Monday, August 3, 2009

Cash for Clunkers

Can anyone explain this Cash for Clunkers program to me?

Here is what I know:
  • If you trade in a "gas guzzler" (18 mpg or less) vehicle on certain "fuel efficient" (better than 18 mpg) new models, the US government will give you between $3,500 and $4,500 in cash. $3,500 for new vehicles bettering your fuel economy by at least 4 mpg but less than 10, and $4,500 for better than 10.
Here is what I don't understand - why?
  • The US government is funded by the taxes of US citizens; why should the money the IRS collects from me be given to my neighbor so that he can drive a new car?
  • Dealers are required to "permanently disable" the trade-in; why? I'm sure it costs more money and more carbon and more energy and more resources to manufacture a new "fuel efficient" automobile than would otherwise be consumed by the "gas guzzler". Couldn't somebody trade in a 9 mpg vehicle for an 18 mpg "clunker" headed for the scrapyard and effectively double their fuel efficiency?
  • One possible scenario: Consumer trades in a "gas guzzler" that gets 18 mpg and purchases a "fuel efficient" new car that gets 22 mpg. Assuming an average of $4.00/gallon for fuel, it would take more than 7 years for the fuel savings to pay back the $3,500. And that doesn't take into account the impact of producing the new car (from 2nd bullet). 
  • If I trade in a "gas guzzler" and purchase a qualifying "fuel efficient" vehicle, and if this vehicle also happens to be a hybrid, can I then receive both the $4,500 PLUS the $8,000 hybrid rebate?
  • I gave my red 1990 Jeep Cherokee to the nuns and got a lousy $500 tax write-off last year; where's MY money? C'mon, Barack. I got involved in my community just like you wanted. I gave of my personal resources to help a charitable organization in my local community to help support rescue missions and soup kitchens, just like you asked. Where's my reward? You're giving my neighbor $4,500 to help the environment, but I only got $500 under that chump Bush to help actual people. I was a fool.
  • This will generate a phony auto industry recovery for a short time. President Obama and congress will point to the popularity of the program and the surge in auto sales. But they have not addressed the core problem: matching supply with demand. In other words, manufacturers are, in general, selling their cars for more than consumers are willing to pay. Consumers might choose to buy another make or model, buy used, or not buy at all (10% unemployment anyone?) for the time being. This $4,500 cash back is effectively lowering the pricetag of a new vehicle. That is why people are buying cars. Not because they want to help the environment. Those people bought a Prius a long time ago. If you're in the market for a new vehicle, you'd be silly not to take advantage of "free" money, right? If the government really wants to sell more cars, it should focus it efforts on lowering the cost of manufacturing cars, thereby allowing cars to be sold for less.

Does anyone else find it highly suspicious that the government took over two of the three major US auto companies using taxpayer dollars - companies that were failing because they weren't producing products that could sell well enough to sustain them - and now the government is again using still more tax dollars to persuade consumers into buying their cars? I do.


I think lawmakers should have spent more time on the substance of the bill instead of the development of a clever acronym. The Cash for Clunkers program is officially known as the Consumer Assistance to Recycle and Save Act, or CARS Act.


The White House is already touting its Cash for Clunkers program as being responsible for Ford's first monthly sales growth in nearly two years. It is probably correct in its assertion, but that is precisely my point: when vehicles cost $4,500 LESS, more will be sold. Duh! It has nothing to do with consumers wanting to rid the environment of their "gas guzzler". It's all about money. It's always about money. All else being equal, who wouldn't want to get 50 or 100 mpg? Unfortunately, all else is not equal. With few exceptions, hybrids and electrics are a lot more expensive to purchase than their dinosaur-powered brothers. They are also less powerful, smaller, less crash-safe, and cannot haul as much cargo. Plus they look funny. While individually us humans may be stupid, as a whole - as a free market - we tend to gravitate toward things that give us the most bang for our buck. But this Clunker of an idea is letting other people get the most bang from my buck - and that's not right. 

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