This will be the first in a series of pragmatic approaches to problems and issues we face today.
As we await an auto industry bailout proposal from Congress, perhaps we should step back and look at some solutions other than simply throwing money at the problem and just hoping for positive results.
First, do we really need this bailout?
It looks like the answer is a qualified yes. The ripple effect on the state of Michigan alone if all of the big three automakers go out of business is, to say the least, catastrophic.
However, the reason it is a qualified yes depends on what they do with the bailout money. The mis-management of all three corporations does not bode well for the success of a bailout. There is no guarantee the bailout money will be used properly.
A bailout, then, should be targeted at influencing a behavior in the carmakers that produces sustainable growth.
It seems to me, then, that what the automakers need first is:
- Demand for their current inventories
- Demand for sustainable output over the next few years
- A gentle push toward ever more fuel efficient autos.
How does throwing $25 billion at them accomplish any of this? It doesn't.
So, one solution that would prove much cheaper for taxpayers is this:
Give $5000 instant rebate to each buyer purchasing an American made auto. Maybe even make it $6k or $7k for the first six months to clear out inventory.
This program (at $5k per vehicle) would cost the feds (and us taxpayers) only $5 Billion for 1 million cars!
The ripple effect of this program on the economy is immediate. Suppliers are at full production and their suppliers are busy and making money and keeping their workers productive.
We keep this program alive for 3 or 4 years.
Now, to promote a move to producing more fuel efficient cars, we make these rebates apply only to the more fuel efficient cars after the first 12-18 months. In the end year, the rebates only apply to the most fuel efficient ones.
Is Congress listening? I think it is a plan that the American people could go for. The benefits to the federal government in increased revenue through increased employment more than makes up for the expense.
Do you have a better approach? Let's hear it!
UPDATE: Some suggestions indicate this idea would reward the big 3 for making gas guzzlers. Easily solved - make the rebate only apply to cars above a certain MPG.