I cannot see giving money to failing banks (so they can reward their incompetent executives with bonuses). Instead, we need to get the American people buying again. So I propose:
-5000$ vouchers to buy a new American made car
-manadatory scrapping of all cars >7 years old, with a $5000 credit to buy a new car
This will immediately inject $500 billion into the USA economy-enough to stimulate demand. What say you all?
I think new cars are poor value for the money. Even a $5000 voucher to get a $15,000 car that depreciates by a third after a year is poor money management. Can I use the money instead for some other economy stimulating purchase?
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Most people driving cars over 7 years old cannot afford a new car even with a $5,000 voucher.
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This only helps one weak segment of our economy and fails to address the home failures.
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It may violate international trade laws we have agreed to and I strongly suspect it does.
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The whole mandatory scrapping part will not go over well and is fairly un-American though I do sympathize with this part if it removed 100,000 gas guzzlers and replaced them with gas efficient vehicles.
ETA: BTW, overall GM & Chrysler have shown almost as bad judgment as the Bankers you are upset at.
Cite that this has happened?
Having a stimulus program targeted towards just one industry is incredibly distortionary: especially an industry with fundamental problems like the US auto industry. Those people who don’t need a new car won’t use the voucher and it’s hard to expand the US auto industry massively in a short period of time. There is also a limit to how many jobs one industry can create. Not to mention WTO issues. Frankly it’s a terrible idea.
A much better proposal would be to give each household vouchers for 1000 dollars of expenditure which have to be spent within ,say, six months. They can be spent at any retailer on any product. This would solve the problem of tax rebates that people often just save them. And it would create demand throughout the economy rather than in a few sectors. From the free-market point of view it would leave people to make decisions about how to spend the stimulus. You could spend serious amounts of money through such vouchers if you repeat them every six months; easily a few hundred billion dollars which would provide a decent stimulus. I don’t know why something like this hasn’t been proposed; perhaps there are practical issues I am not aware of.
Yeah, let’s take away all the cars of people who drive older vehicles! I’ve got a 2000 Honda Civic, which works far better than a new Gm or Dodge vehicle. Man, I couldn’t imagine what was wrong with me! I need to be set straight. I’ll just scrap that car and go try and get myself a car for $10,000.
Of course, it will be a crappy, cheap thing which will soon break down. But it’s American-made! Not like all those Toyotas and Hondas made far away in a foreign country (like the Honda and Toyota plants a hundred miles west of me in Tennessee). I’ll face higher gas mileage.
Sure, it would make me drop out of college, because it would probably chew through the money I laid aside for tuition. But that’s the price I have to pay to support the American working man who deserves that 50$-an-hour job making cars no one wants to buy.
And hey, since the supply of cheap cars will soon run out, I probably won’t get one anyway! So no worries. I’ll just have to find a job within walking distance. I’m sure, of course, the retail outlets will have plenty of decent work available once everyone is forced by ralph124c to blow their money on cars they don’t want!
And heck-
Screw it.
This is so blatantly idiotic that no rational man could have conceived it. Friggin’ Robert Mugabe hasn’t actually done anything this obviously descrtuctive. There’s no point in even continuing the satire. Short version: no one who knew even remotely anything about anything even remotely related to the economy could possibly have come up with this idea.
I award you no points, and may God have mercy on your soul. You are the weakest link. Goodbye!
The price of new American made cars would skyrocket. But despite that, we would quickly run out of new American made cars, as the car companies lack the capacity to make enough for everyone in a short time.
The car companies would foolishly build some new plants to meet the transient demand. Those plants would close after everyone used their $5000 coupon, and we’d have to bail out the auto industry again.
If you try to touch my car I’m going to shoot you in the face. . .
. . .would be the response you get from many, many Americans. It would not be an entirely unreasonable position to take, either.
Also, sorry, but it’s a really dumb idea. Destroying millions of perfectly functional cars in order to circulate currency? In other words, obliterating things with actual value (i.e., obliterating wealth) in order to move around money, an arbitrary *symbol *of wealth? You’re going to want to disavow this proposal before the thread gets onto page 2 or you run the risk of looking very, very foolish.
He has no fear of the last part.
I had conceived of a similar plan, minus the mandatory scrapping of old cars. Just spend all the bailout money subsidising new car purchases. Make it a very healthy subsidy, so that buyers have real incentive to purchase a new car.
This means that car companies will still have to compete for the consumer dollar, as opposed to the “free money” they’ll get from a straight government grant, irrespective of how competitive they are.
First of all, I disagree with both your proposal and that of the OP.
Having said that, if there’s no mandatory scrapping of old cars, why would people necessarily buy new ones? Sure, some would, but lots of people are more than happy with their older cars and have no desire to buy a brand new one. Lots of people would prefer to use this money for a different purchase.
