Monday, October 5, 2009

Updated: Cash For Clunkers

Remember "Cash For Clunkers," the program that subsidized Americans to the tune of nearly $3 billion to buy a new car and destroy an old one?

Well, it turns out the program that the Stimulus program that caused Transportation Secretary Ray LaHood to declare in August, "This is the one stimulus program that seems to be working better than just about any other program" may not have quite lived up to its original billing.

Last week U.S. automakers reported that new car sales for September, the first month since the clunker program expired, sank by 25% from a year earlier. Sales at GM and Chrysler fell by 45% and 42%, respectively. Ford was down about 5%. Some 700,000 cars were sold in the summer under the program as buyers received up to $4,500 to buy a new car they would probably have purchased anyway, so all the program seems to have done is steal those sales from the future. Exactly as critics predicted.

According to Hudson Institute economist Irwin Stelzer, at best "the reduction in gasoline consumption will cut our oil consumption by 0.2 percent per year, or less than a single day's gasoline use." Burton Abrams and George Parsons of the University of Delaware added up the total benefits from reduced gas consumption, environmental improvements and the benefit to car buyers and companies, minus the overall cost of cash for clunkers, and found a net cost of roughly $2,000 per vehicle. Rather than stimulating the economy, the program made the nation as a whole $1.4 billion poorer.

The basic fallacy of cash for clunkers is that you can somehow create wealth by destroying existing assets that are still productive, in this case cars that still work. Under the program, auto dealers were required to destroy the car engines of trade-ins with a sodium silicate solution, then smash them and send them to the junk yard. Cash for clunkers had two objectives: help the environment by increasing fuel efficiency, and boost car sales to help Detroit and the economy. It achieved neither.

In the category of all-time dumb ideas, cash for clunkers rivals the New Deal brainstorm to slaughter pigs to raise pork prices. Perhaps its Congress and President Obama who need to be sent to the junkyard...

18 comments:

Teresa said...

The cash for clunkers program was so ridiculous. They wasted all those decent old cars that could have been donated to organizations, or even sold to other countries. Plus, the program only created temporary jobs. The so-called success of cash for clunkers was definitely exaggerated by the left, and is a common occurrence nowadays.

Soloman said...

Teresa - not only did they waste a bunch of perfectly good cars, but they also enticed people into buying a car on a payment that they really didn't need to add to their budget.

I've heard they're staring up ACORN type home loans again too, in an effort to jump start the housing market.

They just don't get it...

Adrienne said...

Not to mention that now we are planning on buying a car in the next few months. We never buy new - it's a bad deal. So guess what? No decent used cars out there.

Teresa - they destroyed some pretty nice cars. They weren't all clunkers...

tammy said...

Why am I not surprised? Will BO and the left even acknowledge that it was a bad idea and didn't work though?

Cars4Charities said...

Teresa - you are absolutely right. When cash for clunkers was first proposed charities that rely on the revenue from car donation asked that the c4c cars go to them. Cars in bad shape would be scrapped. But, those in good shape would be repaired if needy and either sold or given to the poor. Instead of using common sense, 700,000 running cars were destroyed. Now used car prices are up and car donation revenue is down.

Candle said...

Wow, didn't know about that plan with the pigs - did it ever fly? :) The thing I hate most about Cash for Clunkers is its "my cash for your clunker". My taxes, for your junk. Very irritating.

The_Kid said...

Just like any liberal program born out of drug addict like hysterical panic, arm-chair quarterbacking, ability to see about to the other side of their contact lenses, and COUNTER-productiveness.

Which I guess is the new definition of Progressive since those stupid morons LOVE this stuff.

Well, the one good thing is that the cash for clunkers programs got 67.3% of the Obama bumper stickers Off the Road !

Soloman said...

Adrienne - agreed on buying a used car... let someone else eat the depreciation!

There are bound to be some decent used cars out there.. you may have a tougher time than in the past. Use the internet and save some gas money, at least to narrow down to a few lots with a few decent choices... and good luck!

Soloman said...

Tammy.. have you learned nothing about the Obama administration??

You know they'll never admit they made a mistake, and his leftist support team will stand behind him every step of the way.

Soloman said...

Cars4Charities - welcome..

Now, come on, admit it... you're a plant from the racist 'vast right wing conspiracy' sent out to make sure that everyone hates Obama and everything about him because they can't stand a black man in office.. right?

Seriously, though - on the now rare occasion that I leave the office for lunch, I drive by a place that resells charitably donated cars, and their lot is depleted compared to the beginning of the summer.

A travesty across the board, to be sure.

Soloman said...

Candle - the thing about the pig slaughter is that the government reimbursed (with taxpayer dollars) the farmers for the immediate cost of the pigs slaughtered, with the hope that the laws of supply and demand would kick in.

Unfortunately, they did this in 1933, while the economy was still so depressed that raising the prices at market defeated the intended result, so ultimately the taxpayers lost out on the money initially invested, the food supply was reduced during the "dust bowl" era, and the cost of food at market was driven through the roof!

Sound familiar?

Soloman said...

Kid - I can only hope that you're correct about that bumper sticker percentage!!

The_Kid said...

Well, 90% of all statistics are made up on the spot.

Pedaling said...
This comment has been removed by the author.
Pedaling said...

let's try that again:

so predictable...where is everybody's brain?!

seriously.
some days i feel only 10% of us have a clue
and other days i think, is it me who's messed up? (k, not really)

Soloman said...

Pedaling... I couldn't help but laugh, I'm sure you understand, as you ask "where is everybody's brain?!" and then goofed your own comment. Have a moment...

To your point, though.. I think there are more than 10% of us that have a clue.. I actually think about half of us have a clue, but only about half of that half use that gift - the rest just kind of sit by idly and hope it goes okay.

Let's hope at least the remainder of those with a clue wake up and realize it is OUR duty to keep things right...

Pedaling said...

i'm always good for a laugh, like that. hehe

jacky2002r said...

Due to inflation, recession and unemployment the prices of cars have increased a lot. I mean it has become difficult to buy a new cars for sale.
I would also like to tell people who are interested in buying used cars for sale from owner to check all the important factors like Body Style, Mileage, Exterior Color,Interior Color,Color Description, Engine Transmission, Drive Type, Fuel Type, Doors, Stock No., VIN, Trim Level & Installed Features
Because cars for sale by owner might have some important part of cars missing.

Cheers,
Jack Goldberg