Cash for Clunkers: You Get What You Pay For
It has been quite a while since I have blogged here. I have generally been sitting on the sidelines watching health care reform spiral out of control, banks taking TARP money then paying bonuses exceeding profits, the wars in Iraq and Afghanistan rage on, Obama's birth certificate faux-controversy, etc, etc.
What I have witnessed was a small boon to the auto-industry. Basically, the "Cash for Clunker" program allowed consumers to trade in their gas-guzzling, broken down, or otherwise used car for a new one in exchange for a hefty government rebate. A fantastic plan, imo, that creates and/or saves jobs, gets some money back for taxpayers who now have a vested interest in the auto industry, and helps curb global warming.
The program was very successful. And we all know how we treat successful programs:
From MSN:
The government plans to suspend its popular "cash for clunkers" program amid concerns it could quickly use up the $1 billion in rebates for new car purchases, congressional officials told The Associated Press late today.
The Transportation Department called lawmakers' offices to alert them to the decision to suspend the program at midnight Friday.
Through late Wednesday, 22,782 vehicles had been purchased through the program and nearly $96 million had been spent. But dealers raised concerns about large backlogs in the processing of the deals in the government system, prompting the suspension.
Bill Golling, owner of Golling Chrysler-Jeep-Dodge in Bloomfield Hills, Mich., told the Detroit Free Press that his dealership had sold 80 vehicles already under the program.
"It's working so well I've got people mad at me because I can't take care of them," he said.
The popularity of the program raised concerns that with about 23,000 dealers taking part in the program, auto dealers may already have surpassed the 250,000 vehicle sales funded by the $1 billion program.
That's right, folks. In the midst of getting very little right under admittedly adverse situations, we get one program that works so well we have to scrap it. Such is the thinking in DC these days. We get what we pay for. Cash for Clunkers indeed.
Clearly the $45,000,000,000 ($45 billion) handed over to CITIBANK was money better spent. As former Gov. Palin says, government largess comes at a price, unless of course you are a Wall Street banker and believe in the power of capitalism, free markets and government rescues when you screw up..
The $45 billion allowed CITIBANK, which lost $27 billion in 2008, to stay in business and award $5,000,000,000 ($5 billion) in pay bonuses in 2008, payouts of a million and more to the 728 best and brightest who helped run CITIBANK into the ground. see DA's Cuomo's report at link
July 30, 2009 11:44 PM | Reply | Permalink
http://www.google.com/hostednews/ap/article/ALeqM5i_J2CDMBIZhobnHhGIYFCzqvR52wD99P6GDO1
When are you guys going to learn that you must not react to the first reports of any story?
July 31, 2009 12:31 AM | Reply | Permalink
Viva,
Did you ever think that an immediate response to a story creates a demand for the issue to be addressed by the legislature?
It's a new world these days. Things are floated, we the people react in real-time. This isn't a bad thing.
July 31, 2009 1:22 AM | Reply | Permalink
A response is not the same as the overreaction that is seen on these blogs. A response would be calling your congressman and finding out what's going on. Not this doom and gloom nothing's changed whoah is me attitude.
Now, CNBC is reporting that $2B will be added to the program.
July 31, 2009 10:31 AM | Reply | Permalink
Fine, lets just take one billion from AIG as a partial fine for fraud AND KEEP THIS PROGRAM GOING.
July 31, 2009 1:39 AM | Reply | Permalink
Hmm.
July 31, 2009 1:04 PM | Reply | Permalink
Why is it I don't consider $20,000 spent for each car sale -- or to say it differently a gift of $3500-$4500 to the 200,000 buyers who would have replaced their cars with or without this boondoggle -- a sound use of taxpayer dollars?
July 31, 2009 3:55 AM | Reply | Permalink
Have you actually read the whole plan? Here are a few more important details that didn't really make it into this blog. Pay special attention to the table midway down the page on minimum required gas mileage.
I can buy a "large light-duty" truck that gets as little as 15 MPG and if it does at least 2 MPG better than my current "clunker" I get a $4,500 rebate! What a deal for me and the car dealers, though I fail to see what the polar bears or the American people get out of the transaction.
The only way this idea could possibly deliver on its stated goals is if they mandated that someone buys a particular type of car or one that gets a minimum amount of mileage, like a Focus Hybrid or a Prius or even a modern diesel. Since that sort of mandate is unlikely and not really Constitutional to boot, the true motivation for this fairly expensive piece of corporate-friendly fraud, waste and abuse remains murky though far from unclear.
This is a boondoggle, pure and simple, that is unlikely to make a bit of difference for anyone but the auto manufacturers the few million people who will use the program. Just because it comes out of the Obama White House doesn't make it automatically progressive or effective or even smart.
This is program is a stinker by just about any objective measure.
July 31, 2009 10:11 AM | Reply | Permalink
Sorry. Wrong link: http://www.cashforclunkersfacts.com/
July 31, 2009 10:12 AM | Reply | Permalink
If a truck was getting 13 mpg and it's upgraded to a truck that gets 15 mpg, their is an improvement in fuel efficiency of 15% over the trade in. That is significant. Most of these trucks are used in businesses, (contracting, delivery, etc.), which need a heavier payload to satisfy their intended use. A smart car™ just can't be used as a substitute. Many rack up lots of miles in their service, and a 15% fuel efficiency improvement can be a significant savings in carbon load, and dependency on oil imports.
July 31, 2009 1:26 PM | Reply | Permalink
i.e. The program may have flaws, but the example you cite, isn't one of them.
