Meantime, more than 1.2 million people have lost their jobs this year. No bailout was considered for them. And what about all those people - 700,000 and counting - that have lost their homes to foreclosure? The government bailed out the lenders with $750 billion intended to fund new loans. What did taxpayers really get? Banks used the money to buy up other banks, not provide loans. GMAC and AMEX saw an opportunity and converted themselves to banks so they could get some of that largesse. And the people that need to borrow money? Still waiting for credit lending to loosen up.
Congress needs to stop being Frix-ated on bailouts. Instead, let's look for ways to reward companies that are best serving the needs of consumers. I think they should give consumers $5000 as a new car purchase incentive. Let them decide which car they want to buy. That money will float UP through the system: the consumer gets a new car, the bank makes a new loan; the dealer depletes his stagnant inventory, and the manufacturer sees $5000 and lots of jobs are saved. One car at a time, but I guarantee you thousands of unsold cars will be sold. And everyone wins.
Same thing with home sales. Use the bailout money to guarantee a new home buyer's loan. Give the homeowner a one time tax rebate equal to 5% of the home's value if they buy a home within the next 120 days. Think homes will sell? Think banks will make the loan? You bet.
If you agree, write your congressional representatives and tell them to read this blog.
1 comment:
The CNN/Opinion Research Corp. survey found that 61% of those polled are against the auto bailout - far from "everyone" has drunk the bailout Kool-Aid. But let us all be thankful that we aren't governed by majority opinion. Our elected leaders have the important job of doing what is best for all of us.
I agree the corporations don't deserve a bailout. They have used their powerful lobbies to protect them from having to be good marketers for far too long. The deserve to live and/or perish from their past decisions. This did not happen just because loans weren't being made. It happened because they chose to make large cars and trucks which were profitable so they didn't have to find a way to make money on smaller cars. Postponing hard choices on assembly line retooling investments and energy efficient car strategies contrary to lobbying efforts.
The auto industry talking points of job losses also do us a great disservice. They employee 250,000 directly, but nowhere near the 4 million they talk about. Bailout or not, they all will make cuts as will their suppliers and dealers. This will cost more precious jobs that are so desperately needed and the loss of which will have a dire impact on Federal, State and local tax revenues, unemployment benefits, healthcare costs, compound the banking crisis and bring the almost unmentioned looming pension liabilities. Much of the stockholder investment has already been wiped out with dire effect on pensions and individual, corporate and government investors. Without the financing, Chrysler will be gone or forced to merge for pennies. With the financing Chrysler will likely just postpone the inevitable. Without the financing GM will likely go through bankruptcy, but will likely come out diminished, but viable. Ford will probably make it with or without for a while. All of their dealers, on the other hand, will suffer greatly along with their employees and communities. And letting them fail or continue to flounder is the opposite of the stimulus we need - the cost to counter, I suspect, would be much greater than the cost of the bailout.
The auto industry must first survive in order to produce cars people would buy. But what then? Your idea of the $5,000 incentive would help greatly by forcing demand. But leaving it there would be a shame at this historic moment. I suggest we ask for more: let's require the industry to quit lobbying and accept new CAFE standards - go to 40 MPG in 2009; 50 in 2010 and 80 by 2014 and only allow the incentive on cars or trucks that meet these new standards (buy American anyone?). This would be consistent with our President Elect's promise to invest in greener cleaner technologies. They wouldn't want to, but they could do it if we help them.
But why stop there? We all recognize that employee healthcare costs are a tremendous burden on the competitiveness of all industry. Why not take this moment to remove that burden from all business with universal healthcare? Surely the unions have more reasons to negotiate now than ever before. GM says it costs $1,525 per car just to provide healthcare for its employees - that amount alone, may well make the industry profitable. But universal healthcare would impact every business and every American. Taking the burden off our states would go along way toward solving their budget woes. It would stabilize the finances of our hospitals and providers. And as a economic stimulus, no single initiative could have greater impact. Let's face it: all a government should really do for us, is make us the most productive (as in, safe, healthy, wealthy and happy) taxpayers we can be.
And finally, your suggestion of a 5% tax rebate on home values of a new home purchase. I'd like to hate it because it so dramatically and unfairly gives advantage to those who buy more expensive homes (though if it were capped at $200,000, it might be fair enough) and doesn't help anyone in foreclosure, but it would help some people get in new homes that would help stabilize values and create some jobs. Plus, it quits putting money into banks and Wall Street. There is, however, the argument about the bottom line benefit: while a tax rebate would create a bubble, according to Mark Zandi, chief economist of Moody's Economy.com, investments by government in infrastructure programs that create jobs would generate an increase in one-year GNP of $1.59 for every $1 spent whereas tax rebates generate $1.02 for $1.00 spent. All to say, we can't cut taxes our way out of this problem (the wealthy will have enough losses from Wall Street this year) and creating jobs is the only way to get enough money in people's pockets to buy cars or homes. Or for that matter, Christmas presents.
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