Let’s see, the car companies have between 50 and 100 billion in retirement benefits to pay out and no one is really in a car buying mood (this is a guesstimate, most current figures are very vague).
The California governor wants to raise the sales tax rate to 10%. That would be $3,000 on a $30,000 car purchase. The sales tax in this state is starting to get toxic. There has to be a tax dodge on this. Maybe the Indians will lease cars off of the reservations (you get to gamble away the tax savings at their slot machines).
The government is in a catch 22. If GM, Ford and Chrysler are not bailed out and are allowed to go bankrupt, the government (we the people) gets to take over their retirement pension plans paying reduced benefits. If we bail them out, we still fund the pension plan and the salary structured business at full benefits (upper management would just love this plan, it keeps Christmas real if you believe in Santa (Uncle Sam))
To put it in very simple terms, it’s a basic case of Blackmail by the car companies. If the government does nothing, the big three get to shed their pension plans to the government and the companies can be reborn anew after bankruptcy. That’s not a bad way to go in theory. It pretty much trashes the support manufactures for the auto industry and unemployment gets worse from there.
Therefore, Congress in their infinite wisdom, will probably want to save the car companies with a bailout hoping to only have to pay out 30 to 40 billion. It kind of makes sense (if the end product sells for about 100K). The trouble is, you can’t force people to buy cars or force banks to loan to people without jobs.
Then we have President Bush and Future President Obama both agreeing that the economy is in bad shape and the government has to act now. It sounds great, but there isn’t much you can do if you’re broke. We have decreasing consumption, increasing unemployment, decreasing tax revenue, and gigantic government expenditures that are buying nothing but bad debts. I wonder if Fannie Mae will be accepting car loans any time soon?
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