Of Course Cash for Clunkers Was Going to Work!
You hear it everywhere you turn.
On street corners, at the water cooler, in advertising … it is everywhere. Get cash now for that worn-out old automobile sitting in your driveway. Even Larry Kudlow, television commentator and a supply-sider if there ever was one, has been extolling the economic healing powers and virtues of the federal government’s Cash for Clunkers program.
I can’t blame anybody. Who can argue against a program that is getting old and possibly dangerous automobiles off the road and putting Americans into more fuel-efficient, safer, new automobiles? Even members of my own family have taken advantage of this program in the last week.
But guess what, folks — there is a reason why this program seems to be more popular, more successful, and more economically stimulating than almost any other idea that has been put in place by Washington.
Simply put: we have put the American people back in charge of the purse strings. The liberals in Washington who voted for Cash for Clunkers might have proven their own policies of massive, wasteful, earmark-ridden budgets filled with liberal pet projects don’t actually lead down the yellow brick road of economic recovery.
Their “stimulus” hasn’t been stimulating. What works? Allowing the American people to make their own choices with their own tax money.
Sounds like the Republican proposals for a stimulus based on tax cuts, doesn’t it?
Still, there are plenty of reasons why the Cash for Clunkers program is not as good and righteous as some would have you believe.
Cash for Clunkers is using our tax money to help one industry over others. Money from the local plumber shop, hair stylist, or hardware store is being used to help a business down the street. Auto repair shop owners and employees, who make their living fixing old cars, may see a drop in business because the government is using tax money to prop up their parent industry.
The Cash for Clunkers program is just one more step in the liberal effort to bail out the UAW. The UAW spent $1.98 million to help elect Democrats in the last election and spent another $4.87 million in independent expenditures to help Obama become president. What did the United Auto Workers get for all of their campaign spending? Well, they succeeded in placing thousands of their members on the public dole. Despite their involvement in helping bring down their parent companies, the UAW (thanks to the Obama administration) owns part of these companies.
American taxpayers now own a share of auto companies and have been funneling money, including the Cash for Clunkers billions, to keep those companies afloat.
How can you support a program that subsidizes consumer purchases of a depreciating asset with money that the government has to borrow against the guarantee of future tax receipts?
In 10 years, the cars bought under this program will be clunkers, the money will (probably) still be owed. Lose-lose situation.
Sure, cash for clunker SHOULD be popular. If you people free money, they’ll take it. My family has a 95 Ford Windstar that’s probably worth less than a thousand bucks. But the government is offering 4,500 voucher good for a purchase of a new (foreign, too) car in exchange for it, so why, we’re considering it.
I KINDA think this kind of policy helps create inflation, but who cares? It’s Obamaland.
Cash for clunkers is helping the car companies and also the banks. I have a new 5 year loan with Bank of America for my new pickup that I got only because of the money the government put into the deal. I had been looking to pay cash for a used pickup to replace my clunker pickup but its hard to say no to free government money. Just ask the farm lobby.
I like having a new pickup but because I now have a new monthly car payment I need to cut down on expenses in other areas. I’m thinking I can cut spending on my hobbies, on travel and on improving my home. So there’s another unintended side effect of cash for clunkers.
The only reason I’m for cash for clunkers is because unlike all the other spending in the stimulus bill, I got some of this. Still, even with the extra 2 billion into cash for clunkers, ACORN is getting a lot more.
Ha! Just wait until the ‘Kold Kash For Kidneys’ plan takes effect!
Their own money? Brent “cash for clunkers” is based on giving people other people’s money!
It is just another redistributionist program. It is just legal theft.
Provided you can get you car to pass state safety inspections, it is none of the government’s business how old your car is.
And it deprives honest, lower income people of the chance to get good old cars that can be repaired and utilized on the cheap. It forces a burden on them.
It is a destruction of capital.
There is nothing reasonable about this program at all.
In the time of a recession:
1. It takes money out of the hands of the productive, and places it in at least some hands that are not so productive.
2. It destroys capital: It destroys capital goods before the full usefulness has been extracted from them. Many of the cars being destroyed are in fact perfectly useful. This program could more accurately be called “Cash or Used Cars”.
