Cash For Clunkers

[wphelan]

I've been a little out of the loop recently, so the details of the CARS bill had escaped me until this morning. I knew that on the surface it sounded like a typically-bad Washington idea, but I had no idea how absurd the program was until I read an article in the Chicago Tribune about the process of destroying the so called clunkers.

Honestly, I was shocked when I read that the cars that are traded in are destroyed. I had no idea. It literally made me sick to my stomach. I felt like somebody punched me in the gut. Billions of dollars are being spent to destroy cars. I'm having a hard time wrapping my head around this.

It's like bad dream. This recession is often compared the depression of the 1930s, but it's as if we're trying to recreate the disastrous economic policies that extended that depression. Destroying crops then was a terrible idea, and destroying cars now is a terrible idea. We're spending billions of dollars to make ourselves less wealthy.

I don't know what to do. Can anyone here defend this program and persuade me that it's not as bad as it seems?

[Donkey]

Seems like a slightly concealed aid package for car companies.

[Lily]

This would be hilarious if it weren't so stupid. The link is a list of eligible new cars, including the 2009 Hummer H3T. It gets 16 miles per gallon.

http://www.edmunds.com/cash-for-clunkers/new-car-candidates.html#h

[The Drunk Guy]

This would be hilarious if it weren't so stupid. The link is a list of eligible new cars, including the 2009 Hummer H3T. It gets 16 miles per gallon.

http://www.edmunds.com/cash-for-clunkers/new-car-candidates.html#h
Well, that's better than my old truck...
http://en.wikipedia.org/wiki/File:Jurrasic_attack.JPG

[Americano]

I agree with Donkey, an aid package for Government Motors.

[wphelan]

Right. Not only is it giving money to car companies, but in the process, it's destroying perfectly good vehicles. To top it off, the number one vehicle that's being bought in the program is the Toyota Corolla. That's fine because I don't care what kind of car people buy, but isn't Toyota doing ok without getting government aid?

This program is a huge mess, and somehow it's being touted as a fantastic success! I feel like I'm living in bizarro world.

http://www.chicagotribune.com/news/chi-ap-us-cashforclunkers-t,0,4170424.story

[Michael]

Right. Not only is it giving money to car companies, but in the process, it's destroying perfectly good vehicles. To top it off, the number one vehicle that's being bought in the program is the Toyota Corolla. That's fine because I don't care what kind of car people buy, but isn't Toyota doing ok without getting government aid?

This program is a huge mess, and somehow it's being touted as a fantastic success! I feel like I'm living in bizarro world.

http://www.chicagotribune.com/news/chi-ap-us-cashforclunkers-t,0,4170424.story

Success is measured by popularity and any program that gives away money for nothing is guarenteed to be popular.

It is called 'government by piggy-bank'. Quite embarrassing I should think that our elites are reduced to this kind of games playing.

[Americano]

Right. Not only is it giving money to car companies, but in the process, it's destroying perfectly good vehicles. To top it off, the number one vehicle that's being bought in the program is the Toyota Corolla. That's fine because I don't care what kind of car people buy, but isn't Toyota doing ok without getting government aid?

This program is a huge mess, and somehow it's being touted as a fantastic success! I feel like I'm living in bizarro world.

http://www.chicagotribune.com/news/chi-ap-us-cashforclunkers-t,0,4170424.story

I've felt like I've been living in bizarro world for quite some time. Almost daily my politicians and most fellow Americans reinforce that feeling.

[Michael]

Whoever invented this "cash for clunkers" program and didn't specify that one had to purchase an American-built car to be eligible was insanely stupid.

That turned a decent 'stimulus' plan for the American economy into a 'free giveaway' that serves virtually no benefit to the US taxpayer.

[Donkey]

A lot of those "Asian" cars are built right here in the US of A.

[Michael]

A lot of those "Asian" cars are built right here in the US of A.

Government owns GM right now. No need to subsidize Japanese shareholders with US taxpayer money. That makes no sense.

[Americano]

Government owns GM right now. No need to subsidize Japanese shareholders with US taxpayer money. That makes no sense.

None of it made any sense. Using debt to fund a taxpayer subsidy to an industry with a government owned business involved is pretty lame.

[Michael]

None of it made any sense. Using debt to fund a taxpayer subsidy to an industry with a government owned business involved is pretty lame.

