A Bad Idea Whose Time Hasn’t Come

I recently came across an MSN article that was published recently on how a bill is currently winding its way through the halls of Congress that is essentially a “cash for clunkers” concept to encourage Americans to trade in their old vehicles and buy new ones. The general concept, on the whole, is not bad — American car buyers will get rid of their old, gas-guzzling vehicles and buy more fuel efficient (and hopefully less polluting) cars to replace them. The upshot is that theoretically America’s car fleet will, on the whole, go up in fuel efficiency which means that our gas consumption should, theoretically, go down and therefore our reliance on oil will, theoretically, go down.

On pure face value this is absolutely a “good thing”. However, the way the government is approaching this (and how the interests in Congress are shaping this bill) worries me. The government will offer consumers a $4500 voucher if the vehicle that they purchase gets 10 miles per gallon (mpg) more than the vehicle they are scrapping. If the new vehicle only gets 4 to 9 mpg more then the old one then the voucher is only worth $3500. And that’s just for cars. For light trucks the mileage gain would only have to be 5 mpg and 2 mpg for the respective vouchers.

Ok, yes, it’s an incentive (just like the incentive that sales tax on new vehicles purchased this year between February 17, 2009 and the end of the year will be deductible on your income taxes next year). The idea is to spur the American consumer to go out and “shop” (sound familiar?) and spend money they may not even have on a big ticket item (i.e. durable goods). In theory, Americans buy vehicles, old gas guzzlers are scrapped, car sales — which are about as anemic as they come — are boosted, and the automakers get a bit of a reprieve from the recession.

The problem is that this is money that the American government doesn’t have. Yes, we could just print more money and, voila!, we’ll have the money for this program. But to do so we must tread carefully. We are already seeing the effects of printing more money as the value of the U.S. dollar is declining with respect to other currencies. Other governments are becoming increasingly concerned about their investments (i.e. U.S. Treasury Notes) in the United States and may slow down or stop buying them altogether. With increased dollar circulation we are diluting the value of the dollar and driving inflation. This is what happened in the mid- to late-late 70s and early 80s and it took the Fed quite a bit of time to take enough dollars out of circulation to help stem the tide.

Now, don’t get me wrong, I understand the concept of deficit spending in order to help pull us out of this economic deep dive but I tend to be a fiscal conservative in my overall outlook. Yes, in my opinion, we need to spend on health care and on infrastructure but I see this bill as another congressional way of throwing a lifeline to the auto industry when already two out of the “Big 3” (i.e. G.M. and Chrysler) have already received a huge amount of bailout money and have both declared bankruptcy. The difference here is that this is something that Washington doesn’t have to do. Already the auto makers are doing an enormous amount to try and spur sagging sales. I recently traded in my 1997 Nissan Maxima for a 2009 Toyota Prius because Toyota was offering 0% financing on 2009 Toyota Prius models (the car that just 8 months ago dealers couldn’t even keep on the lots because they were such a hot item). I did it without a government voucher and got a great deal.

There were many other great offers from Toyota as well…I just happened to be in the market for a Prius. And that’s where this bill won’t do much. In the article “Cash in on your gas guzzler” on MSN Catherine Holahan notes

Even if it passes as now written, the bill might not affect sales much. In a recent Kelley Blue Book survey, nearly 40% of car buyers said that the bill wouldn’t spur them to purchase a new vehicle. Only 13% of survey respondents said that they would be “highly motivated” to buy a new car, if the bill passed.

(Holahan, Catherine, “Cash for your gas guzzler“, MSN, May 19, 2009)

And as for environmental impact — in the current form of this bill (it was originally calling for vouchers for new vehicles that “got at least 28 mpg and new SUVs that saw 23 mpg or more.” (Holahan, Catherine, “Cash for your gas guzzler“, MSN, May 19, 2009)) this bill will do little since it has been watered down.

“This will not benefit the environment, but it will help sell a new pickup truck,” said Ann Mesnikoff, the director of green transportation with the Sierra Club, the nation’s largest environmental protection group. “They are trying to make it possible to sell anything under this bill.”

(Holahan, Catherine, “Cash for your gas guzzler“, MSN, May 19, 2009)

The clear winners in this bill are the auto dealers and the auto manufacturers (which is not a bad thing for the auto dealers given the way that G.M. and Chrysler will be cutting thousands of them off in their bankruptcy proceedings). Even the aftermarket parts industry will lose (and so will many Americans who cannot or choose not to buy a new car at this time) as the parts from older vehicles that typically get refurbished and reconditioned for replacement parts are destined for the scrap heap under this bill. Repairing older cars will become more expensive as parts become scarce. The clear losers in this bill are the American taxpayers — both present and future who will have to pay back this additional debt.