3. It put people further into debt (those deal usually involve more loans). Some of these folks should not be going into debt at this time.
4. It sets up moral hazards and unreasonable expectation. (And along these lines, we should check the party affiliations of those on the business side of who benefit from this program.)
5. It is a further politicization of daily life. It is just more of the government sticking it nose into where it does not belong. It overrides the marketplace with political abstractions of dubious merit. It creates more dependency on government and and thus enables immorality and moral turpitude.
6. It is based on faulty economic notions and pseudo-science. It has not been established that in fact taking these “clunkers” of the street is a positive thing in the broader sense. So far, it just reeks of sloganeering, PC sentimentality, hidden agenda and little else. Why is doing this a good thing? Why is it worth spending billions of the taxpayer’s money?
One more disaster from Captain Zero.
No, Mr Littlefield, it does NOT put people in charge of their own tax dollars.
It forces ME to subsidize YOU buying a new car. How, exactly, does that put ME in charge?
We could also have a “cash for getting drunk” program. That should be very popular for those who drink heavily and sell alcoholic beverages. Unfortunately, everybody else pays (including non-drinkers) for it—and the market is badly distorted. The prices for booze will likely even increase temporarily because the lessening need for stores to worry about vigorous competition. If you are hesitant to pay full freight, they can just sell it someone who is being subsidized by the government. Lastly, the money directed towards alcoholic refreshments is now gone and cannot be spent on more productive uses.
This opinion piece lays out just what was wrong with the President’s “economic” recovery program. If it had contained incentives for ordinary Americans to spend and invest it would have embraced Laffer’s recovery principals that have a proven track record of terminating recession. Cash for clunkers creates INCENTIVE for average citizens to spend. It cost a relatively small amount of money. Tax cuts would have been far cheaper than the Recovery and Reinvestment Act passed by Congress and signed by the President. A suspension of the capital gains tax for the year would have cost the government about 360 billion in revenue, less than half of the Dems plan.
Notice how candidate Obama never talked about Reagan during the campaign? Reagan’s tax cuts that were passed by Congress 6 months after he gained office turned the economy around and started one of the longest periods of economic expansion and falling employment in world history. This policy was also employed successfully by President Bush in 2001. His tax cuts triggered a 56 month expansion. It’s no accident that Americans are car buying when the government provides incentive to do it. It is not the policy I would have chosen, but it’s alot closer to Laffer than the Democrats expensive and inefficient Recovery and Reinvestment Act.
Why keep the government largesse confirmed to one economic sector?(oh, that’s right, the government owns the car companies) I can envision ‘cash for lipo’ as we have an obesity problem, ‘cash for tellys’ as we are doing a digital television conversion, ‘cash for negative equity’ as we have underwater mortgages. Let’s just spend taxpayer dollars we don’t have on every agenda item and economic ill, until the every every last private sector transaction is being publicly managed and funded. That sounds like a solid recipe for prosperity.
Now I want a 600 dollar incentive to turn in my old refrigerator.
Those with bad credit and behind on house payments,
not too mention our of work-
can’t afford to participate in the UAW new dream car fantasy land.
Watch what happens 3 months from now.
Cash for Clunkers is logically indefensible. It is paying Americans to dispose of as junk perfectly good vehicles that they have been using for transportation. Destroying assets (the clunkers must be crushed) is not economically sound. As the article says, provide an economic benefit to car dealers, car makers, auto workers and those in related businesses. The funny thing is that the American public is generally selecting cars not made by the government-owned motor companies: the top 5 vehicles being purchased with Cash for Clunkers’ money are all from Toyota, Ford and Honda, not from GM or Chrysler. CFC may be better than the other earmark programs but it certainly is no model that should be used as a template for future programs.
That should have been “falling unemployment” in the post above. Proofed, but not caught.
The program is just plain nuts. Almost everyone will end up with a new, larger car payment that won’t break even on gasoline savings. Well, maybe when gasoline gets to $200 a gallon which might be next year after cap-and-trade.
You’re better off doing repairs and just save the car payment. ‘Tis why you will never be a millionaire.