Supposing that, somehow, citizens were mandated to use this money only for new car purchases, then prices would absolutely go up. There would be a glut of new demand for new cars. Another downside as already mentioned, is that new cars depreciate very rapidly. Then in a few years, the used car market would be over-saturated with supply.
Because they have incentive to do so, and because economic theory tells us that if prices go down, demand goes up.
This particular batch of stimulus money would be made available only to those wanting to buy new cars.
It’s not that hard to mandate such a thing, it’s called a “government subsidy”, it’s very common.
Not proportionate to the subsidy they wouldn’t. If new car prices go up by 3% but the subsidy is at 15%, then it will work.
This sounds like problem solved, not problem created!
Permit me to strongly disagree with the OP’s proposal. The environmental cost of building a new car is known to be large - and no I don’t have a cite right now but have read this more than once in various magazines and news articles. In my particular case I drive a 1997 Ford Contour, stick shift, that averages just under 35 mpg, is a delight to drive, and with nary a dent or rust spot on it. And the mpg is not based on guess work; I keep records of each tankful of gas in an Excel spreadsheet, and do a linear regression on the results to get the best fit average. I plan to drive this car until I don’t drive any more.
So the OP thinks I should spend upwards of $10 or $15K to get something that likely won’t get as good gas mileage, and won’t be as pleasant to drive? WOW!
Yes, the OP’s idea is pretty bad. However, I don’t think he deserves the personal insults and snarking of the What Exit? variety for asking an honest question.
Other ideas being proposed have problems, such as:
I don’t think you’ve thought this through. Your voucher doesn’t differ in any major respect from just giving out cash with no conditions. If I have to buy $1000 worth of goods per month, and then I used to blow my discretionary money but now I’m saving it, giving me a $1000 voucher with conditions just means I’ll use the voucher to buy my necessities, and then save the cash I would have used. There is no difference. It would also be a horrifically difficult program to manage.
The truth is, there’s no easy way to inject money into the economy. Milton Friedman famously said that if you’re going to do it, the least distortionary way would be to randomly drop money from helicopters. The history of one-time rebates of any sort is that they simply don’t do anything - people tend to use one-time gifts and rebates to pay down debt, especially in recessions. People’s spending habits correlate closely with their perception of their long-term income, not what windfall they happened to get in any given week.
That’s why Bush’s $300 payment vanished into the ether and didn’t stimulate the economy one bit.
It seems to me that perhaps the best way to get money into the economy would be to give it to people who are least likely to save it - for example, by temporarily extending unemployment benefits, and by giving money to the poorest sector of society, who typically don’t save anything because they need every dollar to live. There are problems with this as well. For instance, it’s distortionary - Wal-Mart may get a stimulus, but Cadillac a significantly smaller one (only that only comes through the multiplier).
Define “American made.” Is a Nissan made in Tennessee American-made? Or is a Lincoln made in Ontario American-made?
You’ve just bankrupted many, many people.
It used to be that the way to stimulate the economy was to make credit easier so people borrowed and later paid it back. Now we’re just giving money away? Money which has to be borrowed and paid back? It seems to me the situation is fucked up enough already and that maybe, just maybe, it is better to leave the patient alone to recover with nature’s help rather than keep applying remedies which just keep making things worse.
Yes that is a valid point though I wouldn’t be surprised if there is some behavioral model which shows that people don’t necessarily act rationally in these situations. IOW while rational people would behave as you say there are probably enough people who would act differently if they receive a voucher which says you have to spend it in 6 months than if they receive a rebate on which there is no such condition. It’s a classic example of a framingeffect which induces irrational decisions.
Junk all the 1957 Chevys? You unamerican, heartless beast!
Well, the OP’s idea easily falls into the category of the worst economic plans ever. Sending money to claim my Nigerian inheritance seems positively rational by comparison.
Yep, that’s us. If you took our car away and gave us $5000 towards a new one, all you would accomplish is leaving us without transportation, and giving us a nice $5000 voucher to hang on the wall.
We’ve owned our 10-year-old car for about 6 months, and in that time it has averaged just about 36 miles per gallon.
And the OP’s proposal doesn’t even consider the logistical issues involved in dealing with all the paperwork, and collecting and scrapping millions of cars in a short period of time. Hell, here in California the state budget crisis has led to all DMV offices closing on the first and third Friday of every month. DMV offices are a crowded nightmare as it is, without adding millions more vehicle transactions to their workload.
Also, as RickJay asked, how do we define American for this purposes of this exercise?
Mentioned here.
Yes, your capitalist demigods ARE that selfish and short sighted.