commentary by Michael L. Bromley
copyright 2005

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... of Automobiles

Dec 28/04: Now here's a story I like:

Government to extend tax cut on automobiles

At first, I thought I'd rant today about a $25 million study of why drunk drivers drive drunk (Feds study why drunken driving persists). But why bore you with something you already know? Governments will spend money stupidly and people are stupid. With the exception of defining what defines drunk: 1.0, .08, .06, whatever, in the hazy blue land of DUI, little will change. Nor will change the hidden truths about drunk driving, especially that while, as this article states, forty per cent of traffic fatalities are "alcohol related" -- second and third cousins included, I presume -- most are courtesy the drunks drunk well beyond that Fed standard drunk of .08.

It's all the same, be it the U.S. Government trying to rid the roads of drunks or, and back now to our original article, the government of Korea giving tax breaks to stimulate automotive purchases:

Korea will extend tax cuts already in place on automobiles for six months to fuel demand and help revive the economy amid weak domestic consumption, the Ministry of Finance and Economy said yesterday. The 20 percent tax cut, which was slated to end this year, will be extended to June 30 next year. This means the luxury tax on cars with an engine capacity of at least 2,000cc will remain at 8 percent, while taxes on cars with smaller engines will stay at 4 percent.

"This extension comes as a preemptive move to prevent consumer confidence from weakening further," said the Finance Ministry in a statement. The ministry said sales tax cuts on 12 other items, including jewelry, furs and carpets, will remain in place until the end of June 2005.

My question is, where'd it start? With the drunks, it's a matter of social engineering. Incarceration, fines, and all those 25 millions to teach the people to take a cab changes nothing of human nature. The same now in Korea and government toying with consumers' money: It's all a matter of how much and to what consequence. "Here, we'll tax less -- err, we'll take away the tax we put on it earlier -- if you do this." A tax break necessarily follows a tax increase.

I just submitted to Automobile Quarterly the first of four articles called "Motoring Through Tough Times," this first on WWI and the 1920/21 depression. Studying the period, I found that the downturn that followed the War's end didn't have to happen. Government policy made it. After the November, 1918 armistice, the automobile industry boomed -- for a moment. Continued high war taxes and persistent central commands made a mess, and the economic nation beat itself up over material shortages, labor fights, and shipping tangles, also a result of Washington's meddling, in this case with the railroads. The automotive industry near collapsed, including General Motors. The new President of 1921, Warren G. Harding, moved an unwilling Congress to cut taxes, retooled monetary policy, and yanked away the regulators, and the great 1920s prosperity began. It might have been otherwise -- or like Europe.

Where Korea is going with tax incentives is no different from Europe of Harding's time, which kept to the command economy. The warring nations looked to the automobile and, as Korea does today, assorted "luxuries," to pay the way back to prosperity. Horsepower was taxed as an extravagance. The Model T, with its 20 HP or so, was thus a luxury. It was the death of the medium-sized car. European autos went to the extremes of the cheap, low-horsepower and the high-end, with little in between. America, meanwhile, discovered the joys of value: big cars and high horsepower at ever-lower prices (which, thankfully, killed the Model T). As went Europe of 1920, so goes Korea today: double the tax for anything over 2000cc (and this, a tax reduction!)-- that's what, a Harley and a half? A Ford Escort? That's 122 cubic inches.

Somebody, get me a V8!

(Oops, sorry to put politics into the automobiles column. but, dammit, the Guvmints did it first!)
 

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