G.M. and Chrysler are asking the politburo in Washington for more rubles (nytimes). Between the 25 percent tariff on imported light trucks (SUVs) and direct cash infusions, it seems likely that the U.S. taxpayer is being bled to the tune of $100 billion over a 2-3 year period. What does the taxpayer get in return for this money? The right to continue to purchase GM and Chrysler vehicles for $20,000-60,000 each.
What else might we do with $100 billion in this industry? Assuming that we could get a wholesale price of $2000 per car, that’s enough to buy 50 million four-passenger 54 mpg Tata Nanos. The fuel savings from driving Nanos to the 7-11 instead of monster SUVs would save taxpayers $100 billion every year (i.e., the initial investment in the Nanos would be paid back with one year of fuel savings). Current predictions are that the U.S. car/light truck market may shrink to 10 million vehicles per year. Thus with a $100 billion federal expenditure we could give everyone who had intended to buy a car or SUV a free Nano for the next five years. Fifty million American households that had expected to go into debt and make monthly car payments would now have $400 extra every month to buy other things ($240 billion per year). The total amount free for investment in the U.S. economy would be $340 billion per year.
[Note: fuel savings are based on 12,000 miles per year driven. The Nano uses approximately 1000 gallons less than a 10 mpg SUV. With gasoline at $2/gallon, that’s $2000 per Nano per year.]