THE BLOG

Stimulus: Republicans Screw Car Makers and Buyers

03/16/2009 05:12 am ET | Updated May 25, 2011

Well, there they go again.

Republicans took aim at two parts of the now-passed stimulus and recovery bill which would have helped the entire US auto industry, new car buyers and our nation's air quality, while lowering our reliance on foreign oil.

The bill passed by Congress yesterday throws a one-two punch at our auto industry and consumers.

It's the first important bill we can remember with conference changes in two separate rules which will result in harm for the industry which makes cars and trucks and the consumers who buy them.

First, President Barack Obama's desire to upgrade and modernize the federal government's huge fleet of cars and trucks was chopped in half somewhere between the Congress and Senate. 2009-02-14-fordtaurus2008ext.jpg (Cars like this 2008 Ford Taurus may rank as "boring" with many people, but they and similar cars make up a big part of government fleets; newer, cleaner and higher-mileage vehicles must replace older ones, but House Republicans cut that effort in half).

And Maryland's Democratic Senator Barbara Mikulski's amendment to help the auto industry and car buyers, which easily passed the Senate just a few days ago, has become so watered-down in conference that new car buyers, who stood to benefit from $11 billion in savings, will now enjoy barely $2 billion of relief.

Obama requested $600 million for the purchase of new, clean and high-mileage cars and trucks to replace the oldest and dirtiest ones in the federal government's aging fleet. That amount would pay for about 20,000 new cars and trucks, not a huge number but certainly enough to improve and make a real difference in the fleet's emissions and fuel mileage and keep some assembly lines running.

Senate and Congressional Republicans attacked the plan, to paraphrase, as "nothing more than just a way for government employees to drive new cars."

"How does this make or keep jobs?" they asked. To which I'd reply, "How does making and selling new cars and trucks not?" 2009-02-14-assemblyline6.jpg (What's wrong with helping American auto assembly lines remain open? Someone should ask House Republicans).

Thus, when the bill was finally passed by the Senate yesterday, the amount the White House and Congress originally requested had been cut to $300 million, which will translate into about 10,000 new, cleaner and better cars and trucks. That's a nice number, but not as big as it should be.

The original Mikulski amendment allowed qualifying new car and truck buyers to deduct state and federal excise taxes on their purchases, but the biggest part of the savings to buyers would have been deducting the interest paid on their vehicle loans, as homeowners (at least those who still have homes) can deduct interest paid on their mortgages.

Mikulski's amendment would have retroactively applied to new car and truck purchases from Nov. 12, 2008, to Dec. 31, 2009. To qualify, families' total annual income was to have been under $250,000, and individuals under $125,000.

"Everyone wants to save auto manufacturers, but no matter how much government aid we give to auto makers, they can't survive if consumers don't start buying cars," Mikulski said earlier this week.

The federal "cost" of the original amendment (which was really savings for consumers) was estimated at about $11 billion. 2009-02-14-tesladealership.jpg (Making cars and trucks and selling and servicing them keep more than three million Americans employed; only a vibrant auto industry will bring more important and transitional cars, like this Tesla Roadster).

When it emerged from conference, though, and sent to the Senate for passage, Mikulski's proposal had been watered-down by removing the critical interest deduction and the retroactive part of the rule; now the allowed deductions will be effective only on new cars and trucks bought after the bill is signed into law by the president, probably this Monday.

So if you're in the market, don't make that big purchase until President Obama signs it.

Now, a family making less than $250,000 a year could save approximately $600 on a new $35,000 car or truck.

The total amount which could now be saved by buyers drops from $11 billion to $2 billion, a loss of savings to new car buyers of $9 billion.

Both Obama's request for $600 million and Mikulski's $11 billion amendment were also clearly meant to "prime the pump" of the US auto industry, including the Detroit Three and the import companies which make cars and trucks here (thankfully, the protectionist "Buy American" provisions of the stimulus bill have been removed). 2009-02-14-SHAME.jpg (A Code Pink member holds a "Shame" sign behind Bob Nardelli, CEO of Chrysler, during Congressional hearings which saw the heads of the Detroit Three and the UAW undergoing a kind of ritual debasement; Wall Streeters and bankers "testified" this week in Washington, and were treated much more deferentially than the Detroiters, some from Congress talking with them as if the executives are their bosses - Hmmm ...).

Some other countries seem to have little problem with this priming the pump concept when it's aimed at keeping important industries operating.

In Japan, car owners must take their vehicles through a Draconian annual inspection which can cost them more than $1,500 in a process where chipped paint, small dents and not-new tires are considered safety violations (explaining the excellent condition of most cars and trucks in that country, something anyone who's been there can attest to).

Owners have the option of paying thousands to repair the problems, and many, after considering the cost and hassle, decide to trade-in their used jalopies for brand-new vehicles, while their trade-ins are usually shipped to other countries, often in Southeast Asia, where they're sold as used cars.

It's not a very fair system, but the Japanese consider their car making industry crucial to their society, and have been willing to go through the whole charade, which they see as something of a patriotic duty. 2009-02-14-DSC05937.JPG (Toyota's Lexus LF-A supercar concept at the 2007 Tokyo Motor Show, that country's bi-annual exhibition of their most important domestic industry; because of the Bush Worldwide Depression, this car, once scheduled for production in two or three years, will not be seen until well after that, if ever; this year's Tokyo show may very well be canceled).

Remember when Republicans trashed Vice-President Joe Biden for saying, during the election campaign, something about "paying taxes is patriotic?" People around the world have at least two opinions on that concept, as we can see from the Japanese auto inspection process, but I most appreciate what Justice Oliver Wendell Holmes had to say on the topic: "I like paying taxes. With them, I buy civilization."

Priming the pump of our industries, especially automotive, is not a bad idea, even if Republicans gag at the thought.

So, who are the patriots now?