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The troubled U.S. automobile industry has the capacity to produce 15 million cars and trucks per year, but the current market will support the purchase of only nine million.
The industry answer to this problem is to downsize – close plants, furlough workers, cut expenses and produce only what the market can sell. Under normal economic conditions that is the way of the market and it is a good way.
But these are not normal conditions. The market is in crisis and the government is bent on intervention. The government has challenged the industry to restructure to avoid even more serious outcomes.
Here we suggest a more immediate but temporary procedure.
If instead of making loans or giving outright cash to the industry, the U.S. Government purchases six million cars and trucks during the next 12 months, that would put the automobile industry back in full capacity production, 15 million units per year. All the plants would hum along; all the workers would be fully employed. They would bring home full paychecks to their families. The vital parts supply chains would also keep employees at work.
But what’s to be done with the excess automobiles in the government hands? At the very least, nothing! They would already have had their most important effect.
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