Actually, if you do the math, I think this one can work out positively due to the 'spin-off' effect of every dollar of spending at GM.

In other words, a billion dollar 'cash for clunkers' giveaway could perhaps spur $5-10 billion in purchases from GM and GM has rather high jobs multiplier, meaning that there are many other companies down the supply chain that feed off those purchases from GM.

On the whole, if the 'cash for clunkers' program was specific to GM, then I'd be able to support the program as a 'good' stimulus plan.

Without the exclusive GM provision, US taxpayers are ultimately subsidizing Japanese shareholders (and lots of Canadian autoworkers).

I don't have a problem with "Buy American" policies with economic stimulus packages. That makes sense, but given the fact that a majority of the US car market is dominated by foreign companies, a majority of the stimulus spin-off effects from this program will likely accrue to non-American companies and non-American workers - which I think is a stupid waste of American taxpayer money.

[Americano]

Actually, if you do the math, I think this one can work out positively due to the 'spin-off' effect of every dollar of spending at GM.

In other words, a billion dollar 'cash for clunkers' giveaway could perhaps spur $5-10 billion in purchases from GM and GM has rather high jobs multiplier, meaning that there are many other companies down the supply chain that feed off those purchases from GM.

On the whole, if the 'cash for clunkers' program was specific to GM, then I'd be able to support the program as a 'good' stimulus plan.

Without the exclusive GM provision, US taxpayers are ultimately subsidizing Japanese shareholders (and lots of Canadian autoworkers).

I don't have a problem with "Buy American" policies with economic stimulus packages. That makes sense, but given the fact that a majority of the US car market is dominated by foreign companies, a majority of the stimulus spin-off effects from this program will likely accrue to non-American companies and non-American workers - which I think is a stupid waste of American taxpayer money.

Protectionism of a failed US company now majority owned by the US government in the form of publicly subsidized rebates would create an interesting dilemma in some of our trade agreements. If I were say a Japan I'd start offering my products in the US with a $3500-4500 government rebate and effectively eliminate most of GM's remaining market share.

The seldom mentioned economic ramification of destroying all those still serviceable clunkers is what happens to the used car market, which is 75% of vehicles sold in the US. People who buy $4000 vehicles for basic transportation out of necessity can't afford new cars and market forces of reducing supply will effectively drive their costs up while reducing used car dealers, service and parts demand. That's a substantially larger negative impact then the positive flow-through from selling government subsidized new cars and it's where it hurts the most, at lower income levels.

[Donkey]

What would be cool is if you could use that rebate to buy a used car that met the same specs.

[Americano]

What would be cool is if you could use that rebate to buy a used car that met the same specs.

That would be viewed by governing officials as entitlement without benefit to Government Motors.

[Michael]

What would be cool is if you could use that rebate to buy a used car that met the same specs.

There would be way less of an economic stimulus there since no new production is engendered.

Some economic activity would occur as the profit of the used car seller serves as 'income' which can be spent on other goods, but overall, the economic stimulus from selling used cars is very, very small. :)

And as Americano noted, that would also make the program much more of an 'entitlement' program (than it already is) rather than a purely economic stimulus one that it ought to be.

[wphelan]

So the CARS program will be over this coming Monday at 8 p.m. Before killing the program, however, the federal government declared it a success. If these 3 billion dollars have been spent effectively, as is being claimed, why not keep pumping money into the CARS program? Is the auto industry now saved? Or do some people in the federal government realize what a waste of money this program is, and they've realized enough money has burned in the name of saving car companies?

http://www.washingtonpost.com/wp-dyn/content/article/2009/08/20/AR2009082002699.html?hpid=moreheadlines

[Lily]

According to a news report I heard yesterday (I think it was on my local community-sponsered radio, an NPR report), there are two bills in Congress to continue the Cash for Clunkers program. Who knows if they'll actually get anywhere.

[Americano]

So the CARS program will be over this coming Monday at 8 p.m. Before killing the program, however, the federal government declared it a success. If these 3 billion dollars have been spent effectively, as is being claimed, why not keep pumping money into the CARS program? Is the auto industry now saved? Or do some people in the federal government realize what a waste of money this program is, and they've realized enough money has burned in the name of saving car companies?

http://www.washingtonpost.com/wp-dyn/content/article/2009/08/20/AR2009082002699.html?hpid=moreheadlines

I don't think they were worth the attempt to save them, but that's just my opinion.