July 31, 2009 1:28 PM | Reply | Permalink
The plan is being sold as a green initiative and going from 13 to 15 MPG isn't green no matter how much rationalization one applies.
This would have been served as a way to raise the overall MPG of the US fleet via CAFE standards or some other mechanism such as investing four billion in electric car battery research or bullet trains lines in major urban corridors. Just about anything else on the agenda would have been a better use of the money than this. Further, it dampens the credibility of real green efforts that may come in the future.
This is a boondoggle, pure and simple, that will not lead to any substantive changes to the way Americans view their cars or what "being green" means when it comes to vehicles. If this was a republican program, I am quite sure most liberals would hate it for the reasons I cited.
Ironic.
July 31, 2009 3:16 PM | Reply | Permalink
#
# The program requires the scrapping of your eligible trade-in vehicle, and that the dealer disclose to you an estimate of the scrap value of your trade-in. The scrap value, however minimal, will be in addition to the rebate, and not in place of the rebate.
http://www.cars.gov/
July 31, 2009 4:19 PM | Reply | Permalink
Well, that is good then. At least they really are taken off the road. It's not all bad news.
July 31, 2009 4:29 PM | Reply | Permalink
On balance, the clunkers program is probably a good idea. The minimal requirements for eligibility probably confer marginal benefits, but those who would achieve more than minimal differences in gas mileage would see even more incentive to participate.
Even the minimal requirements aren't bad. For example, upgrading from 13 to 15 mpg saves more than 300 gallons of gasoline for a vehicle still to be driven 30,000 miles - someone who drives 15,000 miles per year would save about 3 gallons per week.
July 31, 2009 11:24 AM | Reply | Permalink
To be candid, I haven't really done the homework needed to judge whether Clunkers is worth the cost. The data are probably out there, and what I would want to know, more than anything else, is the dollar cost of eliminating one ton of CO2 emissions. Reduction in other pollutants, reduced dependence on foreign oil, and overall economic benefits to consumers would also be important, but in my view, less critical.
July 31, 2009 12:35 PM | Reply | Permalink
More Money Sought for Cash for Clunkers http://www.latimes.com/business/la-fi-cash-for-clunkers1-2009aug01,0,6459491.story
I never really looked at this from a negative view point. I was surprised and elated that the program worked so well. It is a win-win all around.
Obviously, it cannot go on indefinitely, but it does appear that more money is needed for the program. Overall, I view it as quite a success.
July 31, 2009 12:02 PM | Reply | Permalink
“Two hundred and fifty thousand vehicles in four weeks?” Mr. Wood [an N.A.D.A. spokesman] said. “One word comes out of my mouth: Wow.”
Even at current depression levels dealers sell 200,000 cars in one week. Owners who intended to replace their clunkers have simply held off buying over the past few months.
Total BS and total boondoggle!
July 31, 2009 1:24 PM | Reply | Permalink
If you check the arithmetic, I believe you'll understand why that argument is a non sequitur. In the ordinary market, the majority of trade-ins are not "clunkers", and so substituting very low mileage cars for the average trade-in has the potential to make a substantial difference in terms of gasoline savings and reduced emissions of CO2 and other pollutants.
The critical arithmetic requires one to compare differences between cars in terms of gallons per mile (or more conveniently per thousand miles) rather than miles per gallon. The latter is very deceptive in obscuring the disproportionate effect of very low mileage cars in wasting fuel and increasing pollution.
July 31, 2009 1:37 PM | Reply | Permalink
If you want to play arithmetic games --
How many miles were these clunkers driven last year?
How many of these clunkers would have been taken off the roads in the absence of this boondoggle?
You want to spend a billion dollars -- two billion? four billion? Spend the money installing tailpipe sniffers and get the polluters off the roads!
July 31, 2009 2:30 PM | Reply | Permalink
We currently have no practical devices for reducing CO2 emissions from automobile tailpipes other than by reducing the gallons per mile ratios. This is one reason why the C4C program is considered a small, but important step toward climate change mitigation. It's not nearly enough, but is likely to help at the margins. I don't have all the figures, but it seems likely that the experience so far is part of the reason for extending the program.
July 31, 2009 3:28 PM | Reply | Permalink
I don't have all the figures . . . .
I hadn't noticed you had any, at all.
P.S. The "reason" for "extending the program" is that it's popular. Free money frequently is.
July 31, 2009 10:47 PM | Reply | Permalink
I was discussing this with someone last night. $4,500 is a great down payment for a Yaris or similar priced car. We thought that many of the people who were buying cars through this program may have been people that were having problems saving for the initial down payment and were, therefore, stuck with their clunkers. Of course, we have nothing to base this on but our own experiences in youth and our children's, but I would imagine that this may be part of the buyer demographic.
July 31, 2009 2:42 PM | Reply | Permalink
BTW, it looks like the House just threw another $2 billion into the Cash for Clunker's kitty. So it may yet continue.
July 31, 2009 1:39 PM | Reply | Permalink
Where are the Blue Dogs when you need them?
July 31, 2009 3:54 PM | Reply | Permalink
Yes, the extra cash infusion was easily approved. It is part of the stimulus money, I believe, rather than an addition to it, and has done what many hoped would happen with stimulus funds - stimulate, do it quickly, and bolster an important sector of the economy. The fact that it offers meaningful environmental benefits is a significant bonus.
July 31, 2009 7:19 PM | Reply | Permalink
"Cash for Clunkers"
Isn't this what we should call the campaign contributions that big business gives to our clunker politicians to influence them against things such as the public option :)
July 31, 2009 6:59 PM | Reply | Permalink