[Ibon]

A proposal came my way that I am throwing out here for anyone who wants to give it support or would like to shoot it down. A friend of mine during a discussion came up with an insight and suggested we take the money we are now spending in Iraq and use it to subsidize financially stressed SUV owners with funds so they can trade in their gas guzzlers for US made fuel efficient cars. Those SUV owners who owe more than the resale value of their car would qualify. This action would help these financially strapped individuals, boost sales to the suffering US auto industry and reduce oil consumption and dependency on foreign oil. All manufacturers of US made cars, including Toyota Honda etc. would qualify.

I thought this idea had enough merit to open up a thread for discussion.

[Roy]

[mrobert]

This is a wonderfull idea.
People's birthright for cheap gas and free money must be preserved at all costs.

May I suggest taxing people that don't own a car (they have money to pay taxes, since they don't buy gas) and use that money aswell, to help suffering SUV owners?

[Leanan]

It was suggested in the NY Times last week: link

[TreeFarmer]

I've got an idea, let's take all the money from everyone who saves and makes good decisions and give it to those who make poor decisions.

Wait a minute, it wouldn't matter unless we did it on a continual basis because in five years all the money would be back in the hands of those who make good decisions.

This country has GOT to get out of the bailout mentaility. While I feel pain for those who have made bad decisions, them feeling pain is what will help them make better decisions next time.

TF

[Armageddon]

The government should just print all of us one million dollars.

[green_achers]

Yeah, it's a hare-brained idea, all right. Look for it to be on the president's desk in the next session.

Whenever I hear the word "bipartisan" I wish I had bought more gold.

[Ibon]

$this->bbcode_second_pass_quote('TreeFarmer', 'T')his country has GOT to get out of the bailout mentaility. While I feel pain for those who have made bad decisions, them feeling pain is what will help them make better decisions next time.

[Ibon]

$this->bbcode_second_pass_quote('green_achers', 'W')henever I hear the word "bipartisan" I wish I had bought more gold.

[Twilight]

Here is the problem:
Right now the trade-in value on trucks is their metal and rubber content. They hand over their truck, the programme pays off their loan, they have a few thousand dollars. A few, probably not ten. And that is assuming the commodity bull market holds. So it is pretty obvious they need additional cash on top if they are to buy a new vehicle. And given the reality of living in most parts of the US, no new vehicle, no participation in programme.

So. The funding may be for the cost of TWO vehicles for many participants. Faced with this taxpayer-funded windfall, many will buy another banger, this time free and clear, and blow the rest on booze or one final late mortgage payment. With the number of cars in the US and multiple car households, it is quite possible hundreds of thousands if not millions of people will have a party on the national credit card without reducing their miles driven or efficiency by much. And those in real debt will not get their cars repossessed, and will not participate in demand destruction. A lot if not most of the savings will be offset in these ways.

Assuming participants are handed an economical car instead of cash, many will sell it, buy something with "bling" and repeat the process above. Vanity is powerful.

Also, US domestic car manufacturers do not produce enough economical cars to make this happen. There are too many SUV plants, too few small car plants. New ones are being talked about - in Mexico, for example. Realistically, if the programme were to be a success, it would be partly fed with cars manufactured overseas for minimal benefit to US industry. Cars for which saturated markets will shortly be declining even in the efficient industrialised world. In other words, the US taxpayer would be keeping the party going at Japanese, Korean and German companies for a few extra quarters.

Finally, by the time the government makes something like this happen the patient will be dead, but US auto loan paper will have escaped write-downs long enough for it to reach critical mass somewhere you do not want it.

Actually, there is no finally about it. As a financial beginner I have only scratched the surface.

No, there is no way for this to work if the cost is directly socialised. People have to face the choice of cutting back, moving or going broke for cuts to be made without collateral damage.

[bodigami]

the USA has the worst of communism and capitalism... that idea should be discarded.

[cube]

*maybe off-topic*

It's been said many times, small cars are not profitable for car manufactures that's why they've been dragging their feet for so long. I think one main reason for this setup is because car companies can use the profits from SUV's to subsidize their losses on selling small cars.

In a future world where EVERYBODY drives a small car, the car companies would be forced to raise the price on small cars to make a profit. There's a pro / con to everything.
As much as people on this website hate SUV's.......it's departure will unfortunately lead to more expensive small cars in the future.

my 2 cents.

[shady28]

$this->bbcode_second_pass_quote('Ibon', 'A') proposal came my way that I am throwing out here for anyone who wants to give it support or would like to shoot it down. A friend of mine during a discussion came up with an insight and suggested we take the money we are now spending in Iraq and use it to subsidize financially stressed SUV owners with funds so they can trade in their gas guzzlers for US made fuel efficient cars. Those SUV owners who owe more than the resale value of their car would qualify. This action would help these financially strapped individuals, boost sales to the suffering US auto industry and reduce oil consumption and dependency on foreign oil. All manufacturers of US made cars, including Toyota Honda etc. would qualify. I thought this idea had enough merit to open up a thread for discussion.

[shady28]

[quote="Ibon]... I think we are already embedded in the transition toward more fuel efficient cars and we aren't going to turn back to SUV's since oil prices are never coming back down.[/quote]
I like what you said, but the above assumption is IMO going to be dead wrong.
Demand destruction is and will continue to rapidly trump peak oil.

[Canuk]

$this->bbcode_second_pass_quote('cube', '*')maybe off-topic* It's been said many times, small cars are not profitable for car manufactures that's why they've been dragging their feet for so long. I think one main reason for this setup is because car companies can use the profits from SUV's to subsidize their losses on selling small cars.
In a future world where EVERYBODY drives a small car, the car companies would be forced to raise the price on small cars to make a profit. There's a pro / con to everything. As much as people on this website hate SUV's.......it's departure will unfortunately lead to more expensive small cars in the future. my 2 cents.

[Iaato]

$this->bbcode_second_pass_quote('Ibon', 'A') proposal came my way that I am throwing out here for anyone who wants to give it support or would like to shoot it down. A friend of mine during a discussion came up with an insight and suggested we take the money we are now spending in Iraq and use it to subsidize financially stressed SUV owners with funds so they can trade in their gas guzzlers for US made fuel efficient cars. Those SUV owners who owe more than the resale value of their car would qualify. This action would help these financially strapped individuals, boost sales to the suffering US auto industry and reduce oil consumption and dependency on foreign oil. All manufacturers of US made cars, including Toyota Honda etc. would qualify.

[cube]

$this->bbcode_second_pass_quote('Canuk', 'M')aybe the US can come up with a reason for a tariff on small cars to protect what's left of the domestic market.

[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.

[cube]

$this->bbcode_second_pass_quote('Ibon', '.')..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. ...

[MrBill]

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.