I wanted to express an alternative perspective on the government’s “Cash for Clunkers” program. In my view it is yet another program which rewards past bad behavior. Let’s compare two hypothetical consumers, each of whom bought a car five years ago. I’ll assume that they each drove 12,000 miles per year, paid $2.50/gallon for gas, and paid the same price for his car. One bought a car that gets 17 mpg, the other bought a car that gets 28 mpg. The difference in the cost of operation of the two cars is about $3500, such that the government is now effectively rebating the added fuel cost to the irresponsible consumer.
How is spending money to DESTROY valuable assets helpful to the economy in any way? Sure, it moves money around a bit, but then it efffectively flushes that money down the toilet.
I don’t follow your logic. On the one hand, you claim that this program shows what taxpayers will do when given the freedom of choice in spending their money. On the other, you claim that (and I agree) that this is merely the government picking winners and losers in a temporary recovery program. I don’t think the the CARS program is a good model of anything, unless one wants to make the argument that maybe we should all be given a pre loaded charge card from the government to spend (not save) as we please.
Yes, more rewarding of bad behaviour. Buy a gas-guzzler get bailed out. Whereas my 20 year old car would not qualify because it got too good of mpg. I wouldn’t buy a new car anyway, unless it was a Honda or Toyota as they hold their value, even with $4500 bailout.
BTW, if you want to know which cars are built by the UAW they advertise it here: http://www.uaw.org/uawmade/auto/2009/index.cfm. In case you are considering a used one they have back to 2004 on links on the right. Please don’t buy a UAW car and don’t buy GM or Chrysler.
I’m a fishing enthusiast (that’s as in trout, not flag@whitehouse.gov) and I’d like to see a Cash for Lunkers program. The USG could offer $3500 to $4500 for every trout over, say, 4 lbs. Not only would this stimulate the fishing tackle and salmon egg industries, but Americans get more vital Omega 3 oils into their diet. And I would get some control over my hard-earned tax dollars…that is, if I could entice that big old boy under the log in my favorite spot to do his part for the American economy.
Or wait! How about stimuating the cave exploration equipment makers with Cash for Spelunkers? Or the donut inudustry with Cash for Dunkers?
Hell, why choose? Let’s do it all and get ALL of our tax money under our control.
I don’t approve of your (or Kudlow’s) approval, even if it is qualified.
Using taxpayer money to subsidize a particular segment of a particular industry to the benefit of a particular group of consumers is always wrong, wrong, wrong. It is in no way a proper use of public money. And this is particularly egregious because it’s borrowed public money. Add it’s not as though we’re creating wealth with this “investment”. The assets we’re buying will be virtually worthless before we’re done paying for them.
think there a big thing that everyone is overlooking. there is a reason people drive clunkers . its because they cant afford anything better.. now all a sudden they have a car payment they cant afford. plus they are going to have to pay full insurance . witch they probably cant afford either. unlike the minimum insurance they were paying on that old clunker .. so look forward to alot of defaults on those sweetheart loans & a lot of uninsured cars on the road & alot of repos coming back to the car lots .
20. boogieman7167:
I was just going to post something along those same lines! So, I’ll add-on to your post by saying…
I hope the people who participated in the ‘cash for clunkers’ program didn’t turn in their sole vehicle they use to get to work. If the repo man takes away your only reliable mode of transportation…well, there goes your job, your house, your current medical care plan etc. if you’re lucky enough to still have those in the first place.
Of course, more homeless, jobless, starving people means a smaller carbon footprint for all those earth’s resource wasters. Hopefully most of the people participating in CARS are the white middle-class who had the audacity to survive thus far. /sarc
“Who can argue against a program that is getting old and possibly dangerous automobiles off the road and putting Americans into more fuel-efficient, safer, new automobiles?”
Whoa, whoa, whoa.
a) The energy savings are more than offset by the energy cost of building a new car.
2) Safer? Are you kidding? Just because an econobox has side airbags, it is *not* any safer (usually much less so) than a full-sized vehicle. I’ll take a Hummer over a Prius in a crash any day.
And, as already mentioned- the destruction of perfectly usable vehicles (with salvage/recycling prohibited!) is naked broken-windows destruction of wealth.
