Cash for clunkers

The House has voted to put another $2 billion of borrowed money into the deal. I’d love to read an economist’s take on this program. On the one hand, I resent having $4,500 taken from me so someone else can buy a new car, but if they’re going to take it anyway -and this new money is being shifted from the already-enacted “stimulus” bill – it’s probably money better spent this way than on useless job training programs or porn film festivals in San Francisco – oh wait, they’ve already funded those. Well still, maybe it will help.

But how difficult would it be to simply offer every American or, to be fair to everyone, everyone in America, citizen or not, $4,500 as a trade in for a new car, damn the mileage, damn the cost? I’ve read that the current program has an application 138 pages long and takes five hours to complete. Face it, any car that’s worth only $4,500 is probably old enough that any replacement will give better mileage and emit less pollution. Just write the damn check.

Another funny thing about this program: dealers have been offering rebates at least this large for months, to no effect. Offer a government bounty and everyone flocks to use it. Why? My theory is that a rebate is just the return of your own money while this plan gives you someone else’s: mine, in this case.


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7 responses to “Cash for clunkers

  1. Retired IB'er

    This was dumb policy when first introduced. To add several billion dollars more is… dumber still. Why anyone is surprised the program is “successful” is amazing: it’s giving away “free” money (free to everyone, but the taxpayer that is).

    All this program is doing is accelerating future demand into 2009. This is simply robbing Peter (future demand) to pay Paul, which has been the modus operandi of the economy for far too long; and, the reason the US (both consumer and the federal government) is saddled with such high levels of debt. The debt represents purchases made with future earnings.

    Once again, we see government policy that is designed to patch a problem: pushing the correction down the road. I keep hearing the old adage “deficits don’t matter”. That is true right up until the time they do: and when that day comes, which it will, if we continue on the path we are on the correction will shake this country to its core. Like Hemingway said, “At first I went broke gradually and then all at once…” ( I paraphrase)

  2. lorin

    I have an old car…..could use a new one….but mine is paid for….and I don’t spend enough fixing it per month to justify another debt and higher insurance rates…drat….

  3. Old School Grump

    Whoa, lorin, you are way overthinking this! You’re not supposed to consider the consequences, you’re supposed to blindly, gleefully grab the money. Then, a month or two later, when you realize what the loan payments and higher insurance rates add up to, you’re supposed to be the outraged and pathetic victim who “dint unnerstand ….” Get with the program!

  4. Anonymous

    The article highlights the unforeseen poularity as it, “…burned through its allotted $1 billion in just a week”.
    What is most amusing is that the original $1 billion was based on trading 12 cars per dealership, until the end of the year!

    Will $2 billion last another two weeks? Who’s paying for the following 18 weeks?

    Anyone got a clunker I can ‘ave?

  5. Another anon

    I’ve read, but not verified, that the Govt money is in addition to existing manufacturer rebates.

    For instance, I read a few days ago that Chrysler was offering to match the Govt (mine and your money) rebate for a total of $9k off. That’s a pretty serious discount on some vehicles, although I was able to negotiate ~$8k off on my own four years ago without asking the taxpayers for help.*
    It’s pays to be a knowledgeable and informed consumer, or you can just wait for a govvy handout and pick the prettiest color and options without shopping. Sigh.

    *I had to replace a well loved fully paid for car (I was hit by an idiot and my car was totalled.)

  6. concerned

    It’s nonsense…these buyers are taking on debt to save money.

    I agree with old school 2 months into the payment cycle buyers are going to be smashing their heads on the same desk they write their checks from saying WTF did I do!

    The problem is with congress they just don’t get it. They don’t understand that this just needs to resolve/unwind itself.

  7. Paco

    “I agree with old school 2 months into the payment cycle buyers are going to be smashing their heads on the same desk they write their checks from saying WTF did I do!”

    No, “concerned”, they’ll complain to Congress about predatory car lenders and Congress will respond with a law requiring car lenders to renegotiate the loans and then a few weeks later the U.S. Treasury will bail out failing car lenders.

    Meaning no disrespect, but what part of “change has c0me to America don’t you understand?