Home > Stimulus > Cash for This, Cash For That. Bailout America: ‘Part 25′

Cash for This, Cash For That. Bailout America: ‘Part 25′

September 3rd, 2009


09.03.2009
11.05.2010 repaired broken links with PDF archive files
12.16.2012 repaired broken links


 

Cash for This, Cash For That. Bailout America: ‘Part 25′

original article written by Net Advisor

As the economy was faltering as early as 2006, the government has repeatedly tried to jump start this heart patient suffering from major economic arrest.

2008 Bush stimulus. “The one-time tax rebates are at the center of a hard-won agreement to pump about $150 billion into the economy this year and perhaps stave off the first recession since 2001 (source).” That didn’t work.

There is just no way to jump start a crashing economy. The government can’t bailout everyone, but they will sure try to — and they will use all your money, China’s money, Saudi’s money, Japans money and EU’s money if they have to.

Then we had one of many Obama stimulus plans. Of course the government will spin that result to every positive angle, even if it is misleading or inaccurate. If they didn’t they would lose the next election. Understand politics and economies don’t mix.

Other “stimulus.”
$410 billion spending bill
The FED

I could go on, this could be pages and pages of data. Let’s take a look at the recent highly published program that represents a token amount of government spending and we are led to believe the government can do no wrong to tax payers or American industry.

“Cash For Clunkers.”
Cash for Clunkers is not going to turn the economy around either. The $2.8 billion of auto sales is going to have a negligible impact on the economy, and what we will see in the coming months, auto sales will decline from these temporary elevated levels unless (1) car prices drop sharply; (2) Another incentive to get someone else to pay for cars is initiated.

As I figured, this $3 billion dollar program has been nothing but problems for the government, car dealers, and has helped foreign car sales more than it has helped U.S. car sales.

If the government had to close a $3 Billion program that was “too big to run” which involved some few hundred thousand cars, what would a $10 Trillion dollar national heathcare program with over 45 million people in it be link to operate?

Clunker Results.
Auto sales are up 1% from a year ago (August 2008) as a result of the Clunker program. ONE PERCENT. Remember this is a temporary sales increase. What will sustain auto sales now?

For the U.S. automakers, Ford, the only company that is not being ran (bailout out and controlled) by the U.S. government, coincidentally had the best American car sales with a 17% increase.

So How Did GM and Chrysler Do?
GM sales fell 20% from a year ago (August 2008) and Chrysler down 15% over the same period. Sure GM and Chrysler car sales were up for one month during the Clunker program and in good numbers, but sales for one month does not make a trend. The year-over-year figures show the longer term trend of who is winning, and who is losing in the car sales business.

Thanks For Your Money: Foreign Car Sales Rocket.
Foreign car sales are the big winners in the taxpayer funded “Cash for Clunkers” program. People traded in mostly American cars and bought foreign cars. “Hyundai, Kia and Subaru posted whopping gains over August of last year, up 47%, 60% and 51.5% respectively.” Hyundai reported their best one month sales ever (Read more).

Is America Losing Another Industry to Foreign Competitors?

Despite two of the last three U.S. auto manufacturers that were forced by the U.S. government into bankruptcy, (GM forced bankruptcy) and with over $80 Billion in tax payer bailout money, U.S. auto sales are not keeping up with foreign car sales.

Countries with no debt such as China are gaining economic ground.

“In January 2009, China surpassed the U.S. to become the world’s largest car market.

Source: Time Magazine

Instead of giving money to Chinese automakers, the Chinese government is reducing the sales taxes on the cars by 50%.

Longer term, U.S. manufactures will face stiff competition from China and India with their cheap labor in the auto business.

According to U.S. government estimates, it has been reported that the “cost of Chinese factory labor is…64 cents an hour.” In terms of annual salary, another report suggests China labor is at $3,000 to $8,000 a year; and India $3,500 to $12,000 a year, more for computer technical backgrounds (source).

At the same time, high U.S. union wages and benefits drive up the cost of domestically produced products. This is a recipe for failure; hence 2 major auto bankruptcies within months apart. What this means to tax payers is more and more taxes we will end up paying for this endless bailouts, stimulate everything, and socialize the rest.

Buy American: Made in China, (and Mexico)
U.S. manufacturing plants have been leaving the USA and have established factories where labor is cheap, and where such countries have little or no environmental regulation, no pension, and virtually no law suits such as in China and Mexico.

Yes, Your Tax Dollars Hard at Work… in China and Mexico:
U.S. automakers expand in Mexico, but do it very quietly.

GM
UAW Furious Over New GM Plant in China
GM expands to 8 plants in China

Ford
Ford weighs third China plant to meet demand
Ford Invests More in China

Chrysler
Chrysler seeks production plant in China
Chrysler to make Fiat 500 Minicar in Mexico

So After Cash for Clunker’s, What is the Next Bailout Plan? “Cash for Appliances”
The government is now moving a $300 million program to get people to buy refrigerators, washers and dryers and the alike. Think this program is going to turn the economy around? No. It’s is just the government borrowing against tax payer’s future earnings, redistributing the wealth to a program the government ‘knows best’ of what we should be buying now. Current Tax breaks for energy efficiency.

It seems like everyone wants free money from the government to stimulate something. CNBC reported earlier this year that even the creator of “Girls Gone Wild” asked the government for bailout money.

Question:
What might be a better alternative to just dumping money that we don’t have into programs that the government wants to control?

Answer:
Try the, “One-Two Economic Punch!”

1. Cut taxes. Lowering taxes for businesses and consumers across the board means that consumers have more money to spend on what THEY think THEY need. Consumers can decide not to spend and may even reduce existing debt. Consumers don’t necessarily need more stuff, they just need to be able to afford and pay for the stuff they already bought.

Reducing taxes for business means the company has more money to invest back in the business, and thus create jobs.

In 2002, the Bush Administration passed a stimulus plan that reduced taxes on Americans and regardless of political ideology, the stock market and economy rebounded from 2002-2007 until we had the housing crisis.

2. Reduce the Deficit with Real Numbers. You want to see the stock market soar? Stop government deficit spending, and actually stay on track to reduce the national debt until it is zero. The result would make the U.S. Dollar soar in value, and consumers could purchase foreign made products (since we don’t make anything here anymore) really cheap.

Further Reading:
Economic Stimulus: Dos and Don’ts (2009)

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