Saturday, November 29, 2008

auto bailout

My friend Dave Miller, has a wonderful idea that I think deserves to go viral. So, here it is.

The US auto industry needs help. If we sit back and do nothing, thousands of workers could lose their jobs. It is said that over 10% of the US work force is connected to the auto industry.

So here is my solution. Let's start with the 25 Billion issue. Face it Detroit, we're not just going to give it to you. Philosophically, we are against straight handouts to save failing businesses. But here is what we can do.

We should give the poorest 5 million US taxpaying families a car voucher for $20,000.00. That's right. Just give the money to the taxpayers. So they can buy a new car. But only a car.

Here is how it'll work. The voucher must be used to purchase a new American made car from either Ford, GM, Chrysler or their affiliates.

To encourage fuel conservation the car must get at least 30 MPG based on EPA estimates.

Obviously there would have to be some other bits attached - only tax paying families so it wouldn't be the poorest folk, maybe it should have some restriction on re-sale but maybe not, anything else? - which would give some lawyers income for a month or two but the bottom line is that it would get those companies working, contribute to the larger economy, it encourages competition as the three companies compete for the business, it doesn't hurt the companies that are doing better as those customers aren't in the market for a new car anyway, it helps the environment as it would push some of the big older gas guzzlers and polluters off the road, and wouldn't be the same as just flushing the money down a toilet as seems to have happened with the bank bailout. If the auto-makers needed to retool a few plants to increase production of the smaller cars rather than SUV's, they would have the solid promise of a chunk of income coming their way as encouragement to the lenders.

I think it is a great idea that deserves wider discussion, consideration, and bettering up. What do you think?


Pastor Bob Cornwall said...

Roy, Looking at this issue from Metro-Detroit gives a different vantage point. The reality is that the auto industry is caught in a vortex of several things. Earlier it was high gas prices that finally shifted American tastes to smaller cars (which both GM and Ford produce), then it was the credit freeze that has made it next to impossible to get the credit to buy a car. I mean, if you can't pay for your house, you can't pay for a car.

The request to Congress, which Ford hopes not to use, is simply a means of gaining credit which is now frozen to tide things over. The above scenario would be fine. But as we dump on the car makers, remember that it's not just the auto companies involved here. It's the barber shops, the restaurants, the grocery stores, yes, even the churches that are effected.

fernando said...

From the perspective of economic Darwinianism, these companies deserve to fail through a lack of vision and innovation. Moreover, a government bailout is a further investment in car-culture, which is not sound socially or environmentally.

We should be investing in a future with few cars - not a future with more big, dumb, gas-guzzling cars.

That said, the social cost of this industry collapsing in months rather than decades is harsh - too harsh. A solution that rewards businesses for making and selling, rather than borrowing and spending, makes sense.

Pastor Bob Cornwall said...


I think you will see that the Big 3 understand that they will need to develop the kinds of vehicles you're talking about. As far as developing a culture with fewer cars, I think we're decades away from such a reality. Most major cities have mass transit, but smaller and rural communities do not.

The funny thing is, the 25 billion that Congress appropriated and the Bush Administration wants to use to help the auto-industry, was specifically for designing fuel efficient alternatives. In the mean time, what do we do? How do we help this industry migrate to the next phase? And, if gas prices continue to go down or stabilize under $2, will Americans make the switch, or will Detroit be punished once again for shutting down profitable plants.