The Little Engine That Can’t

[Crewleader]

The Little Engine That Can’t
John Schettler - Feb 09

Most economists will say that the US Gross Domestic Product is largely driven by “consumer spending,” as much as 72% of GDP depending on our sorties to the shopping malls by some estimates. For decades we have been a nation of spenders, with scant savings, largely relying on credit cards and loans to buy what we needed. The interval between desire and fulfillment grew ever shorter due to easy financing, tapping of artificially inflated home equity, and painless lending terms. It was said that American consumers never cared all that much about the long term price of a thing they wanted to buy. If they did they would never slap down plastic at 19% to 29% interest to make a purchase. Instead, what really mattered was how much they had to put down and how low the monthly payments were. Sometimes this even became nothing down with no payments until some future date, a tactic furniture stores often used. No interest or payments for a year? The aim was to get the expensive sofa out of their showroom and into your living room by any means possible. It was buy now, pay later in the extreme.

http://www.writingshop.ws/html/little_engine.html?

[ixion]

1. the author proposes a very good solution, IMO, to wit:

"My solution is elegantly simple. If consumer spending is 72% of the economy then pour on the bailout funds at the bottom, on Main Street, not on Wall Street. Why use taxpayer money to pay off bad securities bets made by the banks? Instead, use it to help taxpayers. The worries Larson has about the money going into rainy day funds, or to China, can be easily circumvented."

[Art_from_Ark]

2. The problem with the author's plan

is this:

"$825 billion is a lot of bailout money. It could put $5500 into the budget sheet of every family in the US, (about 150 million families)—but in the form of a voucher, not cash, a voucher good for 6 months from the date of issue. The government voucher would be redeemable in only three ways: 1) to buy a home, where it could be applied directly to the down payment; 2) buy a new or used car, again a substantial down payment that lowers the monthly payment on a new car, buys a used car outright, or pays off the balance due on an existing car loan; 3) used to retire any existing consumer loan or credit card balance with a US financial institution. That’s it. Period. "

In other words, the plan would reward people for living beyond their means, or for getting into (more) debt, but would offer nothing to those of us who have either paid off our debts or have tried to live our lives so that we would have little or no debt to begin with.

[The Brethren]

3. That is an excellent idea.