Our grandkids will be throwing rocks at our tombstones for recreation.

  6. And let me add that I shall think a good deal about your plan, for the more I think of it, the better it sounds.

    However, I am perplexed when I start to think about how the potential market in incentives may work.
    I shall work it through and be in contact.

  7. I appreciate your comment in regards my brief post on the subject of the auto bail-out.

    I thought it a bit lengthy (over 2x the length of the original post), so rather than post it, I linked to your blog.

    Thanks for reading.


  8. I would just like to say, I appreciate you visiting my blog and spreading some thoughtful alternatives to what I also feel is a poor way for the government to handle a very important situtation. I don't have a made me think about that fact, so thanks. I would like to raise a few issues with your solution however.

    It assumes that there are enough Americans still interested in owning "American" cars to make it work. I feel like many Americans would toss their vouchers aside thereby undermining the initial and turnover effects you discussed.

    Also, you assume the auto industry is worth saving. I'm not unpatriotic, and I understand the historical value of the Big Three...but he automotive market in the U.S. is obviously saturated or we wouldn't have that problem. When markets are over saturated the weaker companies have to be laid to rest to create market efficiencies. Otherwise we continue to use valuable resources to produce something consumers don't really want. Neither a voucher system or the governmental bailout addresses this issue.

    Thanks for a thoughtful alternative...perhaps if enough interested people put their brains together a real useful solution can be created.



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