Enough Already!

Once again President Bush has shown us just how pathetic and partisan he really is. Here it is, September, very little time left in this congress to get much of anything done and the House of Representatives passes an energy bill that has bipartisan support. It includes a little of everything: it allows for offshore drilling, includes incentives for renewable energy, requires oil companies to drill for oil on lands that they already lease from the government, and requires the government to release oil from the Strategic Petroleum Reserve (SPR). And what does President Bush and the White House call it? “A waste of time” that’s what.

President Bush doesn’t like it because allows drilling between 50 and 100 miles offshore…not the 3 mile limit that he and the Republicans prefer. President Bush doesn’t like it because it pays for itself through a repeal of some of the tax cuts that the energy bill from 2005 gives to the oil industry. President Bush doesn’t like it because it doesn’t give states an incentive to allow for drilling off their coasts. In general President Bush doesn’t like this bill because it doesn’t give his buddies in the oil industry (who are raking in money hand over fist while oil is high) a free reign to do whatever they want, wherever they want without any consequences.

Instead of thinking…”Gee…this is about the best we’re going to get with this Congress” he would rather spit on it and play the “Blame the Democrats” game by saying that the bill was laced with “poison pills” and that House Democrats “‘lack of seriousness about expanding access to the vast domestic energy resources’ off U.S. coasts” (CNN, “Administration rips Democrats’ energy bill as waste of time“, CNN.com, September 17, 2008 ). This has nothing to do with actually trying to break the gridlock and the deadlock in Washington politics. This is just stupidity on the part of a President who has managed to screw up America more than it ever has been in the past. I notice how people in my community get all worked up about how “bad Clinton was”…well, at least under Clinton we had budget surpluses, we were growing the economy, we were respected in the world community, and we were paying down the national debt. Bush has managed to erase all of that and more!. We borrow from the Chinese to pay the Saudis for their oil, we have budget deficits galore, the national debt has grown tremendously, we are not respected in the world, we are in the middle of war that we (and the rest of the world) were lied to in order to gain support, and our civil rights are being eroded daily.

It’s time that President Bush stop blockading any effort to achieve a bipartisan move forward on the energy issue and support what he can get rather than stonewall based on ideology and sheer stupidity. If he wants to save any part of his legacy (whatever there may be left) then he needs to get his head out of the ground and do something positive.

Doesn’t He Get It?

President Bush has used his weekly radio address today to, once again, slam Congressional Democrats and tout the need for opening up the coasts of America to offshore oil drilling.

To reduce pressure on prices, we need to increase the supply of oil, especially oil produced here at home

Bush, George, W., Weekly Radio Address, August 2, 2008 as quoted in “Bush pushes offshore drilling
“, MSNBC.

Interestingly, he acknowledged that it would be years before any of the oil found offshore could be pumped and made available to the market. So, in essence, he’s admitting that opening up offshore oil leases will do NOTHING to alleviate the situation today. But, and here’s the rub, he gives us a little insight into his reasoning for pushing this idea so vehemently:

lifting the ban would create new opportunities for American workers and businessmen

Bush, George, W., Weekly Radio Address, August 2, 2008 as quoted in “Bush pushes offshore drilling
“, MSNBC.

Now we have the truth — which we’ve really known all along. It’s not about oil prices at all…rather it’s about making his buddies in the oil business more money regardless of the environmental impact. Who cares if a little oil spills here and there and kills some fishes or coral reefs…at least his friends in Exxon-Mobile and Conoco-Phillips will make more money and their companies will make more obscense profits at the expense of the American economy and environment.

Fact is, President Bush is a one-trick pony. And just like he’s managed to put us into this mess, now he wants Congress to give him a shovel to dig even deeper. In fact, energy experts and the government’s own research agency at the Energy Dpartment have said that drilling in the Outer Continental Shelf would have no impact on current gasoline prices and probably would have none for years. (“Bush pushes offshore drilling“, MSNBC, August 2, 2008 ).

But, like the good partisan politician that he is, President Bush wastes no opportunity to blame the Democrats for the problem. Somewhere in Texas a village is missing it’s idiot.