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Stimulus? What Stimulus?

Posted by: David Welch on February 13, 2009

Comedian Lewis Black once joked that the Republicans always come up with lousy ideas to bring to a vote. Not to be outdone, he went on, the Democrats will take the same idea and make it even worse. The point: The wrangling and compromise often ends up in milquetoast measures that do little or nothing.

Which brings me to the stimulus package. The stimulus proposal being voted on today, which is the result of weeks of horse trading between the two parties, will give what amounts to an average rebate of $330 per car, according to research firm R.L. Polk. Um, consumers aren’t responding to rebates that average almost $4,000. Another $330 won’t move much iron off the lot. In fact, Polk says that the stimulus will only result in about 94,000 additional new car sales this year.

Yes, 94,000 vehicles. That means if the industry sells a dismal 10.5 million vehicles this year like some economists predict, the auto portion of the stimulus package will get the market to 10.6 million. Well, that won’t get General Motors and Chrysler off the dole, not will it keep Toyota from laying people off. Sure, there are other parts of the stimulus package that could create jobs or generate some growth and help car sales.

The stimulus could have been much more. An earlier proposal had a tax deduction for the interest on a car purchase that would have been worth up to $1,250 per vehicle. Polk estimates that such an incentive would have increased car sales by 359,000 this year. That’s a stimulus that would have been felt by all of the car companies. But 94,000 vehicles? I hope the stimulus has a bigger jolt than that.

What would really get the car business back on its feet is getting credit moving again. Sean McAlinden, chief economist at the Center for Automotive Research, says the auto industry needs about $500 billion a year in credit, $400 billion of which goes to consumers who buy or lease a car. McAlinden says that $200 billion of that $400 billion just wasn’t there last year. No wonder cars aren’t selling. This week, Rep. Barney Frank (D-Mass.) said that the second $350 billion in government money for the banking sector won’t vanish like the first $350 billion. Stipulations will be made. It will be accounted for. It will be loaned out. We’ll see.

Reader Comments

Paul (Vw)

February 14, 2009 8:22 PM

>>> The stimulus proposal being voted on today, which is the result of weeks of horse trading between the two parties

I'd be interested to know just what kind of horse trading (if any) took place between the parties. No republicans voted for it in the house and a mere 3 RINOs in the senate. I doubt that Collins/Specter/Snowe really had any substantive effect (other than to create the false image of bi-partisanship) on what is a democratic bill through and through.

If this current "stimulus" bill works, the democrats will get (and deserve) all the glory.

That being said, if it were the republicans who had an (almost) super-majority in the senate...the presidency and the house I suspect we'd have ended up with a similarly uninspiring so-called "stimulus" bill.

So the big bailout of late last year for Detroit did not do the trick. The so-called "stimulus" bill won't either from Mr. Welch's assessment. So what is it going to take to make Detroit competitive (and sound) again?

bob the worker

February 16, 2009 1:38 PM

Forget this "stimulus" horse sh!t.

LET the incompetants all die!

The american system will work it out if all the do-gooding, interfearing, imbecilicly idiot-accuntant types (and blood sucking bankers) just get out of the way!
All these big "experts" really want, is to steal a piece of the begging for themselves, so bob the plumber and Mr ordinary citizen can simply waste away.

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Want the straight scoop on the auto industry? Our man in Detroit David Welch, brings keen observations and provocative perspective on the auto business.

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