Sunday, August 9, 2009

A Clunker of a Program

Have you gotten your $4500 Cash for Clunkers rebate from the government yet? I bet you haven't.


Because you probably didn't buy a gas guzzler that qualifies. So how does it make you feel to know that you and the rest of your fellow taxpayers are subsidizing people who made the bad decision to buy one of those Clunkers. If you're like me, you think it's a blatant rip off.

Some of the defenders of this program tout the improved national fleet mileage and resulting reduction in gasoline and green house gas emissions. But even under the most optimistic assumptions, the impact is truly negligible, about the same as what the U.S. burns every 22 seconds. And this is at a cost to the taxpayers that is about seven times what "Cap and Trade" carbon permits trade for in Europe.

Proponents of this giveaway also cite the great public response to the program which is jump-starting the sales of new cars.

Sure. People will gladly accept a $4500 gift.

Auto sales that were postponed while this program was being debated and those which were planned for the future are being consummated now, making it pretty likely that sales will drop once the program expires. Additionally, there are a bunch of negative effects. One, for example, is the impact it's having on the car repair and aftermarket parts industries, which are being badly hurt by the decision to scrap the clunker cars instead of repairing them.

This program is just one more example of the government picking winners and losers. While advocates of more government intervention tout how programs like this and other "stimulants" are enhancing the economy, to me it's just the government distorting the free enterprise system.

Whether it's Cash for Clunkers, subsidies for underwater mortgage holders or any of the other government interventions implemented recently, the negative impacts often outweigh the positives.

Also, let's be real. There's no free lunch. Somebody has to pay for all this massive spending. That somebody is us, our grandchildren, or even better, now that I think about it, China.


SpecRider on the Storm said...

My opinion... I our governments want to really make an impact and stimulate the economy, provide incentives to spend money on home energy upgrades. The incentive though should get people spending real money - not handouts.

We all have equity... the mortgage companies are in trouble - government buys mortgages and resells them back to the consumer at a lower long term rate (say 10 years) provided you are willing to invest your equity by increasing your mortgage to make the necessary improvements.

The lower rate should lower monthly payments (this gets a bit complicated but trust me on this one), homes are responsible for 50% of the CO2 emissions (so win-win on that point.

Win for the government since it is no longer giving away money, but is investing it. Added advantage is the savings in conventional infrastructure perhaps saving the construction of several power stations.

Win for the consumer since they are spending money without having to dip into savings, and in return lowering their monthly payments to more reasonable levels.

Win all the way around since real money with tangible results is being circulated.

Most building codes are requiring stricter emission standards for new buildings, but the majority of building stock is old... and we need to address that if we are going to make significant improvements.

In the end if Chrysler goes down - that would be painful - but something would replace them. It is that fear of change that has prompted the misguided "Clunker Program" - and is at best a band aid solution to a major arterial bleed. At worst it is trying to revive a dead patient that already has permanent brain damage. The patient might continue living for a while - but why would you want that.

Brutal opinion - but thought I would offer the (in my mind) more sensible solution if you have to spend billions of dollars

Liberty Lives said...

If nothing else, this program shows the utter ineptitude of the Gov't. It can't make a $1B (now $3B) program easy to understand and administer, but we want them to run our healthcare and energy systems?

If we truly had a free market system, it would fix the problem on its own and get the Gov't out of picking winners and losers based on political motives.