Cash for clunkers
14 Aug '09 21:481 editI don't mean to seem like I'm picking on everything Barack Obama does. Hey, I kinda sorta even like the guy, and I certainly don't think he's evil incarnate. I think the idea of saving social security by picking up the payroll tax at $250k of income is brilliant (now, if only he'll do it); and given the cards he's been dealt, he's been okay so far in handling the recession (not great, but okay).
That having been said, WTF is he thinking with this cash for clunkers business? For non-Americans out there, it's a program by which you can trade in a fuel inefficient car and get a $4,500 credit towards a more fuel efficient new vehicle. The old cars are then destroyed and the guy drives home in his brand new Camry or Accord or (gasp!) a Fusion or Focus.
Like the sheep that they are, the media is touting the program as a big success because so many people are taking advantage of it. DUH... it's a HANDOUT! Of course people are going to take advantage of it. Headlines blare: Car sales are up!!!!" as though this is some brilliant plan. Gee, if we gave everyone $10k, I suppose that would make incomes go up too.
Okay, so what's the effect of this program?
1) It does not generate demand. It compresses demand and moves it from the coming year or two to now. All it does is makes people who would need cars in the next year or two buy it now instead. Purchases go up now so fast that dealers don't have the inventory and it will depress demand in the next two years as the car manufacturers heal and start to get back to their normal car production numbers.
2) It kills used car dealers! I read about this in the paper today but it's so obvious anyone can see it. The same people who used to sell their $2,500 to the dealer (who would then sell it for $3,200) are giving it away instead to get a $4,500 rebate. In effect, the inventory for cheap used cars has dried up. If you generally buy cheap used cars and need a new one, plan to use the bus for the next while.
3) It encourages irresponsible spending. People who drive these "clunkers" probably do so because that's what they can AFFORD TO DRIVE. Now, you're telling them, "hey, look! buy that brand new car." In 2 years when they can't afford to make their monthly payments, where is the government going to be??
4) It's yet another government expenditure with no offsetting tax or cost cut. Yet another unbalanced handout. How many of these do we need before enough it enough??
Can anyone in their right mind (on second thought, I'll even settle for someone in his wrong mind) offer any sort of coherent defense for this program? I'd love to read one. I haven't seen one yet.
That having been said, WTF is he thinking with this cash for clunkers business? For non-Americans out there, it's a program by which you can trade in a fuel inefficient car and get a $4,500 credit towards a more fuel efficient new vehicle. The old cars are then destroyed and the guy drives home in his brand new Camry or Accord or (gasp!) a Fusion or Focus.
Like the sheep that they are, the media is touting the program as a big success because so many people are taking advantage of it. DUH... it's a HANDOUT! Of course people are going to take advantage of it. Headlines blare: Car sales are up!!!!" as though this is some brilliant plan. Gee, if we gave everyone $10k, I suppose that would make incomes go up too.
Okay, so what's the effect of this program?
1) It does not generate demand. It compresses demand and moves it from the coming year or two to now. All it does is makes people who would need cars in the next year or two buy it now instead. Purchases go up now so fast that dealers don't have the inventory and it will depress demand in the next two years as the car manufacturers heal and start to get back to their normal car production numbers.
2) It kills used car dealers! I read about this in the paper today but it's so obvious anyone can see it. The same people who used to sell their $2,500 to the dealer (who would then sell it for $3,200) are giving it away instead to get a $4,500 rebate. In effect, the inventory for cheap used cars has dried up. If you generally buy cheap used cars and need a new one, plan to use the bus for the next while.
3) It encourages irresponsible spending. People who drive these "clunkers" probably do so because that's what they can AFFORD TO DRIVE. Now, you're telling them, "hey, look! buy that brand new car." In 2 years when they can't afford to make their monthly payments, where is the government going to be??
4) It's yet another government expenditure with no offsetting tax or cost cut. Yet another unbalanced handout. How many of these do we need before enough it enough??
Can anyone in their right mind (on second thought, I'll even settle for someone in his wrong mind) offer any sort of coherent defense for this program? I'd love to read one. I haven't seen one yet.
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