An ill conceived effort for an automaker bailout appetizer

Author: Jared Fallon

US automakers have been falling behind foreign competitors at an increasingly rapid rate over the past few years. Once the Japanese engineering genius Toyota was able to conquer the SUV/Truck market in the states Detroit’s Big Three began to see drastic decreases in sales, customer loyalty, and ever-needed funding for a host of projects. These issues of concern include greatly needed energy-efficient technology research and development (such as hybrid or renewable fuels) and increasing numbers of US employee layoffs, early retirement packages, and decreased healthcare benefits. At a time when the looming financial crisis is threatening the prosperity of the world’s economic growth and a host of US industries, one US legislator is seeking to throw taxpayer money at encouraging people to buy automobiles made within the US.

Representative Louie Gohmert (R-TX) has a bill currently pending in its respective committee as of last Friday “To Amend the Internal Revenue Code of 1986 to allow a one-time, $1,500 credit against income tax for an automobile manufactured in the United States.” H.R.7303’s official title is the “Consumer and Automotive Recovery Act of 2008”. The idea behind the proposal is along the same vein of the massive amounts of government bailouts requested since Mac and Mae, much like the $50 billion in loans Detroit is asking Congress to provide. Louie’s proposal is strong in good-natured intent, but only achieves three primary goals: helping US consumers in the short run, helping ALL automaker companies that manufacture within the US, and offering partial assistance in the preservation of a small percentage of auto manufacturer’s American employees. Furthermore, much like Bush’s stimulus pack, the bill would be funded merely by taking money away from Americans in order to reward the Americans that choose to spend their money on a new vehicle.  

As Ford, GM, and DaimlerChrystler continue to lead the initaive for the proposed bailout one should question the effect such a proposal would have that offers no safeguards for the $1,500 tax credit to be used for the purchase of foreign companies manufacturing in the US. The two plants that come to mind immediately is Toyota’s hyper-green 2,000 employee San Antonio plant or the Japanese company’s 7,000 employee plant located in Georgetown, Kentucky. While Louie’s efforts would help ensure the American workers’ jobs within such plants, it would be counter-intuitive as to the progress and assistance that US auto manufacturers truly are need of in today’s increasingly hostile climate.

At this point, greater economic benefit would be seen by redirecting our collective efforts on helping regain the once-famous Detroit company supremacy companies such as Ford and GM once had. While Gohmert’s idea may be well intended, such policies should be aimed more towards increasing US companies’ research, development, and overall competiveness before they begin supplying unneeded momentum for foreign automakers.