Bailing out the auto industry and SUV owners

Ibon

You have to ponder a moment what choices any government will have once resource constraints cause increasingly severe contractions of the life its citizens take for granted that will in stages become increasingly obsolete. In these opening acts we may lose the big McMansion houses and big SUV's. These first consequences are already creating a public outcry. So if there are not attempts at a "bailout" or at least adjustments in the form of subsidies to try to mitigate how does a government survive.

Let's put it another way. How does any government survive the multi decade task of the real mitigation that would be required to build up an alternative sustainable infrastructure of mass transit using alternative energies if it is not simultaneously dealing with mitigating the hardships of the current generation going through the growing pains of this transition?

You cannot just make bold statements that the government should stop bailing out its citizens when any government that didn't take short term actions wouldn't stand a chance in hell of surviving.

So we have the enormous task with ever diminishing energy and resources to balance the short term needs of the current generations citizens with the long term requirements to make a transition toward a more sustainable society.

Doing this without a social revolution or without war seems very unlikely unless through some other means we could bring down the human population first to a level where those diminishing energy resources could be equally shared between short term needs and long term mitigation.
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cube · Fusion Joined: Mar 12, 2005 Posts: 3823

MrBill · Expert Joined: Sep 15, 2005 Posts: 5650 Location: Eurasia

Any government subsidy that favored domestic versus foreign imports would in any case fall foul of WTO obligations triggering tit for tat tariffs on US exports that are currently at record levels due a weak US dollar.

Any subsidy paid to American car makers for small cars at the exclusion of foreign automakers - $2000, $5.000, $10.000 - would get capitalized into the price of US made small cars. That would benefit car makers at the expense of taxpayers. There is no way the car makers will pass along that windfall except in rebates that narrow the price difference between domestic made cars and similar imports. I can see the car companies working on those spreadsheets right now.

It still does nothing to solve the problem of how to extricate US forces from Iraq. So you replace one unfunded liability with two. Remember the USA is running budget deficits. They do not have any surplus to spend. While doing nothing to reduce America's dependence on imported oil, which I am told is the reason that America is in Iraq in the first place?

And, of course, as others have rightly pointed out, this simply rewards poor decision making, and penalizes those that already own small cars, take public transport or do not own cars. Not unlike the interest rate tax deduction on mortgages that unfairly discriminates against those that rent or those that cannot afford to buy a house. It is bad public policy.

Given it is such a bad idea there is likely someone in Congress working on such a plan right now. Maybe a Congressman from Detroit.
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Javaman · Heavy Crude Joined: Jun 18, 2008 Posts: 137

Ibon

OK. This idea sucks for the reasons explained.

On the general topic of "bailing out" citizens or corporations making bad decisions it makes sense that the best course is letting an economic process of "natural selection" weed out those institutions and individuals.

But as economic pressures start disenfranchising larger percentages of the population government will be forced to mitigate short term crises to avoid social revolutions. Latin American politics have pragmatically shifted left during the past 10 years for this very reason.

Does anyone argue that the US economy, increasingly mired in debt, will start producing an underclass of disenfranchised citizens whose growing numbers will eventually threaten the stability of government similar to many Latin American countries?

These social pressures will grow immense in the years to come. Whining over gas prices and losing your SUV is just the opening acts .
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Our resiliency resembles an invasive weed. We are the Kudzu Ape

Twilight · Expert Joined: Mar 02, 2007 Posts: 3076 Location: UK

Change at the individual level is necessary and inevitable. People will come up with all sorts of arguments why they should not change and someone else should, but with finite resources, appeasing any group will be at a cost to another. By bowing to the demands of the "disenfranchised", and on the contrary they would in fact be the kingmakers, governments will succeed in little more than playing revolutionary Whac-A-Mole.
Here is a typical example from today's news.

mrobert

@MrBill: You are right. Let me give you a real life example.

Overhere, the government offers you a subsidy if you save money for a new house, change your house or improve it. It's a nice idea.
How it goes?

I open an account with a bank for 2 or 5 years, and start putting in money monthly. Once a year, the government pays the subsidy into that account. At the end of the period, I can use the money.

Where is the catch?
Banks pay no more the 3% yearly interest for that money, credited at the end of the year. The government will pay the subsidy this year, for last year.
The subsidy is a percentage of that money, capped. The most you can get in terms of percentages, is up to 10% per year.

Current CD interest rates here, are between 8 and 11%.

Now, even in best case scenario, If I decide to put my savings in simple CD's and don't apply for the subsidy, I still make at least that sum of money. (Interest is capitalized and paid monthly).

It looks VERY GOOD on paper, but practically, 100% of the government subsidy actually subsidisez banks interest paid for people's deposits, offering a wonderfull source of 0% interest rate financing for banks.
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Canuk

cube · Fusion Joined: Mar 12, 2005 Posts: 3823

Twilight · Expert Joined: Mar 02, 2007 Posts: 3076 Location: UK

Denny

I am for REAL change. Let's not subsidize anybody's purchase of any kind of vehcile, instead, let them trade in their SUV's for a pittance, and they can use that on public transit.

Javaman · Heavy Crude Joined: Jun 18, 2008 Posts: 137

yesplease · Fission Joined: Oct 03, 2006 Posts: 2569