Orbital Matters

Saturn Smith
Editor’s Pick
JULY 31, 2009 8:01PM

Cash For Clunkers Could Use an Upgrade

Rate: 4 Flag

Just before dashing off for their August break, Congress today tripled the total investment in the Cash for Clunkers program, adding $2 billion to the existing $1 billion that's already been allocated and spent.  Cash for Clunkers is the program under which car owners can trade in a qualifying vehicle -- one that gets 18 miles per gallon or less -- for another, more efficient vehicle.  Improve the mileage by at least 4 mpg and you get $3,500 toward your new vehicle; raise it by 10, you get $4,500.

The program has apparently been a boon to car dealers, who've otherwise had a rough year.  Since buying used cars with better gas mileage also counts under the program, it's a bit more inclusive than efforts to otherwise prop up the car sales industry, as the profits aren't exclusively being seen by company dealerships.  The benefits seem obvious.  What could be the downside?

The downside so far is that the program isn't well-organized, and so we may be pouring good money into creating nationwide headaches for dealerships.  There's another way to look at this, though: what if we think about Cash for Clunkers as a pilot program, instead of a discrete single-time slush fund? 

Cash for Clunkers has been wildly popular so far, and it seems like a program that could benefit quite a wide swath of the population if it continues.  People can get more fuel efficient cars, which is better for the environment and better for the country, as we start needing less fuel from overseas.  The car dealerships make some sales, which means the people at the dealerships get to keep their jobs -- and get to spend their paychecks in the community.  The auto industry gets the picture, that Americans are (slowly, yes, and perhaps not permanently) getting tired of driving gas hogs, and they continue (and perhaps accelerate) their race toward greener technology.

I'm a little afraid that, in the great governmental tradition, Cash for Clunkers will become either a a permanent program, unchanged except, probably, by increasing bureaucracy and internal inefficiency, or, worse, that it will become a one-off, one-time feel-good solution to a series of much larger problems.  Congress gives Cash for Clunkers more funding and congratulates itself for helping business and the environment; consumers buy a (sometimes only slightly) better car, and feel better about their own investment; and everybody quickly forgets that this is a start, not an end.

Why not consider Cash for Clunkers a pilot program in a larger package of government involvement in improving America's motorpool?  For instance, what of the cars -- as shown and noted extensively at No Cash for Clunkers -- that are, by condition if not by model, no longer as efficient as they could be?  What if instead of $3,500 a person to buy a new vehicle, the government offered 30 or 40 percent vouchers toward repairs that make a vehicle more fuel efficient (pending government inspection)?  What if they offered a flat $3,500 for turning in a car and replacing it with a bicycle?  What if they handed out bus passes for free in the city, contingent upon the tickets being used for a certain number of trips every week? 

Cash for Clunkers got quick Congressional support because it's being billed as an auto industry rescue plan as much as (and sometimes more than) an environmental program.  Every program above, however, could be billed the same way.  In this economy, job creation and retention are the magic bullets of legislation.  Democrats and Republicans voted for C4C today.  Maybe the same coalition could be swayed to make more major steps toward environmental protection in this, well, environment, if only the White House would work on framing the issue as one of long term economic protection instead of short-term economic intervention.

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what a success this government program managed to triple in cost within 6 days, now taxpayers are subsidizing car buyers to the tune of 3 billion, God forbid they would have just created a tax deduction for the same amount if you buy a new car. Oh wait then they couldn't try to control what you buy.
I'm not clear on how helpful this concept is, though thank you for pointing out that yes, about Gov't programs "in the great governmental tradition, Cash for Clunkers will become either a permanent program, unchanged except, probably, by increasing bureaucracy and internal inefficiency, or, worse, that it will become a one-off, one-time feel-good solution to a series of much larger problems." And we want them to run our healthcare system again why?

But back to the cars, it's taking a lot of energy to take the cars back, fix them up [sell them abroad?], dismantle them, etc. There is no energy savings here to be honest about it. It's just a redistribution of energy. It is a temporary feel-good use of my/our money. Where does everyone think this money is coming from?! It's coming from us. rated.
For an even better upgrade, visit littlewillie's blog.
What kind of upgrades are we talking about?
You mentioned repairs--which repairs? For when a car breaks or blows oil or coolant out the exhaust because it hasn't been maintained? And if it hasn't been maintained, a warranty won't cover it either. So why should the government?
Tires? Good idea. Proper inflation can do as much to improve fuel economy as a tune up. It contributes to safety and handling too. It keeps tires from wearing out prematurely. A tire pressure guage costs $1.50 at WalMart.
Filters? Changing air filters on schedule saves lots of gas.
And how many people would take the government up on a "bikes for clunkers" program? Not many. Very, very few.
I like the idea of bus or other transit passes. The local "Sprinter" light rail that runs through my city cost $500 million and generates $1 revenue per passenger with an operational cost of $6 per passenger. That's a real cost effective system.

