Trading in the Trading Down Economy

New York City -- The media has discovered a new word to describe how America is reacting to high oil prices and the shaky economy: Trading Down. The genesis for this new interpretation was the surprise news that Wal-Mart's sales jumped 5.8% last month while overall consumption is down. Buffeted by soaring fuels prices, rising food prices, resetting mortgages, consumer debt and other headwinds, the American family is shopping at Wal-Mart, buying smaller cars instead of big ones--or buying no cars at all and otherwise lowering its aspirations.

Trading down, as accurate as this interpretation may be, is never popular with Americans. As one advertising campaign during the height of the housing boom put it, your ancestors did not come to America to rent. And neither did they come here to lose ground economically. America has always been the land of opportunity and should be. The question, therefore, is how are these diminished expectations going to square with our very identity as a nation.

The answer is that trading down won't work for long. Americans demand improvement, progress and a better tomorrow. While they may make due with a crisis as they did in the 1970s, they won't be satisfied indefinitely. The political leaders who view the current crisis as an opportunity to reposition America, not as something to adjust to, are those who will ultimately win elections and the support of the American people.

To this end, current stimulus proposals focused on tax rebates and the extension of unemployment benefits--while sound enough--smack too much of acquiescence. To get out front on how to get through this crisis and even turn it to our advantage, our political leaders should be figuring out how to build a new, leaner, less oil-dependent American economy that once more delivers the American Dream.

Here are a few ideas to stimulate America's economy in a way that addresses the current fuel crisis but also begins to move us into the future:

First, the government should immediately extend the solar tax credit. The imminent expiration of this credit is causing projects to be cancelled and people to be layed off every day, eroding America's solar industry. The cost of this is only about $1.5 billion and it may actually generate more revenue than that down the road from additional economic activity.

Second, the federal government should provide a substantial tax credit of $2,000 above any existing credits for the purchase of hybrids (or other battery driven) and high gas mileage vehicles. This will jump start the ailing car industry, put money into the economy immediately and help address the high cost of fuel.

Third, the government should provide an immediate $3 billion to the states and cities to help meet soaring demand for public transportation. Many states and cities are seeing their public infrastructure overwhelmed and this money used for maintenance and to keep down fares would have an immediate stimulus impact on the economy.

Fourth, the government should provide tax credits to Americans to winterize their homes before the winter heating season, by installing new windows and energy efficient appliances.

Finally, the government should authorize funds for workforce housing. Currently, policemen, firemen and teachers--not to mention regular families--can only find housing miles away from where they work. Now high gas prices are devastating their incomes. Money for workforce housing construction would again show up quickly in the economy and also give people a chance to move closer to their jobs, reducing energy consumption.

In coming weeks, we hope that these ideas are seriously debated and that others emerge that in addition to dealing with our current problems, will also help us build for the future. NDN will be holding an event on the impact of high energy prices on the American way of life and potential solutions soon. Stay tuned.