Friday, January 11, 2008

Tune Up

In my last sarcastic post, I was trying to make the point that a broad based economic stimulus package would not work. The 2001 dip in the economy was a response to a broad based economic downturn. The 2008 economic dip is being caused by imbalances in the economy. Our current problem is as follows:

The global economy is surging; so gas prices are high.

The surge in the global economy has created new environmental risks.

The global economic boom has our agricultural and energy sectors working at full tilt.

The housing, automobile and financial sectors are waning.

The manufacturing sector is also weak.

If we had a stimulus, it should be aimed specifically at the imbalance.

What I would do for an incentive is launch a two part program: The program would give, for a very limited time, cash coupons for people to tune-up and retrofit their cars for energy savings. The stimulus would also help pay for installing insulation or energy efficient furnaces and windows in older houses. (assuming newer houses are energy efficient).

Both programs would need to be for a specific short duration.

If we tuned up a large percentage of older cars, we probably would achieve a temporary reduction of a percentage point or more in fuel. A major push to insulate would result in long term savings on energy.

If we tuned-up a million older cars, we probably would save about 5 to 10 million gallons of gas for the remainder of the year. We might even convince people that regular tune ups are a good idea.

The two point program would immediately provide jobs in the domestic automotive and housing industries. (Energy efficient tune ups involve both parts and labor).

NOTE: A temporary tax cut incentive at this point in time would not really help the manufacturin sector. The manufacturing sector thinks long term. So a tax cut would just spur domestic consumption. The goods would come from the international market ... which is healthy.

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