The Big Dealership

It’s not turning car companies into government agencies that bothers me so much as turning the government into a car company. And not a car manufacturer, you understand. I mean a car dealer. The kind with the big lot on the edge of town covered in balloons and promoted incessantly by radio commercials with catchy jingles.

This trend kicked off in March when the president announced new car warranties backed by the government. That was on top of an assortment of other incentives then in place to get folks to come on down and kick the tires, such as a temporary deduction for state sales taxes and tax credits (a. k. a. rebates) for hybrids.

The latest gimmick under consideration by our national dealership is a version of the old "we’ll pay you $1000 for any trade" scheme. Working its way through Congress is a cash-for-clunkers promotion. Turn in any drivable car with mileage at least 10 MPG worse than what you are buying to replace it and Crazy Uncle Sam will pay you $4500. Hurry hurry hurry. At these prices these deals just won’t last.

Obviously, this is a perfectly sensible use of taxpayer dollars. (Or, to be more precise, a perfectly sensible use for the dollars we are borrowing from the Chinese.) But this obsession with cars is getting out of control. We need to broaden these sorts of initiatives to cover more of our economy.

For example, our national wardrobe could use some work. Why not a scheme that pays a $5 credit for each article of clothing more than 10 years old that is replaced by something newer and more tasteful? For too long we have suffered by having to look at clothing on others that, frankly, didn’t look that great when it was new in the 1990s. It’s time for us all to move on.

And do you realize that there are still millions of Americans relying on videotapes for entertainment? Isn’t it past time that the government buy up those VCRs so that these poor folks can buy DVRs? And there are still households still watching standard definition TVs. I know it’s upsetting to think about, but those families do exist, and right here in America, not just in some impoverished Third-World nation. They need the government’s help too.

Of course, there is nothing wrong with the government assuming the role of car dealer. The car industry is an innocent victim of circumstance that needs our help. And the American consumer deserves a break in the form of the magic of new car smell. But the rest of the economy is also hurting, and I for one would really appreciate a bunch of new stuff.

Let’s step boldly into the future with a blanket subsidy for all consumer spending. Specifically, let me propose a tax credit of 10% on all credit card charges through the end of the year. Think of it as the ultimate cash-back promotion. I know critics will ask how the government could possibly afford this. Well, I have an answer: a national sales tax.

Cars, Government, Musings | Frank Curmudgeon | June 12, 2009 12:30 pm

9 Comments

By Kosmo @ The Casual Observer, June 12, 2009 @ 12:41 pm

At some point, this bill would have required two MPG aspects in order to get the rebate:

A) An improvement of more than 10 mpg

B) The clunker must get less than X mpg (18 was a number I saw kicked around, but it seemed to be in flex as the bill was debated)

So replacing a 25 MPGm car with a 40 mpg one wouldn’t get you the rebate.

Not sure if the second test remained in the bill or not.
By Rob Bennett, June 12, 2009 @ 12:46 pm

Why not a scheme that pays a $5 credit for each article of clothing more than 10 years old

My retirement plan is back on track!

Rob
By SJ, June 12, 2009 @ 3:24 pm

HAHAHAHA…

But that national wardrobe upgrading sounds brilliaant~~~
By Kevin M, June 12, 2009 @ 3:38 pm

If you look at the big picture, this whole mess w/GM & Chrysler is really ridiculous. The government is basically doing all it can to help a couple of the worst run companies in a long time live to lose another billion dollars.

I personally would rather see all the money invested in public transportation to get more cars off the road completely, rather than just replacing them with slightly better version of the same problem.
By Kosmo @ The Casual Observer, June 12, 2009 @ 4:38 pm

@ Kevin – if it was just the car companies that would feel the pain, I don’t think the government would be stepping in.

However, the bigger issue is the downstream impact – parts suppliers, workers, creditors, etc. Those are the folks that the government are trying to save.

I’m just explaining the logic – I actually agree with you. I’m not a big fan of the bailout. It’s not as if these troubles snuck up suddenly – they were many years in the process. GM had a book value of -$85 billion at the end of FY 2008. That’s not 85B in liabilities, but actually -85B equity (a much worse situation).

GM could make a 10B profit (which they have NEVER done in their history) in each of the next 9 years – and be at break even.
By IndependentOperator, June 12, 2009 @ 7:34 pm

“let me propose a tax credit of 10% on all credit card charges through the end of the year… I know critics will ask how the government could possibly afford this. Well, I have an answer: a national sales tax.”

Great idea. How about a sales tax of, say, 10%?

Frank, your sense of humor is unmatched…
By IndependentOperator, June 12, 2009 @ 7:39 pm

@Kosmo:

Hate to inject some logic in this otherwise illogical argument by the government and mainstream media, but…

Those downstream suppliers are feeding a demand on cars. If the demand is there, when GM fails someone more competent will fill the hole, or the existing players will expand. If the demand is NOT there, then some of the downstream suppliers need to go out of business and invest that capital in something the market actually wants (like nosehair clippers).
By Kosmo @ The Casual Observer, June 13, 2009 @ 9:28 pm

@ Indepedent Operator

Yeah, I fully agree with you on this over the long term. Over the short term, the suppliers can supply parts for cars that languish in GM’s inventory Whether GM sells the car or not, the supplier gets paid (in theory). That’s not a great long term strategy, though!

I don’t actually AGREE with the downstream suppliers argument, I’m just saying that this is the argument that is being presented.
By Liz, July 1, 2009 @ 7:12 pm

This is such a bad idea. The government requires that the dealer send the traded in “gas hog” to the junk yard and have it destroyed. This is one of the requirements. This will remove millions of used parts from the pipeline putting a severe crimp on a lot of people. I am so tired of the government’s unintended consequences.