[wphelan]

I don't think they were worth the attempt to save them, but that's just my opinion.

Damn right they weren't. I just don't see how they can justify calling this a 'success,' unless success just means popular now. And if it's so 'successful,' why pull the plug? I'm just surprised it's ended so quickly. Usually terrible programs like this find a way to suck money out of the public coffers for years, if not decades.

[Michael]

Damn right they weren't. I just don't see how they can justify calling this a 'success,' unless success just means popular now. And if it's so 'successful,' why pull the plug? I'm just surprised it's ended so quickly. Usually terrible programs like this find a way to suck money out of the public coffers for years, if not decades.

Yes, "success" certainly is defined as "popular". No doubt of that. It is also very short-term too. Today's success often produces tomorrow's problem, but few make the connections between them and go on rewarding 'today's success' with fame and fortune despite the repeatedly bad track record.

This seems to apply to Washington as much as it does to Wall Street. :ummm:

[Americano]

Damn right they weren't. I just don't see how they can justify calling this a 'success,' unless success just means popular now. And if it's so 'successful,' why pull the plug? I'm just surprised it's ended so quickly. Usually terrible programs like this find a way to suck money out of the public coffers for years, if not decades.

The general public has a short attention span and I suspect the auto industry sucked-up all the viable buyers within the assigned demographic. The holiday shopping season, almost totally dependent on consumer spending, is rapidly approaching. Cars for Xmas subsidization, the absolutely slowest sales period of the year for car sales?

[Evangeline]

Whoever invented this "cash for clunkers" program and didn't specify that one had to purchase an American-built car to be eligible was insanely stupid.

That turned a decent 'stimulus' plan for the American economy into a 'free giveaway' that serves virtually no benefit to the US taxpayer.

They couldn't do that. Canada would have flipped out.

Anyway, the Japanese cars are made here in the USA, ultimately.

And the program did help the car dealers and the US car makers too.

But I agree that the congress did wimp out with the low standards for new cars. They should have made the MPG much higher to qualify.

[wphelan]

They couldn't do that. Canada would have flipped out.

Anyway, the Japanese cars are made here in the USA, ultimately.

And the program did help the car dealers and the US car makers too.

But I agree that the congress did wimp out with the low standards for new cars. They should have made the MPG much higher to qualify.

The problem is that by 'helping' these car dealers and car makers, they allow them to continue business as usual, at least for a little while longer. Propping up failed business models with $3 billion we don't have doesn't make sense. It doesn't help people in lower income brackets either, because by destroying all these perfectly good used cars, we're driving up the prices of used cars. This entire program is indefensible. It would have been better to just give money directly to whomever this was supposed to help. There's no need to destroy things in the process.

Edit: I don't want to give the impression that I agree with giving away any part of $3 billion dollars. I'm just saying it would have been a better alternative. This whole situation is a perfect example of Bastiat's broken window fallacy.

[Michael]

They couldn't do that. Canada would have flipped out.
I don't think that's entirely accurate. ;)

The whole US stimulus bill has a specific "made-in-USA" provision that some Canadian political groups have complained about and PM Harper mentioned "his concern" about the issue at the recent meeting in Mexico between Obama, Harper & Calderon. That's about the whole of it and that bill is like $800 billion in spending. There is no formal NAFTA challenge or formal political complaint made - ergo, it is incorrect to assert Canada would "freakout" over a US-only provision on a tiny $3 billion program when they are barely even objecting to an $800 billion program of US-only.

Anyway, the Japanese cars are made here in the USA, ultimately.
Canada's usual position on this issue is that anything that is good for car sales is good for Canada's auto industry. We have about 25% of the North American auto industry located in southern Ontario. Our production of Japanese & Korean autos is greater than our production of US autos.

And the program did help the car dealers and the US car makers too.
Yes, the program would produce a 'stimulus' effect to drive additional auto sales. That's the theory behind the program.

But I agree that the congress did wimp out with the low standards for new cars. They should have made the MPG much higher to qualify.
Agreed. If/when the government is giving away stimulus money, it should where ever possible, be directed preferentially towards environmentally friendly products.

