I visited a Ford dealer Saturday with my youngest son. He traded a Honda Civic, which he had for three years without liking much, for a Ford Escape, which he seems, after a few days, to like quite well. I was there to assist with arranging the financing; it looks like his worst case is 3.99% with a $2,000 rebate and the best is 2.69% with the same rebate (a dealer-financing option). I’ll know by the time you read this which one wins the day. We did the calcs, and taking the rebate and borrowing at 3.99% is better than 1.9% and no rebate.
The thing is this: there were many folks at the Ford dealer, and more than a few were completing paperwork to buy automobiles. Given all the trouble in the economy, I find it remarkable that we consumer-citizens are buying big-ticket items.
It is clearer and clearer to me that the United States may continue to have relatively high unemployment and with increased productivity from the workers who have not lost their jobs. So, I guess maybe the 91% of us who are gainfully employed are still going to buy things, including new cars, Boeing airplanes and Caterpillar equipment.
As I keep writing, I’m bullish on the United States. I’m bearish on Washington, though, and pray that members of both houses of Congress and the executive branch are getting the message that spending needs to be cut. Yes, Mr. Buffett’s wish for increased taxes on the rich is fine, but — as Barron’s Monday edition points out — that only takes care of about 5% of what’s needed. What the United States really needs are spending cuts. Politicians always seem to promise that spending cuts will accompany tax increases, and they never do. The last increase had a promise of $2.50 of cuts for every $1 of increased taxes — did we ever get the $2.50 part? Of course not.
Have a great week and do terrific things (and you might write to your federal representatives).
For more on taxes and spending, see: