With this morning's newly announced 6.5% unemployment rate, it appears that the economy is accelerating to the downside (See Full Story). Almost a million workers have lost their jobs since January.
One critical statistic in trying to stimulate job growth is that the fact that almost 1 in every 10 jobs in this country is somehow connected to the automobile industry. That says to me we need to do something for the drowning U.S. auto makers before they can't breathe any longer. This is where the real gains are to be made in this economy. Forget about infrastructure and energy spending to stimulate the economy. We need to stimulate the auto industry. To do this, I think a program that gives a Federal rebate check should be established. The check should be in the amount of eight or ten percent of the car's sticker price, the MSRP. It would be issued to anyone buying a new, American-made, high-mileage car. This should not be some kind of tax deduction scheme. You want that rebate check in the hands of the auto buyer as quickly as possible. Additionally, the government could work with credit agencies to provide easier credit for their autoloans. After all, it is the seize up in credit that is really putting a crunch on an already-weak economy and auto industry.
The reason that a rebate check and not a tax deduction is important is because it actually serves four purposes. First, it immediately draws people in to buy a new car. A tax deduction, services to delay their buying intentions until the last tax applicable minute; like late December. Next, because the check is assigned as a percentage of the MSRP and not some flat-rebate amount, it will drive consumers to buy higher and not arbitrarily drive them to buy the cheapest thing on the lot. Then, because it is assigned to fuel efficiency, it will help lower the demand for gasoline and, subsequently, help keep gasoline prices lower. Lastly, that money in the hands of those car buyers will probably come back into the economy in the form of new consumer spending. That spending is essential for industries other than the automakers to survive this recession. The horrible retail sales numbers of yesterday proved that we need more consumer activity and that cash rebate check could do that (See Full Story).
Because of the multiple effects of a rebate check, it could, literally, be a win, win, win, and win situation. Just my opinion.