[drgoodtrips]

I wonder if it actually helped any of the auto makers/dealerships except in the incredibly short term. I'd be willing to wager that it didn't increase overall car purchasing nearly as much as it gave people an incentive to pull the trigger on a purchase they were going to make regardless.

I'd be curious to know what percentage of the people who took advantage of the program had no plans to buy a car for a year or longer before the program came along.

[wphelan]

I wonder if it actually helped any of the auto makers/dealerships except in the incredibly short term. I'd be willing to wager that it didn't increase overall car purchasing nearly as much as it gave people an incentive to pull the trigger on a purchase they were going to make regardless.

I'd be curious to know what percentage of the people who took advantage of the program had no plans to buy a car for a year or longer before the program came along.

I find no reason to believe this program did anything but sell the same number of cars that would have been sold anyway, except bunch them all together. I fully expect the auto industry will be calling for more help in about six months or a year while they wonder where are the buyers are.

And it still makes me sick to think of all the perfectly good automobiles that were destroyed in this program.

[drgoodtrips]

I find no reason to believe this program did anything but sell the same number of cars that would have been sold anyway, except bunch them all together. I fully expect the auto industry will be calling for more help in about six months or a year while they wonder where are the buyers are.

And it still makes me sick to think of all the perfectly good automobiles that were destroyed in this program.

It vaguely reminds me of the South Park where they all buy hybrids and then, when that causes a problem, they destroy all of the hybrids. But, with a give-away like that, I don't suppose they had a choice. Imagine the headlines if the auto-dealers did the reasonable thing and flooded the market with cheap clunkers, causing a rush to buy the very things they're trying to socially engineer out of existence. :lol:

[Americano]

I find no reason to believe this program did anything but sell the same number of cars that would have been sold anyway, except bunch them all together. I fully expect the auto industry will be calling for more help in about six months or a year while they wonder where are the buyers are.

Agreed. And the Xmas shopping holidays are coming up, traditionally the slowest period for new car sales.

And it still makes me sick to think of all the perfectly good automobiles that were destroyed in this program.

[wphelan]

South Park is about the only thing on tv that makes sense sometimes. I'm ready for some new episodes.


This clip makes me want to laugh and be frustrated at its accuracy at the same time.

http://www.huffingtonpost.com/2009/03/26/south-park-explains-the-b_n_179748.html

[Michael]

South Park is about the only thing on tv that makes sense sometimes. I'm ready for some new episodes.


This clip makes me want to laugh and be frustrated at its accuracy at the same time.

http://www.huffingtonpost.com/2009/03/26/south-park-explains-the-b_n_179748.html

Brilliantly funny clip. :rofl:

Odd given that the politics of South Park are normally quite rightwing, but I suppose being freaked out by the wholesale bailing out of Wall Street billionaires is a truly bipartisan enterprise.

[drgoodtrips]

I get the sense that the creators are more of the libertarian bent than rightwing. I also find it sort of curious, given the often offensive nature of the show, what a concerted effort they make to appear equally critical of liberals and conservatives. It should probably just come off as a desire to satirize everyone, but instead something about it rings to me that they're striving to be labelled a-political.

I contrast this with, say, John Stewart, who satirizes everyone but without bothering to try to appear as if he's completely neutral in terms of politics.

[Michael]

I get the sense that the creators are more of the libertarian bent than rightwing.
Agreed.

But I'd also add that there's no difference in the US context. There is no substantial political distinction between "US libertarianism" and "US rightwingers". They both are hardcore partisan Republican voters. Ergo, they are both "rightwing", plain and simple. They may theoretically disagree about big government and substituting the Bible for the Constitution, but that's just theoretical - they both end up voting for big government Republicans every time, so the distinction is entirely academic in reality.

I also find it sort of curious, given the often offensive nature of the show, what a concerted effort they make to appear equally critical of liberals and conservatives. It should probably just come off as a desire to satirize everyone, but instead something about it rings to me that they're striving to be labelled a-political.

I contrast this with, say, John Stewart, who satirizes everyone but without bothering to try to appear as if he's completely neutral in terms of politics.
Nothing surprising there. Only those with an overt partisan agenda generally feel the need to hide the agenda or deny their political interest. The care they take in this usually reveals the seriousness of the political interest.

Jon Stewart doesn't have much of an overt partisan agenda, ergo, he's an equal opportunity satirist and attacks anything worthy of attack.