CARS is one of the few good things for consumers that have come out of this economic debacle. I'll be writing a post on it over the weekend. Briefly put, if the new injection of funds is approved by the Senate next week, the total outlay will be $3 billion to help stimulate the sale of up to 750,000 new cars or about 7.5% of the number of new vehicles projected to be sold this year. If consumers are financing $4500 less for their new vehicle that means they'll spend roughly $100 per month less on their car loan over the course of 60 months. And, dealers are seeing the strongest traffic they have in years because of CARS. The average car salesperson makes only about $3000 a month working 50-60 hours a week.
$3 billion. And it will help thousands of dealers move more inventory. That's compared to well over a trillion spent to bail out banks. And the public has seen zero direct benefit from that.
This is a good deal and boosting it by another $2 billion is a better deal. It doesn't matter if the auto manufacturer is American, Japanese or German. It's all part of the American automotive industry.
I'm happy with this as a one time program with a total of $3 billion. The industry and consumers need a shot in the arm now. Next year is another thing all together. Hopefully, things will have changed by then.
And parenthetically, according to the Cars.gov website, used vehicles do NOT qualify although I think it would be beneficial to include Factory Certified pre-owned vehicles.
Why not consider Cash for Clunkers a pilot program in a larger package of government involvement in improving America's motorpool?

Because there are better ways of doing it, perhaps? I think of it this way: The current program is worthwhile in a few different ways: it's apparently an effective stimulus (something that those opposing it on philosophical grounds never seem to acknowledge); it's putting money into an important industry that's having problems; it reduces our need for oil; and it's good for the environment. There's a natural time limit, we hope, on the first two needs. And there are much more direct ways of handling the latter two than subsidizing car purchases. Fuel taxes to account for externalities like pollution, for example. Or more federal funding for research on more efficient transportation technology.
Remember when auto companies started hadning out rebates in the 70's? We are now addicted to them.
This is exactly what a stimulus program should be. It should be a quick, one time deal to get money into the economy quickly. And that is exactly what cash for clunkers does.

It also has the added benefit of getting low mileage, high emissions vehicles off the road and replacing them with vehicles that get 33 percent better mileage. Remember, you've got to get 18 mpg or less and you've got to replace it with a vehicle that gets 24 mpg. That cuts down on emissions and reduces the amount of oil that we consume.

As for the dumbasses who argue this is a bad program, look at who they are. Doofuses like William Krystal, who argued that the Iraq invasion would cost a billion bucks, tops.

As for the government controlling what you buy, uh, no. People are free to buy whatever they want. They just won't get the $4500 if they don't buy what's on the list.

As for the tax deduction argument, Dolpies, do you think a $4500 deduction (not credit, and there is a difference in case you didn't know that) would stimulate demand now? Not really. People wouldn't see that hit until April. If you want to stimulate sales now, you've got to make them want to buy now. Offering them something in April won't do that.
This whole program is dumb. We are gong to destroy approx. 750,000 cars in the name of stimulus and environment being promoted by our president that is supposed to care so much for the poor. I wonder how the poor people in Chicago that he cares so much about feel about perfectly good cars being destroyed. Why not give me the same rebate so I can denote my car to someone that may never be able to afford one. Well the answer is simple inst it? Because it saves the environment. So what ware we telling the poor? You could have had a car donated to you but it "pollutes" too much. So basically if you are poor to have a car in our environmental conscious society.
And of course that is exactly what cap and trad will do too. Drive up energy prices on those who cannot afford it in the first place.

750,000 usable cars being destroyed. Not only could have been donated, but not cheap "clunkers" which is all someone could afford are not available any more.
But that is ok. I sure I can just pay some more taxes to buy the poor a hybrid later on. Or help pay their electricity bill.
No doubt Obama will notice how his policies put hardship on the poor and he will just tax me some more to pay for that too.

Throwing a way a usable car is like throwing away food in front of a hungry person. Somebody had a real need for these cars and their need was ignored.
Brilliant. I wonder if all the poor who voted for Obama feel like this is a good policy.
Those 750,000 cars that get traded in will have to have a value of less than $4,500. That means they should probably be considered liabilities to the poor that might inherit them rather than assets they are missing out on. Besides, the market is saturated with used cars. The void that will exist will probably be temporarily filled with salvaged cars that otherwise would end up merely as parts. The parts may go up in price, but that could end up stimulating the manufacture of new parts. Not to mention that ultimately, the used car market will end up getting a big stimulus in a few years, because the average age of used cars will go down considerably as these older cars are scrapped. Not to mention the borderline poor who couldn't afford a new car before this program. Not to mention how much those poor will benefit from having a car which does not require constant maintenance and repair. Not to mention that this will put a downward pressure on gas prices which are beginning to rise again. It doesn't take much intelligence to understand the less-than-obvious benefits of this program. Mostly, it takes a willingness to examine a situation with a clear head.

Also, if the program becomes permanent, the free market will adjust to it in such a way that ultimately more cars will be produced and purchased. The permanent rise in new car demand would equal more used cars to replace the ones being scrapped in a market that is already saturated anyway.
perhaps the program was not made a permanent one because it was just planned to serve as an urgent solution to the chronic effects of the falling auto industry. But if we will delve more closely, we can see that by reviving the auto industry through this program, people who are part of the large corporations that has filed chapter 11 will regain what was taken away from them. People then would have the capacity to again support their family. If the cash for clunkers will just be put to repairs of individual car exhaust clamp and other car problems, then only few could benefit.
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