Bailing Out the Environment and the Economy in Detroit

The Sunday bobbleheads are all a-twitter about drawing a line at bailing out Detroit —and about demanding that the UAW make concessions before helping the automakers.  I’ll be damned if the current situation is about the cost of labor—or about the auto industry sending the country into an economic crisis.  Maybe somebody in the Obama transition team can get a grip on this.  The problem originated on Wall St and in Washington, not in Detroit.  The auto industry, hardly a model of foresight itself, is paying the price of greed and opacity in the financial markets going horribly wrong.

That said. what can the government do to prevent the financial crisis from taking Detroit down with it?  Perhaps the answer lies in combining our essential transistion from the internal combustion engine to cleaner power with public investment in our manufacturing base.  If the auto industry needs help, a reasonable quid pro quo could be that the investment go directly towards hybrids, electric cars, and incentives for the public to buy them.

We need to stimulate the economy now, not in several years. Therefore, why not combine an immediate investment in much larger tax credits towards the purchase of hybrids (only those getting a minimum mile-per-gallon, excluding the riduculous SUV and large truck hybrids) with an investment in hiring and spending in Detroit on producing hybrids and electric plug-ins like the Chevy Volt, which will be coming on line soon enough to require investment today?

Why not require equity for taxpayers in return for any U.S. investment in the auto companies, requiring a voting share.  Our voting leverage would be focused on management working with an eye to conversion to greener technologies immediately.  Why not also give consumers a credit—or a voucher—for turning in vehicles that are churning out greenhouse gases over certain amounts?  This targeted stimulus voucher could be redeemable for purchasing hybrids, in addition to the new hybrid purchase credit.  This combination of money would be a major incentive to largely low-income families, who are nursing old gas guzzlers, to turn them in for new hybrids, stimulating the economy as they clean up the air.  And hey, they’d be helping keep Detriot workers on the assembly line to boot!

I’m no economist, but aren’t there lots of ways to structure targeted stimulus incentives towards spending we need, rather than merely bailing out rich investors or sending money out randomly from the IRS in checks we’ll just hoard instead of spending?

UPDATE— Clearly, I'm not an economist, since it's been pointed out to me that the incentives for low-income families to trade up from a gas guzzling clunker to a hybrid would probably be prohibitively expensive.  However, brighter minds than I have suggested that an incentive to turn in the clunkers could be structured to finance a more efficient used car that gets much better mileage and needs less repair.  This would still help stimulate the economy and clean up the air.

  

Hybrids and electrics clearly are the immediate future of the industry.  Stimulating their adoption is in our best interest and in the interest of saving our auto industry.  We better not forget that in any assistance Detroit is offered.