Stimulating Auto Sales

The automobile industry is in a real mess without a doubt.  Some of this is due to missteps taken by the big three, but one cannot deny that the current financial crunch is a major factor.  The big three have come to congress asking for help, but is it congress place to pick winners and losers?  I think not.  Not doing anything, however could leave the United States and for that matter the world in an even greater economic downturn.

What I am proposing is that the government stimulate the auto industry as a whole, rather than specific companies.  This is sort of a bottom up approach as opposed to curing the problem top down by making direct cash infusions into failing companies. 

Here it is in a nutshell: Give U.S. citizens a direct rebate of $1000 for the purchase of a new vehicle before Dec. 31, 2009.  The rebate would apply to U.S. manufactured vehicles.  To avoid the legislation being considered protectionist, allow for a $300 rebate for the purchase of foreign vehicles, provided that another $700 is matched by either the country of origin or the manufacturer.  Large cars would get the same rebate as small ones, which would actually create an incentive for the smaller car in terms of the percentage cost of the vehicle.  Example 1000 divided by 10000 is 10%  whereas the same 1000 divided by 30000 is only 3.33%.  Remember small cars help us fight imported oil.

This plan is designed to stimulate the industry as a whole and not pick winners and loser or micromanage the industry.  The estimate I am making for the cost of this plan is approximately $20 billion based upon 20 million sales times 1000 purchases.  This plan would benefit consumers as well as the industy  While $20 billion seems like a lot, the cost of a failed industry would be even greater.  I welcome your comments and suggestions.

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