Sunday, November 16, 2008

Stimulate Car Buyers, Not Car Makers

I personally am against a bailout, the car manufacturers are inefficient. (the big 3 pay $75 an hour, including benefits, as opposed to $40 for the non union plants)  If there is going to be some sort of help this seems to be the lesser of two evils.

Stimulate Car Buyers, Not Car Makers -
Should Uncle Sam save General Motors, Ford and Chrysler from bankruptcy? In normal times, most mainstream economists (and many mainstream legislators) would probably say no. But with financial markets in turmoil and the economy on the cusp of a nasty recession, these are hardly normal times. In any event, Congress and President-elect Barack Obama are committed to spending billions to keep the Big Three afloat.

What's not been decided, however, is how that money should be spent. A radical change in perspective could spare the nation a lot of grief down the road. Rather than subsidizing the auto makers directly (and almost certainly sucking Washington into their management), why not give Americans the financial incentive to accelerate purchases of cars and light trucks? The consumer-subsidy approach would be a less wasteful route to the desired end, as well as one that would leave a less toxic legacy of market intervention once the economy has recovered.

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