Moreover, I resent the sh*t out of subsidizing other people’s new cars, while my modest 10-year-old sedan is disqualified.
This is nothing but a vote-buying and Government Motors/UAW subsidy scheme.
klrtz1 made a great point earlier in that this is also a benefit to the banks. I also have a new 5 year loan from BOA after trading in a clunker for a brand new sedan. I was due for a new car and this came about at just the right time! This is about the only thing that I could even partially agree with that has happened in the last six months coming out of Washington.
Mongoose #5 said it best.
My add on is that somehow, I feel no moral uplifting or more green because my money helped someone buy a new car. Pouring money down a hole does work in the greater scheme of planned oblescence.Still, the folks who bought new have to deal with credit and payments, or is that also to be covered by the new USSA?
I see Sunstein’s fingerprints all over this. They’re laughing their butts off watching all these rubes dancing to their tunes.
Among other things, here’s what’s wrong with this, and just about every other bright idea pursued by this administration:
http://en.wikipedia.org/wiki/Parable_of_the_broken_window
Yeah, a terrific idea. Take my (tax) money, and give it to Joe Blow so he can buy a car. Why not just appropriate my car and give it to Joe, cutting out all the paperwork?
I’m going to go out on a limb here, and assume you used the picture of Einstein in order to prove a very well-worn and indesputable point about the typical Democrat knee-jerk reaction to an economic downturn:
“Insanity: doing the same thing over and over again, expecting different results.” – Albert Einstein
Cash for Clunkers is nothing more than Tit for Tat. It just has a nicer ring to it than the old nursing term, but it means exactly the same thing: keep the masses hooked to the government teat in one form or another.
Because your car ain’t good enough for Joe Blow. Any more dumb questions?
Something that I saw mentioned in an article elsewhere discussed what will happen after the program ends. All of the people who can afford a new vehicle (with government help) are clamoring to get one now. It has created great demand in the short-term, but there will be a large depression in the auto market when it’s all over. After the program ends, the folks who can wait to buy will wait because they will be hoping that the gubmint will institute another similar program.
Some very good comments here with regard to folks buying who couldn’t afford a new car before. How are they gonna pay now? (21. Delia and 20. boogieman7167 both hit the nail on the head!)
regards
How many people would have purchased cars and trade in their old one in anyway? How what is the increase in sales over that number? Divide the difference by $1 billion and you have the real cost of Cash for Clunkers. Auto site edmunds.com did it and the number is much higher that $4500 per car. Also, search YouTube and find the video of a Cash for Clunkers car engine being “decommissioned” and look at the vast amount of pollution being spewed into the air.
“After the program ends, the folks who can wait to buy will wait because they will be hoping that the gubmint will institute another similar program.”
That is a very good point. I suspect that there may be a delay of six months or longer before people realize the government will not also give them $4,500. What the heck? Why rush the process? Most people probably do not purchase a new care for practical reasons—but to impress their neighbors.
Those presently taking advantage of the clunker program also know full well that it’s bovine excrement. Nothing is owed to them. Thus, they will not be angry when it finally ends.
29, yup. Not only that, but at some point, everyone who was going to buy will have bought. Then the bubble collapses. Then what are they going to do? Vouchers for $10,000?
This stimulus is like trying to give fellatio to a dead body. It looks like they’re having fun, but the receiver isn’t getting anything out of the deal, and the giver ends up with a mouthful of rubbery rotting flesh.
22. Salvage is prohibited, recycling is not. The materials from the crushed cars will be recycled into new raw materials.
“The materials from the crushed cars will be recycled into new raw materials.”
This is a very dumb argument. Most of these crushed cars are of value. They can provide adequate transportation to countless poor Americans. The typical payout for a crushed car might be $100.00. That is far less than the typical price of a still usable “formally owned” auto vehicle. We might also wish to melt down great works of art like Michaelangelo’s David and sell them for scrap metal.
10. no fear Obama:
“Now I want a 600 dollar incentive to turn in my old refrigerator.”
Take your little laptop and go to
http://www.energystar.gov/index.cfm?fuseaction=rebate.rebate_locator
Come on though, a $600 incentive to replace a refrigerator? That’s disproportionate as the average fridge costs less than $1200. Maybe if you’re replacing that walk in $10,000 SubZero you can get $600 back!
The replacing of any appliance with an Energy Star qualified one will get you cash rebates, tax credits, most states have instituted free haul offs and overall savings on your utility bill… that may just add up to $600 over the lifetime of the appliance.
But that’s not what you’re looking for is it? You just pretty much want someone to pay for half of your new fridge don’t cha?
Cool! Another argument for running around breaking windows. We can recycle the glass! Kristallnacht economics. The more windows we break, the richer we get.
http://en.wikipedia.org/wiki/Parable_of_the_broken_window
When are they going to start buying the airlines new planes? I mean if a little’s good, isn’t a lot better?
Attn Teleprompter Jesus: You’re probably correct. Better beat my automobiles into, idunno, plowshares, donate them to NEA, or maybe wine and loaves?
If Brent Littlefield is a GOP strategist, no wonder the party has fallen on hard times recently.
Three billion to create some temporary jobs, that we the taxpayer have to pay in the long run. What ever happened to spending ones own money or giving your own money away? Taking my money to give to someone making more than me is just flat out wrong. Who benefits from this? The banks, Auto co, some workers get a few more weeks of employment but mainly the banks and auto makers benefit. We might as well have a cash for clunker TV set program, look at all the energy they waste, trade in your old 19” for a new 30+ flat panel. Or a upgrade your home furnace/ ac system program. Why stop there how about a vacation program to help out the poor vacation industry.
31. David Thomson: Thanks, DT. I wasn’t the one who thought of it, though. Here’s the meaty part of the article that I was referring to, followed by the link:
“It isn’t clear this will even lead to more auto production over time, since the clunker cash may simply cause buyers to move their purchases forward. GDP will get a fillip in the third and perhaps fourth quarters, which will please the Obama Administration. But the test will be if auto sales hold up next year and into the future once the clunker checks go away. The debate over the subsidy may even have prolonged this year’s auto slump as buyers delayed their purchases waiting for the free lunch.”
http://online.wsj.com/article/SB10001424052970204313604574326531645819464.html
32. Calvin Ball: That’s a very good analogy, if a bit too graphic.
regards
my clunkers are worth more than 4500. plus i would get a generic p.o.s. and the appropriate payment to go with it. hey my son has a 2 door post 55 chevy with a 454 5 speed,ford 9 inch 3.23 posi,disc brakes all around, it definitely gets bad gas mileage, it qualifies as a clunker. we laughed about it, it gets bad mileage really fast.
People do not realize that the THEY are going to pay for these programs. Yes the taxpayers are going to pick up the tab. You the taxpayer are going to pay. The Federal Govt does not have it’s own money …. each voucher is coming in part out of your bank account. Your first installment on these car loans will be paid on April 15th.
“Simply put: we have put the American people back in charge of the purse strings.”
You mean the decision between buying a car or not?
I elected to keep my clunker! Gets me from point A to B and I don’t have a car payment… I am thinking I will get another 10 years out of it.
When I drove my old paid-in-full Pontiac minivan into the ground, after replacing the engine once, I paid cash for an ancient Toyota Previa with almost 400,000 miles on it so that I could drive it while I (horrors!) save up for a better van.
Whatever happened to the “don’t buy stuff you can’t afford” principle?
“We are seeing the same principles at work in Cash for Clunkers, arguably the most successful program of the last year because the American people were left free to make their own decisions with their tax money.”
Ummm how do you figure? I’m still getting taxed to the tune of over $30k per year, the Fed is still borrowing money, and I have elected not to add a car payment to my debt. Other people are spending MY tax dollars not me. In addition my wife’s older car doesn’t qualify due it already being fuel efficient, so even if I were all fired up to add more debt I would be unable to take advantage of the program anyway.
Cut Government spending, cut taxes, and let people keep more of their money. If I were able to keep just 50% of my tax money I could afford to buy a moderately priced car every year or two in cash…how’s THAT for stimulating the auto industry?
Chuck: The amount of pollutants released during the decommissioning are trivial compared to those released by letting the car keep driving
what is going to happen when the people cant pay there payments they will lose there cars an do they know they are going to have to pay taxes on that money